Descon Oxychem Limited Annual Report 2010

DESCON OXYCHEM LIMITED
Contents
Annual Report 2010
Page
Vision and Mission Statement
Company Information
Notice of Annual General Meeting
Directors Report to the Shareholders
Pattern of Shareholding
Statement of Compliance with Code of Corporate Governance
10
Review Report to the Members on Statement of Compliance with the

Best Practices of Code of Corporate Governance
12
Auditors Report
13
Balance Sheet
14
Profit and Loss Account
16
Cash Flow Statement
18
Statement of Changes in Equity
19
Notes to the Financial Statements
20
Proxy Form
45
Annual Report 2010
COMPANY INFORMATION
Zakaria
Vision and Mission
Syed Zamanat Abbas
My Bank Limited
Soneri Bank Limited
Askari Bank Limited
OUR VISION
"To become a leading chemical solutions provider to industry worldwide."
OUR MISSION
"To provide competitive chemical solutions through technological innovation to form the basis of
better life."
STATEMENT OF ETHICS & BUSINESS PRACTICES
We believe in a stimulating and challenging team oriented work environment that encourages,
develops and rewards excellence. We are committed to diligently serving our community and
stakeholders while maintaining high standards of moral and ethical values.
Tel: 042-35923721-9
Fax: 042-35923749
Annual Report 2010
Directors Report To Shareholders
Notice of Annual General Meeting

Notice is hereby given that 6th Annual General Meeting of Descon Oxychem Limited, will be held on
Wednesday, October 13, 2010, at 10.00 am, at Descon Headquarters, 18-Km Ferozepur Road, Lahore, to
transact the following business:
ORDINARY BUSINESS
1.
To confirm the minutes of the last Annual General Meeting of the company held on October 26, 2009.
2.
To receive, consider and adopt the audited accounts of the company for the year ended 30 June 2010
together with the Director's and Auditor's Reports thereon.
3.
To appoint the Auditors and fix their remuneration for the year ending June 30, 2011. The present
Auditors M/s. A.F. Ferguson & Co., Chartered Accountants, retire and have offered themselves for
re-appointment.
4.
To transact any other business with the permission of the Chair.
th
(ABDUL SOHAIL)
COMPANY SECRETARY
Notes:1.
The share transfer books of the company shall remain closed from 07-10-2010 to 13-10-2010 (both
days inclusive).
2.
Members are requested to attend in person along with Computerized National Identity Card (CNIC)
or appoint some other member as proxy and send their proxy duly witnessed so as to reach the
registered office of the company not later than 48 hours before the time of holding the Meeting.
3.
Any individual Beneficial Owner of CDC, entitled to attend and vote at this meeting, must bring his /
her original CNIC or passport, Account and participants, I.D. Numbers to prove his / her identity, and
in case of proxy must enclose an attested copy of his / her CNIC or passport. Representatives of
corporate members should bring the usual documents required for such purpose.
4.
The Directors welcome you to the 6th Annual General Meeting of the company and present before you the audited
th
accounts along with the auditor's report for the year ended on June 30 2010.
Business Environment
During the year under review your company has had its fair share of challenges which stretched all its resources to
their limits. The year started with the after shocks of the 2008 financial crisis which depressed the international price
of Hydrogen Peroxide to unprecedented levels owing to lower international demand and worldwide excess capacity.
In the second quarter while the plant was producing at capacity, the prices started to firm up, it looked as if the worst
was behind us but alas it was not the case. For five consecutive months, from October 2009 to February 2010 the plant
was starved of natural gas, being an essential raw material, the production was down to a trickle. The management of
your company under such force majuere type circumstances strived day and night, to address all issues, however
insurmountable they may be seem.
By the grace of God and the efforts of your management the following major milestones have been achieved to realize
the potential of the business in line with its long term goals:
By Order of the Board
Lahore
August 30, 2010
Ladies & Gentlemen
Shareholders are requested to immediately notify change in address, if any, to the company's Share
Registrar M/s. Corplink (Private) Limited, Wings Arcade, 1-K, Commercial, Model Town, Lahore
and also furnish attested photocopy of their CNIC as per Listing Regulations, if not provided earlier.
Built the infrastructure to resolve the issue related to improving supply of gas.
Plant continuously producing at capacity.
International Retail Price of H2O2 has moved from Rs 23/kg in August'09 to Rs 44/Kg in August'10 an
increase of Rs 21/Kg (91%).
Loans from the Sponsors of Rs 409 mn to help revive the business after successive unplanned
catastrophes.
In principle obtained agreements from almost all members of the Syndicate to reschedule the long
term loans to align them with the current realities of the business.
Operational & Financial Highlights

The support from the Sponsors to the tune of Rs. 409 mn coupled with the support from the Syndicate of banks holding
the portfolio of Rs 1.47 bn of long term loans has made it possible for your company to maintain its operations.
The plant is producing around full capacity for the last three months (many days in during this period it has achieved
production volumes above full capacity), retail price is where the company can make healthy margins, banks have
been very supportive to help us with the rescheduling of the debt and we see no reason why the business cannot
achieve its true potential. The current business conditions have provided the confidence to all our stakeholders
including the financial institutions to support the managements and Sponsors efforts to turnaround the business.
Future Outlook
The current monsoon floods have wreaked havoc for many of our communities, the resultant challenges for your
company would not be very different from what will be faced by other businesses in the country, however, the
management of your company has experienced and persevered much worse circumstances, hence are better equipped
and confident that we have in place all the ingredients for a bright and prosperous future.
Corporate Governance
Your company is pleased to inform you that its Directors and management are fully conversant with the
responsibilities as formulated in Code of Corporate Governance and incorporated in the listing regulations of stock
exchanges issued by SECP. The prescribed practices are effectively under implementation in the company and there
has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.
Annual Report 2010
The statements as required by the Code of Corporate Governance are given below:
Name of Director
i.
Mr. Abdul Razak Dawood

Mr. Taimur Dawood
Syed Zamanat Abbas
Mr. Faisal Dawood
Mr. Muhammad Sadiq
Mr. Salman Zakaria
Mr. Farooq Nazir
Mr. Shaikh Azhar Ali
Presentation of Financial Statement

The financial statements, prepared by the management of the company, fairly present its state of affairs, the
results of its operations, cash flows and changes in equity.
ii.
Books of Accounts
The company has maintained proper books of accounts.
iii.
Accounting Policies
Appropriate accounting policies have been consistently applied in preparation of financial statements and
accounting estimates are based on reasonable and prudent judgment.
iv.
International Accounting Standards (IAS)

International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial
statements.
v.
Accounting Year
The accounting year of the company is from 1st July to 30th June.
vi.
Safety and Environments

The company strictly complies with the standards of the safety rules and regulations. It also follows
environmental friendly policies.
vii.
viii.
Going Concern
There is no significant doubt upon the company's ability to continue as a going concern.
Internal Control System
The system of internal control is sound in design and has been effectively implemented and monitored. The
review will continue in future for the improvement in controls.
ix.
Trading Company's Shares

During the year under review no Director. CEO. CFO. Company Secretary and their spouses and minor
children has sold or purchased any shares of the company.
x.
Outstanding Statutory Dues

There are no outstanding statutory dues.
Meetings
Attended
5
5
5
0
5
3
2
0
Remarks
Leave of absence was granted in five meetings

Appointed during the year
Appointed during the year
Leave of absence was granted in two meetings and
resigned during this year
xv.
Auditors
In pursuance of the Code of Corporate Governance, the Audit Committee has recommended the reappointment of M/s A.F. Ferguson & Co., Chartered Accountants, as Auditors of the Company for the year
ending June 30, 2011.
xvi.
Audit Committee
The Board of Directors in compliance to the Code of Corporate Governance has established an audit
committee and following non-executive Directors are its members:
Name of Director
Mr. Abdul Razak Dawood
Syed Zamanat Abbas
Mr. Faisal Dawood
Designation
Chairman
Member
Member
During the year under review, the committee has performed its functions satisfactory and in accordance with the Code
of Corporate Governance.
Acknowledgments
In the end, the management would like to take this opportunity to express their appreciation and thank all employees
for their commitment, loyalty and hard work in surpassing targets set for the year. We also acknowledge the support
and cooperation received from our esteemed customers, supplies, bankers and stakeholders towards the development
of the company.
For and on behalf of the Board
xi.
Dividends
The company could not declare any dividend due to loss arising during the year.
xii.
Quality Control
To ensure implementation of the Management System, Internal Quality Audits, Surveillance Audits and
Management Review meetings are conducted regularly.
xiii.
Communication
Communication with the shareholders is given high priority. Annual, Half Yearly and Quarterly Accounts are
distributed to them within the time specified in the company's Ordinance, 1984. Every opportunity is given to
the individual shareholders to attend and freely ask questions about the company's operations at the Annual
General Meeting.
xiv.
Board of Directors
During the year under review, five (05) meetings were held and the attendance of the Directors was as under:
Lahore
August 30, 2010
Taimur Dawood
Chief Executive Officer
Annual Report 2010
FORM 34
Pattern of Share Holding

No. of Shareholders
81
2,410
512
810
247
94
93
34
21
13
9
10
23
3
5
5
3
5
3
2
4
12
2
1
2
1
2
1
2
2
2
1
3
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
4,450
Categories of Shareholders
Shareholding
From
To
1
101
501
1,001
5,001
10,001
15,001
20,001
25,001
30,001
35,001
40,001
45,001
50,001
55,001
60,001
65,001
70,001
75,001
80,001
90,001
95,001
100,001
105,001
110,001
125,001
135,001
140,001
145,001
150,001
165,001
190,001
195,001
200,001
210,001
220,001
230,001
240,001
245,001
270,001
295,001
325,001
350,001
365,001
370,001
460,001
495,001
770,001
940,001
995,001
1,225,001
1,405,001
1,510,001
1,840,001
1,950,001
1,995,001
4,125,001
5,320,001
5,640,001
7,435,001
8,495,001
8,725,001
10,060,001
10,780,001
100
500
1,000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
80,000
85,000
95,000
100,000
105,000
110,000
115,000
130,000
140,000
145,000
150,000
155,000
170,000
195,000
200,000
205,000
215,000
225,000
235,000
245,000
250,000
275,000
300,000
330,000
355,000
370,000
375,000
465,000
500,000
775,000
945,000
1,000,000
1,230,000
1,410,000
1,515,000
1,845,000
1,955,000
2,000,000
4,130,000
5,325,000
5,645,000
7,440,000
8,500,000
8,730,000
10,065,000
10,785,000
Total No of Shares
3,612
1,191,934
502,255
2,349,804
1,990,183
1,170,095
1,725,071
802,037
571,173
436,600
353,051
425,087
1,130,690
160,500
289,108
315,420
201,257
365,717
232,164
162,000
373,614
1,200,000
205,100
110,000
223,000
125,500
275,830
141,500
300,000
304,286
340,000
195,000
600,000
200,010
212,076
224,624
235,000
243,500
250,000
273,201
300,000
325,500
352,505
368,098
373,710
460,112
500,000
775,000
945,000
1,000,000
1,225,149
1,408,000
1,514,497
1,840,330
1,953,200
2,000,000
4,129,000
5,322,300
11,289,000
7,439,800
8,500,000
8,725,250
10,062,300
10,781,250
102,000,000
S.NO NAME
HOLDING
%AGE
10,781,250
5,644,500
5,644,500
500
49,544
500
500
4,129,000
5,322,300
80,500
31,653,094
10.5699
5.5338
5.5338
0.0005
0.0486
0.0005
0.0005
4.0480
5.2179
0.0789
31.0324
10,062,300
8,725,250
7,439,800
1,953,200
92,054
28,272,604
9.8650
8.5542
7.2939
1.9149
0.0902
27.7182
INSURANCE COMPANIES
2,840,330
2.7846
FINANCIAL INSTITUTION
1,907,325
1.8699
MODARABAS & MUTUAL FUNDS
1,040,352
1.0200
JOINT STOCK COMPANIES
3,263,222
3.1992
758,072
0.7432
32,265,001
31.6324
102,000,000
100.0000
10,781,250
10.5699
10,781,250
10.5699
DIRECTORS, CEO, THEIR SPOUSE AND MINOR CHILDREN

1
2
3
4
5
6
7
8
9
Mr. ABDUL RAZAK DAWOOD

Mr. TAIMUR DAWOOD
Mr. FAISAL DAWOOD
Mr.. MUHAMMAD SADIQ
Mr. SALMAN ZAKARIA (CDC)
Mr. FAROOQ NAZIR (CDC)
SYED ZAMANAT ABBAS
Mrs. BILQUiS DAWOOD W/O ABDUL RAZAK DAWOOD
Ms. MEHREEN DAWOOD
Ms. MEHREEN DAWOOD (CDC)
ASSOCIATED COMPANIES
1
DESCON CHEMICAL (PVT.) LIMITED
2
DESCON CORPORATION (PVT.) LIMITED
3
DESCON ENGINEERING LIMITED
4
DESCON HOLDINGS (PVT.) LIMITED
5
INTERWORLD TRAVELS (PVT) LIMITED
OTHERS
SHARES HELD BY THE GENERAL PUBLIC
Share holder holding 10% or more voting interest

1
Mr. ABDUL RAZAK DAWOOD
Annual Report 2010
Statement of Compliance with the Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance (the Code) contained in listing
regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance,
whereby a listed company is managed in compliance with the best practices of corporate governance.
15.
The directors, CEO and executives do not hold any interest in the shares of the Company other than that
disclosed in the pattern of shareholding.
16.
The Company has complied with all the corporate and financial reporting requirements of the Code.
17.
The Board has formed an audit committee. It comprises of three (03) members, all of whom are nonexecutive directors including the Chairman of the committee.
18.
The meetings of the audit committee were held at least once every quarter prior to approval of interim and
final results of the Company as required by the Code. The terms of reference of the committee have been
formed and advised to the committee for compliance.
The company has applied the principles contained in the Code in the following manner:
1.
The company encourages the representation of independent and non-executive directors on its Board of
Directors. At present the Board includes five (05) non-executive directors and two (2) executive directors.
2.
The directors have confirmed that none of them is serving as a director in more than ten (10) listed companies,
including this Company.
19.
All the directors of the company have given declaration that they are aware of their duties and powers under
the relevant laws and the company's Memorandum and Articles of Association and the listing regulation of
the stock exchanges of Pakistan.
The Board has set-up an effective internal audit function by appointing a full-time Head of Internal Audit.
The day to day operations of this function have been outsourced to M/s. KPMG Taseer Hadi & Company,
Chartered Accountants who is considered suitably qualified and experienced.
20.
All material information as required by under the relevant rules has been provided to the Stock Exchanges
and to the Securities and Exchange Commission of Pakistan within the prescribed time.
21.
The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under
the Quality Control Review Programme (QCRP) of the Institute of Chartered Accountants of Pakistan
(ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares of the
Company and that the firm and all its partners are in compliance with International Federation of
Accountants (IFAC) guidelines on Code of ethics as adopted by ICAP.
3.
4.
5.
A casual vacancy occurring in the Board on January 05, 2010 was filled up within thirty (30) days thereof.
6.
The company has prepared a Statement of Ethics and Business Practices which has been signed by all
directors and employees of the company.
22.
The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the
company. A complete record of particulars of significant policies along with the dates on which they were
approved or amended has been maintained.
All related party transactions entered during the year were at arm's length basis and these have been placed
before the Audit committee and Board of Directors. These transactions are duly reviewed and approved by
Audit Committee and Board of Directors.
23.
All the powers of the Board have been duly exercised and decisions on material transactions, including
appointment and determination of remuneration and terms and conditions of employment of the CEO and
other executive directors have been taken by the Board.
The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the listing regulations and the auditors have confirmed that they have observed
IFAC guidelines in this regard.
24.
We confirm that all other material principles contained in the Code have been complied with.
7.
8.
9.
10
All the directors of the company are registered as taxpayers and none of them 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
defaulter by that stock exchange.
The meetings of the Board were presided over by the Chairman. The Board met at least once in every quarter.
Written notices of the Board meetings, along with agenda and working papers were circulated at least seven
(07) days before the meetings. The minutes of the meetings were appropriately recorded and circulated.
10.
The company intends to nominate its directors, one by one, to the Corporate Governance Leadership Skills
Program of Pakistan Institute of Corporate Governance that will become mandatory effective June 2011.
11.
The Board ensures arrangement of orientation courses for its directors to apprise them of their duties and
responsibilities, and to keep them informed about the enforcement of new laws, rules and regulations thereof.
12.
There were no new appointments in Internal Audit, CFO or Company Secretary during this year. However, all
such appointments including their remuneration and terms and conditions of employment were approved by
the Board.
13.
The director's report for this year has been prepared in compliance with the requirements of the Code and fully
describes the salient matters required to be disclosed.
14.
The financial statements of the company were duly endorsed by CEO and CFO before approval of the Board.
For and on behalf of the Board
Lahore
August 30, 2010
(Taimur Dawood)
11
Annual Report 2010
Review Report to the Members on Statement of Compliance

with Best Practices of Code of Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate
Governance prepared by the Board of Directors of Descon Oxychem Limited ('the company') to comply with the
Listing Regulation No. 35 of the Karachi Stock Exchange where the company 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 company's compliance with the provisions of the Code of
Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel
and review of various documents prepared by the company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider
whether the Board's statement on internal control covers all risks and controls, or to form an opinion on the
effectiveness of such internal controls, the company's corporate governance procedures and risks.
Further, Sub-Regulation (xiii a) of Listing Regulations 35 notified by The Karachi Stock Exchange (Guarantee)
Limited vide circular KSE/N-269 dated January 19, 2009 requires the company to place before the Board of Directors
for their consideration and 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 mechanism. Further, all such transactions
are also required to be separately placed before the audit committee. We are only required and have ensured
compliance of requirement to the extent of approval of related party transactions by the Board of Directors and
placement of such transactions before the audit committee.
Auditors' Report to the Members

We have audited the annexed balance sheet of Descon Oxychem Limited as at June 30, 2010 and the related profit and
loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together
with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and
explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the company's management to establish and maintain a system of internal control, and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirements of the companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based
on our audit.
We conducted our audit in accordance with auditing standards as applicable in Pakistan. These standards require that
we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the above said statements. An audit also includes assessing the accounting policies and significant estimates made
by management, as well as evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and, after due verification, we report that:
(a)
In our opinion, proper books of account have been kept by the company as required by the Companies
Ordinance, 1984:
(b)
In our opinion:
(i)
We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's
length price or not.
Based on our review nothing has come to our attention, which causes us to believe that the Statement of Compliance
does not appropriately reflect the company's compliance, in all material respects, with the best practices contained in
the Code of Corporate Governance as applicable to the company for the year ended June 30, 2010.
August 30, 2010
(ii)
(iii)
The balance sheet and profit and loss account together with the notes thereon have been drawn up in
conformity with the Companies Ordinance, 1984, and are in agreement with the books of account
and are further in accordance with accounting policies consistently applied except for the changes in
accounting policies as stated in note 2.4.1 to the annexed financial statements with which we concur
The expenditure incurred during the year was for the purpose of the company's business; and
The business conducted, investments made and the expenditure incurred during the year were in
accordance with the objects of the company.
(c)
In our opinion and to the best of our information and according to the explanations given to us, the balance
sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of
changes in equity. Together with the notes forming part there of conform with approved accounting standards
as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the
manner so required and respectively give a true and fair view of the state of the company's affairs as at June
30, 2010 and of the loss, total comprehensive loss, its cash flows and changes in equity for the year then
ended; and
(d)
In our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance 1980 (XVIII of 1980)
A.F. Ferguson & Co

Chartered Accountants
Engagement Partner: Mr. Muhammad Masood
August 30, 2010
12
A.F. Ferguson & Co

Chartered Accountants
Engagement Partner: Mr. Muhammad Masood
13
Annual Report 2010
BALANCE SHEET AS AT JUNE 30, 2010
Note
2010
Rupees
2009
Rupees
(Restated)
2010
Rupees
2009
Rupees
(Restated)
2,307,063,891
137,012,283
43,403,304
65,473,054
79,579,622
85,246,571
2,561,241,349
51,185,827
83,329,342
12,917,133
27,872,124
2,717,778,725
2,736,545,775
20
21
22
23
135,371,467
50,994,989
26,775,896
11,658,197
131,911,775
56,069,125
1,227,602
-
24
25
114,900,818
60,168,074
140,761,500
3,289,127
399,869,441
333,259,129
3,117,648,166
3,069,804,904
Note
EQUITY AND LIABILITIES

ASSETS
SHARE CAPITAL AND RESERVES
NON CURRENT ASSETS
Authorized capital
110,000,000 (2009: 110,000,000)
ordinary shares of Rs 10 each
Issued, subscribed and paid up capital
102,000,000 (2009: 102,000,000)
ordinary shares of Rs 10 each
Reserves
Accumulated loss
1,100,000,000
1,100,000,000
1,020,000,000
437,146
(465,256,275)
555,180,871
1,020,000,000
(175,845,179)
844,154,821
1,280,221,596
408,784,832
141,191,038
1,469,818,187
-
1,830,197,466
1,469,818,187
Property, plant and equipment

Assets subject to finance lease
Capital work-in-progress
Intangible asset
Long term deposits
Deferred taxation
14
15
16
17
18
19
NON CURRENT LIABILITIES

Long term finances
- secured
- unsecured
Liabilities against assets subject to finance lease
6
7
8
CURRENT LIABILITIES
Current portion of non current liabilities
Finances under mark up
arrangement - secured
Trade and other payables
Accrued finance cost
9
10
11
12
CONTINGENCIES AND COMMITMENTS
13
190,602,085
286,473,215
157,611,939
97,582,590
732,269,829
259,319,520
404,005,888
92,506,488
755,831,896
3,117,648,166
3,069,804,904
CURRENT ASSETS
Stores and spares
Stock in trade
Trade debts
Investment - available for sale
Advances, deposits, prepayments
and other receivables
Cash and bank balances
The annexed notes 1 to 43 form an integral part of these financial statements.
Director
14
15
Annual Report 2010
Statement of Comprehensive Income

For the Year ended June 30, 2010
Profit and Loss Account

For the Year ended June 30, 2010
Sales
Cost of goods sold
Note
2010
Rupees
2009
Rupees
(Restated)
26
27
709,672,163
(683,401,018)
191,334,616
(228,164,903)
26,271,145
(36,830,287)
(38,662,494)
(42,583,427)
(101,460)
7,037,503
(34,161,308)
(10,473,517)
(35,096)
592
Gross profit / (loss)

Administrative expenses
Distribution and selling costs
Other operating expenses
Other operating income
28
29
30
31
2010
Rupees
Loss for the year

Other comprehensive income
Un-realized gain on available for sale investments
(289,411,096)
Total comprehensive loss for the year
(288,973,950)
437,146
2009
Rupees
(Restated)
(150,075,344)
(150,075,344)

(74,309,878)
(44,669,329)
(81,499,616)
(96,219,570)
Loss from operations

Finance cost
32
(48,038,733)
(288,065,532)
Loss before taxation

Taxation
33
(336,104,265)
46,693,169
(177,719,186)
27,643,842
(289,411,096)
(150,075,344)
(2.84)
(1.55)
Loss for the year

Loss per share - basic and diluted
34
16
Director
17
Annual Report 2010
Cash Flow Statement
Statement of Changes in Equity
For the year ended June 30, 2010
Note
2010
Rupees
(Rupees)
2009
Rupees
(Restated)
Share
capital
Share
deposit
money
Fair value
reserve
Accumulated
loss
Total
Cash flow from operating activities

Cash generated from operations
Finance cost paid
Profit on deposits received
Taxes paid
35
Net cash used in operating activities
141,802,106
(278,483,064)
51,746
(13,920,116)
44,136,126
(168,350,299)
857,001
(11,531,907)
(150,549,328)
(134,889,079)
Balance as on June 30, 2008

Share deposit money received
Issue of ordinary shares
Cost of issuance of shares
restated - refer note 2.2
Balance as on June 30, 2009 - restated
Cash flow from investing activities

Fixed capital expenditure
Intangible asset
Proceeds from sale of property, plant and equipment
Proceeds from finance lease facility
Repayment of long term loan from SNGPL
Long term security deposits paid
Investments in open ended mutual fund
(159,540,808)
143,046,438
142,196,532
(67,452,582)
(9,975,000)
(1,099,015,978)
(16,905,000)
24,810
2,561,000
(12,052,040)
-

Loss for the year
Other comprehensive income
Un-realized gain on available
for sale investments
Total comprehensive income /
(loss) for the year
Balance as on June 30, 2010
48,274,580
Net cash used in investing activities
(14,257,597)
(11,512,238)
680,742,403
325,000,000
(11,512,238)
(150,075,344)
(150,075,344)
(175,845,179)
844,154,821
(289,411,096)
(289,411,096)
437,146
437,146
(289,411,096)
(288,973,950)
437,146
(465,256,275)
555,180,871
1,020,000,000
1,020,000,000
325,000,000
(325,000,000)
437,146
(1,125,387,208)
Cash flow from financing activities
Loan from associated company - unsecured

Proceeds from issuance of share capital
132,000,000
-
514,132,015
325,000,000
Net cash generated from financing activities
132,000,000
839,132,015
29,725,252
(256,030,393)
(421,144,272)
165,113,879
(226,305,141)
(256,030,393)
Net increase / decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
695,000,000
325,000,000
38
18
19
Annual Report 2010
be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of an acquiree, on a
transaction-by-transaction basis.
Notes to and Forming Part of the Financial Statements

1.
- IFRS 4, 'Insurance Contracts' is effective from 1 July 2009. The standard and amendments clarify how to account for
embedded derivatives, how to separately account for deposit components to avoid the omission of assets and liabilities,
further it permits an expanded presentation for insurance contracts acquired in a business combination or portfolio transfer
and addresses limited aspects of discretionary participation features contained in insurance contracts or financial
instruments. Overall, the IFRS disclosure help users understand the amounts in the insurer's financial statements that arise
from insurance contracts and the nature and extent of risks arising from insurance contracts.
Legal status and nature of business

1.1
Constitution and ownership

The company was incorporated in Pakistan as a private limited company on November 12, 2004 under the Companies
Ordinance, 1984 and was converted into a public limited company with effect from February 28, 2008 as approved by the
Securities and Exchange Commission of Pakistan (SECP) vide letter no. ARL 16222 dated March 14, 2008. Subsequently,
on September 15, 2008, it was listed on Karachi Stock Exchange. The registered office of the company is situated at 18-KM
Ferozepur Road, Lahore and the factory is situated at 18-KM Lahore-Sheikhupura Road, Lahore.
1.2
2.
- IFRS 5 (amendment), 'Measurement of non-current assets (or disposal groups) classified as held-for-sale'. The
amendment is part of the IASB's annual improvements project published in April 2009. The amendment provides
clarification 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, particularly
paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.
Activities
The company is principally engaged in manufacture, procurement and sale of hydrogen peroxide and allied products. The
company commenced its trial production from December 1, 2008 and commercial production from March 1, 2009.
- IFRS 8, 'Operating segments' is effective from 1 July 2009, replacing IAS 14, 'Segment reporting', and aligns segment
reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related
information'. The new standard requires a 'management approach', under which segment information is presented on the
same basis as that used for internal reporting purposes.
Basis of preparation
2.1
2.2
2.3
These financial statements have been prepared in accordance with approved accounting standards as applicable in
Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and
directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the
Companies Ordinance, 1984 shall prevail.
- IFRIC 12, 'Service Concession Arrangements' is effective from 1 July 2009. The IFRIC gives guidance on the accounting
by operators for public-to-private service concession arrangements. Infrastructure within the scope of this Interpretation
shall not be recognised as property, plant and equipment of the operator because the contractual service arrangement does
not convey the right to control the use of the public service infrastructure to the operator.
The company's inventory of 'working solution' classified under stores and spares was inadvertently overvalued by Rs 28.6
million as at June 30, 2009. This error has been rectified during the period by restating the opening balance of equity and
stores and spares by the same amount in line with the requirements of International Accounting Standard (IAS) 8 'Accounting Policies, Changes in Accounting Estimates and Errors'.
- IFRIC 13, 'Customer loyalty programmes' is effective from 1 July 2009 and clarifies that where goods or services are sold
together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multipleelement arrangement and the consideration receivable from the customer is allocated between the components of the
arrangement using fair values.
During the year, there were unexpected shortages and interruptions in supply of gas to the company resulting in production
loss and lower margins which were contrary to the commitment made by the supplier and beyond the control of the
company. The company has incurred a net loss of Rs 289.411 million during the year and accumulated loss stands at Rs
464.819 million as at June 30, 2010. Current liabilities exceed current assets by Rs 332.400 million and the existing
borrowing facilities are fully utilized. These conditions indicate the existence of an uncertainty on the company's ability to
continue as going concern. The management of the company, however, is very confident that it will be able to meet its
obligations on time and carry on the business without any curtailment based on the timely and proactive action taken by it,
including:
- IFRIC 15, 'Accounting for agreements for the construction of real estate' is effective from 1 July 2009 and addresses
whether an agreement for the construction of real estate is within the scope of IAS 11 or IAS 18. The IFRIC clarifies that the
terms of the agreement and all the surrounding facts and circumstances must be considered when determining under which
standard the agreement will be considered. Such a determination requires judgement with respect to each agreement. IAS
11 applies when the agreement for the construction of real estate meets the definition of a construction contract, that is the
buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or
specify major structural changes once construction is in progress. In contrast an agreement for the construction of real estate
in which buyers have only limited ability to influence the design of the real estate is an agreement for the sale of goods
within the scope of IAS 18.
- Conversion of short term payable of Rs 276.785 million to associated companies into an interest bearing long term loan;
- Additional funding from associated companies of Rs 132 million as an interest bearing long term loan.
- IFRIC 16, 'Hedges of a net investment in a foreign operation' is effective from 1 July 2009. A derivative or a non-derivative
instrument (or a combination of derivative and non-derivative instruments) may be designated as a hedging instrument in a
hedge of a net investment in a foreign operation. The hedging instrument(s) may be held by any entity or entities within the
group, as long as the designation, documentation and effectiveness requirements of IAS 39 paragraph 88 that relate to a net
investment hedge are satisfied. In particular, the hedging strategy of the group should be clearly documented because of the
possibility of different designations at different levels of the group.
Furthermore, the company is in advance stages of finalizing of restructuring of its existing syndicate loan for relaxation in
key terms including the payment period and the syndicate members representing substantial portion of the lending have
already communicated in-principle agreement to the relaxation in terms. The management is confident that the
restructuring will be completed within a few months.
2.4
Standards, interpretations and amendments to published approved accounting standards

2.4.1
The following amendments to existing standards have been published that are applicable to the company's financial
statements covering annual periods, beginning on or after the following dates:
- IFRS 2, 'Share based payment' is effective from 1 January 2009. Currently effective IFRSs require attribution of group
share-based payment transactions only if they are equity settled. The amendments resolve diversity in practice regarding
attribution of cash-settled share-based payment transactions and require an entity receiving goods or services in either an
equity-settled or a cash-settled payment transaction to account for the transaction in its separate or individual financial
statements.
- IFRS 3, 'Business Combinations' effective from 01 July 2009, broadens among other things the definition of business
resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair
value, transaction costs other than share and debt issue costs to be expensed, any pre-existing interest in an acquiree to be
measured at fair value, with the related gain or loss recognised in profit or loss and any noncontrolling (minority) interest to
20
Amendments to published standards effective in current year

- IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income
and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in
equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown
in performance statement. Companies can choose whether to present one performance statement (the statement of
comprehensive income) or two statements (profit and loss account and statement of comprehensive income).
The company has preferred to present two statements; a profit and loss account (income statement) and a second statement
beginning with profit or loss and display components of other comprehensive income (statement of comprehensive
income). Comparative information has also been re-presented so it is in conformity with the revised standard. As this
change only impacts presentation aspects, there is no impact on profit for the year.
- IAS 23 'Borrowing Costs' Certain amendments have been published that are applicable to the company's financial
21
Annual Report 2010
2.4.4
statements covering annual periods, beginning on or after July 01, 2009. Adoption of these amendments require the
company to capitalize the borrowing costs directly attributable to the acquisition, construction or production of a qualifying
asset (one that takes substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of
immediately expensing these borrowing costs has been removed. The company's current accounting policy is in
compliance with this amendment, and therefore there is no impact on the company's financial statements.
'
- IAS 36 (Amendment), 'Impairment of assets' (effective from 1 July 2009). The amendment is part of the IASB's annual
improvements project published in May 2008. Where fair value less costs to sell is calculated on the basis of discounted
cash flows, disclosures equivalent to those for value-in-use calculation should be made. However, there is no impact on the
company as there are no external or internal indicators of impairment.
Standards or Interpretations
3.
The company's significant accounting policies are stated in note 4. Not all of these significant policies require the management to
make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies
the management considers critical because of their complexity, judgment of estimation involved in their application and their impact
on these financial statements. Estimates and judgments are continually evaluated and are based on historical experience, including
expectations of future events that are believed to be reasonable under the circumstances. These judgments involve assumptions or
estimates in respect of future events and the actual results may differ from these estimates. The areas involving a higher degree of
judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows:
a)
b)
2.4.3
Amendments and interpretations to published standards not yet effective

The following amendments and interpretations to existing standards have been published and are mandatory for the
company's accounting periods beginning on or after their respective effective dates:
AS 24 - Related Party Disclosures (revised 2009) effective for annual periods beginning on or after July 01, 2011. The
revision amends the definition of a related party and modifies certain related party disclosure requirements for governmentrelated entities. The amendment would result in certain changes in disclosures.
22
Useful life and residual values of property, plant and equipment

The company reviews the useful lives of property, plant and equipment on regular basis. Any change in estimates in future
years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding
effect on the depreciation charge and impairment.
The following amendments to existing standards have been published that are not applicable to the company's financial
statements:
There are other standards, amendments and interpretations that were mandatory for accounting periods beginning on or
after July 1, 2009 but were considered not to be relevant or did not have any significant effect on the company's operations.
Provision for taxation

The company takes into account the current income tax law and the decisions taken by appellate authorities. Instances
where the company's view differs from the view taken by the income tax department at the assessment stage and where the
company considers that its views on items of material nature is in accordance with law, the amounts are shown as contingent
liabilities.
Amendments to published standards effective in current year not applicable to the company
- IFRIC 18, 'Transfers of Assets from Customers' is effective from 1 July 2009. Entities may enter into transactions where
assets are transferred by a customer in return for connection to a network and/or provision of ongoing access to goods or
services delivered through that network. IFRIC 18 requires an item transferred from a customer to be recognised when it
meets the definition of an asset in the IASB Framework. All relevant facts should be considered to determine whether the
entity controls the item and whether it is probable there will be future economic benefits. The asset is recognised initially at
fair value. The corresponding credit is revenue and recognised in accordance with IAS 18, 'Revenue'.
July 01, 2011

July 01, 2010
Basis of measurement
- IFRS 7 'Financial Instruments : Disclosures' is effective from July 01, 2009. It requires disclosures about the significance
of financial instruments for the company's financial position and performance, as well as quantitative and qualitative
disclosure on the nature and extent to risks, however, it does not have any impact on the classification and valuation of the
company's financial instruments.
- IFRIC 17, Distributions of non-cash assets to owners is effective from 1 July 2009 and states that when a Bank distributes
non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent
changes in the fair value before the liability is discharged, this is recognised in equity. When the non-cash asset is
distributed, the difference between the carrying amount and fair value is recognised in the income statement.
July 01, 2010

July 01, 2013
These financial statements have been prepared under the historical cost convention.
- IAS 39 (Amendment), 'Financial Instruments: Recognition and Measurement' - Reclassification of Financial Assets
(effective from July 1, 2009). This amendment to the Standard permits an entity to reclassify non-derivative financial assets
(other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value
through profit or loss category in particular circumstances. The amendment also permits an entity to transfer from the
available-for-sale category to the loans and receivables category, a financial asset that would have met the definition of
loans and receivables (if the financial asset had not been designated as available-for-sale), if the entity has the intention and
ability to hold that financial asset for the foreseeable future. Its adoption has not had any impact on the company's financial
statements.
- IAS 27, 'Consolidated and Separate Financial Statements' is effective from 01 July 2009, requires accounting for changes
in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transaction.
When the group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with
the gain or loss recognized in the profit or loss.
Effective date (accounting

periods beginning on or after)
IAS 32 - Classification of rights issues

IFRS 9 - Financial instruments
IFRIC 14 - IAS 19 - The limit on a defined benefit assets, minimum funding requirements and
their interaction
IFRIC 19 - Extinguishing financial liabilities with equity instruments
- IAS 38 (Amendment), 'Intangible assets' (effective from July 1, 2009). The amended standard states that a prepayment
may only be recognized in the event that payment has been made in advance of obtaining right of access of goods or receipt
of services. Its adoption has not had any impact on the company's financial statements.
2.4.2
Standards and interpretations to existing standards that are not applicable to the company and not yet effective
4.
Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
4.1
Employees retirement benefits

The main features of the schemes operated by the company for its employees are as follows:
(a)
Defined contribution scheme

A recognized voluntary contributory provident fund scheme is in operation covering all permanent employees. Equal
monthly contributions are made by the company and employees in accordance with the rules of the scheme at 10% of basic
pay.
(b)
Accumulating compensated absences

The company provides for accumulating compensated absences when the employees render service that increases their
entitlement to future compensated absences. Under the company's policy, permanent management employees are entitled
to 10 days sick leaves and 21 days annual leaves per calendar year, sick leaves can be accumulated upto a maximum number
of 30 days, while unutilized annual leaves lapse and can only be encashed in case of death and not upon termination,
resignation or retirement. The contractual employees are not entitled to carry forward sick or annual leaves.
Provisions are made annually to cover the obligation for accumulating compensated absences and are charged to profit and
loss account.
23
Annual Report 2010
4.2
The amortization period and the amortization method for an intangible asset are reviewed, at each financial year end, and
adjusted if impact on amortization is significant.
Taxation
Current
Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for
taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the
profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision
for tax made in previous years arising from assessments framed during the year for such years.
The company assesses at each balance sheet date whether there is any indication that intangible may be impaired. If such
indication exists, the carrying amount of such assets are reviewed to assess whether they are recorded in excess of their
recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their
recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognized, the amortization
charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life.
Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences, unused tax losses and tax credits can be utilized.
4.5
Leases
The company is the lessee:
4.5.1
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates
that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income
statement, except in the case of items credited or charged to equity in which case it is included in equity.
4.3
Leases where the company has substantially all the risks and rewards of ownership are classified as finance leases. Assets
subject to finance lease are initially recognized at lower of present value of minimum lease payments under the lease
arrangements and the fair value of assets. Subsequently these assets are stated at cost less accumulated depreciation and any
identified impairment loss.

Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified
impairment loss. Freehold land is stated at cost. Cost in relation to certain property, plant and equipment comprises
historical cost and borrowing costs referred to in note 14.
Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance
outstanding. The interest element of the rental is charged to profit over the lease term.
The related rental obligations, net of finance cost, are included in liabilities against assets subject to finance lease as referred
to in note 8. The liabilities are classified as current and non-current depending upon the timing of the payment.
Depreciation on all property, plant and equipment except land is charged to profit on the straight line basis so as to write off
the historical cost of an asset over its estimated useful life at the rates given in note 14 without taking into account any
residual value, as considered insignificant.
Assets acquired under a finance lease are depreciated over the useful life of the asset on reducing balance method at the rates
given in note 15. Depreciation on leased assets is charged to the profit and loss account.
The assets' residual values and useful lives are reviewed, at each financial year end, and adjusted if impact on depreciation
is significant. The company's estimate of the residual value of its property, plant and equipment as at June 30, 2010 has not
required any adjustment as its impact is considered insignificant.
Depreciation on additions to property, plant and equipment is charged from the month in which the asset is acquired or
capitalized, while no depreciation is charged for the month in which the asset is disposed off.
Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is
charged for the month in which the asset is disposed off.
4.6
4.7
4.8
Materials in transit are stated at cost comprising invoice value plus other charges paid thereon.
24
Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be
incurred in order to make a sale. Provision is made in the financial statements for obsolete and slow moving stock-in-trade
based on management's estimate.
Intangible Asset
Amortization is charged to income on the straight line basis so as to write off the cost of an asset over its estimated useful
life. Amortization on license acquired has been charged from the month of commencement of commercial production.
Stock in trade
Stock of raw materials, packing materials, work-in-process and finished goods, except for those in transit are valued
principally at the lower of weighted average cost and net realizable value. Cost of work-in-process and finished goods
comprises cost of direct materials, salaries of production staff and appropriate manufacturing overheads.
The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the
carrying amount of the asset is recognized as an income or expense.
Intangible asset represents cost of license acquired to manufacture hydrogen peroxide. Intangible asset is stated at cost less
accumulated amortization and identified impairment loss, if any.
Stores and spares

Stores and spares, except for the 'working solution' are valued at lower of moving average cost and net realizable value.
Write down in stores and spares is made for slow moving and obsolete items. Items in transit are valued at cost comprising
invoice value plus other directly attributable charges incurred thereon. Working solution is valued at lower of weighted
average cost determined on a yearly basis.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be
measured reliably. All other repair and maintenance costs are charged to income during the period in which they are
incurred.
4.4
Capital work in progress

Capital work in progress is stated at cost less any identified impairment loss, if any. Trial production losses are capitalized
till the date of commencement of commercial production as unallocated expenditure.
Initial fill of catalysts is capitalized with plant and machinery whereas costs of subsequent replacements of such catalysts
are included in property, plant and equipment and depreciated on straight line basis over their estimated useful lives.
The company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be
impaired. If such indication exists, the carrying amount of such assets are reviewed to assess whether they are recorded in
excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written
down to their recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable
amount is the higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognized, the
depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful
life.
Finance leases
4.9
Financial instruments
4.9.1
Financial Assets
The company classifies its financial assets in the following categories: available for sale and loans and receivables. The
25
Annual Report 2010
classification depends on the purpose for which the financial assets were acquired.
a)
estimate of the amount can be made. Provisions are reviewed at year end and adjusted to reflect the current best estimate.
Loans and Receivables
4.14
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than twelve months after the balance sheet date, which
are classified as non-current assets. Loans and receivables comprise trade debts, advances, deposits prepayments and other
receivables and cash and cash equivalents except for the finances under markup arrangements.
b)
All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at exchange rates which approximate
those prevailing at the balance sheet date. Transactions in foreign currencies are translated into rupees at the spot rate. All
non-monetary items are translated into rupees at exchange rates prevailing on the date of transaction or on the date when fair
values are determined.
Available for sale

4.15
Available for sale financial assets are non-derivatives that are either designated in this category or are not classified as (a) loans
and receivables, (b) held to maturity investments or (c) financial assets at fair value through profit or loss. They are included in
the non-current assets unless the management intends to dispose off the investment within twelve months of the balance sheet
date.
Financial Liabilities
4.16
5.
102,000,000
102,000,000
4.12
6.
26
1,020,000,000
695,000,000
325,000,000
1,020,000,000
1,020,000,000
8,725,250
7,439,800
10,062,300
1,953,200
92,054
8,725,250
7,500,000
10,430,398
1,953,200
92,054
28,272,604
28,700,902
Long term finances - secured

2010
Rupees
Less: Current portion shown under current liabilities
Borrowings
Borrowings are recorded at the proceeds received. In subsequent periods, borrowings are stated at the amortized cost using the
effective yield method.
4.13
102,000,000
Descon Corporation (Private) Limited

Descon Engineering Limited
Descon Chemicals (Private) Limited
Descon Holdings (Private) Limited
Interworld Travels (Private) Limited
Trade debts
Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash
equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of change in value and finances under mark-up
arrangements. In the balance sheet, finances under mark-up arrangements are included in current liabilities.
32,500,000
Ordinary shares of Rs 10 each fully paid in

cash as at the beginning of the year
Issuance of shares against cash
Ordinary shares of Rs 10 each fully paid in
in cash as at June 30
2009
Rupees
2010
2009
(Number of shares)
Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding
amounts at the period end. Bad debts are written off when identified.
4.11
69,500,000
2010
Rupees
Ordinary shares of the company held by associated undertakings as at year end are as follows:
Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally
enforceable right to set off the recognized amount and the company intends either to settle on a net basis or to realize the assets
and to settle the liabilities simultaneously.
4.10
Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and rates applicable
thereon.
Issued, subscribed and paid up capital
2010
2009
(Number of shares)
A financial liability is de-recognized when the obligation under the liability is discharged, cancelled or expired. When an
existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as de-recognition of the original
liability and the recognition of a new liability and the difference in the respective carrying amounts is recognized in the profit
and loss account.
Offsetting of financial assets and liabilities
Revenue recognition
Revenue from sales is recognized on dispatch/shipment of goods to customers.
All financial liabilities are recognized at the time when the company becomes a party to the contractual provisions of the
instrument.
4.9.3
The financial statements are presented in Pak Rupees, which is the company's functional and presentation currency.
Borrowing costs
Mark up, interest and other charges on borrowings are capitalized up to the date of commissioning of the respective plant
and machinery, acquired out of the proceeds of such borrowings. All other mark-up, interest and other charges are charged
to income.
Investments classified as available for sale are initially measured at cost, being the fair value of consideration given. At
subsequent reporting dates, these investments are measured at fair value (quoted market price), unless fair value cannot be
reliably measured. The investments for which a quoted price is not available, are measured at cost as it is not practical to apply
any other valuation methodology. Unrealized gain and losses arising from changes in the fair value are included in the fair value
reserve in the period in which they arise.
4.9.2
Foreign currency transactions and translation
- note 6.1
- note 9
2009
Rupees
1,469,818,187
189,596,591
1,469,818,187
-
1,280,221,596
1,469,818,187
Liabilities for trade creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid
in future for the goods and/or services received, whether or not billed to the company, exemptions available.
This loan has been obtained from a consortium of financial institutions led by Allied Bank Limited to finance the capital expenditure in
relation to the hydrogen peroxide plant installation, construction and fabrication project. It is secured by way of hypothecation charge
over all present and future fixed assets, wherever situated other than the immovable property and first pari passu mortgage charge over
immovable property. It carries markup at six month KIBOR plus 2.75% per annum and is payable semi annually. The effective markup
charged per annum ranges from 15.13% to 16.77%. Out of the aggregate facility of Rs 1.470 billion (2009: Rs 1.470 billion), the amount
availed as at June 30, 2010 is Rs 1.470 billion (2009: 1.470 billion) repayable in 9 semi annual installments commencing in August 2010.
Provisions are recognized when the company has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
The company has requested its lenders to restructure the syndicate loan for relaxation in terms, including the payment period and the
company believes that the lenders are principally in agreement with the restructuring plan.
Finance costs are accounted for on an accrual basis and are included in accrued finance cost to the extent of the amount
remaining unpaid.
6.1
27
Annual Report 2010
As specified in the restructuring plan prepared by the company, the sponsors have already converted a current payable of Rs 276.78
million into a long term unsecured loan as referred to in note 7.1 and provided additional funds of Rs 132 million as a long term
unsecured loan (note 7.2 and 7.3).
7.
In case of delay in the repayments under the finance agreement compensation at 20% per annum on the overdue amount will be
charged.
2010
2009
Rupees
Rupees
Long term finances - unsecured
From associated company :
- Descon Engineering Limited - Loan 1
- note 7.1
276,784,832
- Descon Engineering Limited - Loan 2
- note 7.2
112,000,000
- Interworld Travels (Private) Limited - Loan 3
- note 7.3
20,000,000
408,784,832
7.1
2010
Rupees
9.
Current portion of long term liabilities

Liabilities against assets subject to finance lease - secured
7.3
10.
Running finance
Term finance
Bill discounting facility
Bridge loan
This loan was granted by DEL, an associated company on June 30, 2010 by converting its short term non-interest
bearing receivables of Rs 276.78 million into an un-secured interest bearing long term loan. The loan is repayable in
one installment in June 2015 and the markup is payable only after 50% of the facility under note 6 has been discharged.
The loan carries markup at six month KIBOR plus 2.75%.
The loan was disbursed to the company under an agreement dated May 19, 2010 by DEL, an associated company. This loan
is repayable in one installment in May 2015 and the markup is payable only after 50% of the facility under note 6 has been
discharged. Mark-up charged on the loan is six months KIBOR plus 2.00%.
2010
Rupees
8.
10.2
141,191,038
10.3
Taxes, repairs and insurance costs are to be borne by the company.

The lease is secured against cross corporate guarantee of Descon Engineering Limited and personal guarantee of Mr Abdul Razzaq
Dawood.
The amount of future payments of the lease and the period in which these payments will become due are as follows:
Minimum
Lease
payments
Finance
cost not
due
Present value of lease

Liability
2010
2009
22,350,000
21,344,506
1,005,494
160,513,113
19,322,075
141,191,038
182,863,113
40,666,581
142,196,532
Rupees
Not later than one year
Later than one year and not later
than five years
28
2009
Rupees
- note 10.1
- note 10.2
- note 10.3
- note 10.4
141,029,795
45,443,420
100,000,000
199,319,520
60,000,000
-
286,473,215
259,319,520
Running finance
Term finance
Bill discounting facility

This represents the bill discounting facility of Rs 50 million (2009: Nil) availed from Bank AL-Habib Limited to meet the
working capital requirements of the company. The bills are discounted on 30 to 60 days on a markup of one month KIBOR
plus 1%.
10.4
Bridge Loan
This head represents the short term bridge loan of Rs 100 million (2009: Nil) availed from KASB bank in order to meet the
working capital requirements of the company. The loan carries a markup of 3 month KIBOR reviewed on first working day
of every calendar quarter on the basis of arithmetic mean of previous six working days plus 2.5% per annum. The rate of
mark up is Re 0.41 per 1000 per diem.
The finance lease is repayable in 48 monthly installments in arrears, with a grace period of 6 months.
The minimum lease payments have been discounted at an implicit interest rate of 18.39% to arrive at their present value. In case of
default in any payment, an additional charge at the rate of 0.1% per day shall be paid.
190,602,085
This has been repaid during the year.
2009
Rupees
142,196,532
(1,005,494)
This represents the outstanding balance against the running finance facility of Rs 200 million (2009: Rs 200 million) under
markup arrangement from Bank Al-Habib Limited to meet the working capital requirements of the company. It carries
markup of 3 months average KIBOR reviewed on first working day of every calendar quarter on the basis of arithmetic
mean of previous six working days plus 1% per annum. The markup charged during the year ranges from Re 0.37 to Re 0.38
per 1000 per diem on the outstanding balance or part thereof.

Present value of minimum lease payments
Less:
Current portion shown under current liabilities - note 9
189,596,591
1,005,494
Finances under mark up arrangements - secured
This loan has been obtained from Interworld Travels (Private) Limited, an associated company, in order to meet the
working capital requirements of the company. During the period the loan carried markup on the basis of 3 month KIBOR on
the date of disbursement plus 1%. The markup charged during the year ranged from Re 0.36 to 0.37 per 1000 per diem. The
facility is unsecured. The loan was originally payable within one year of disbursement but pursuant to an agreement dated
June 30, 2010 the loan is repayable in one installment in June 2015 and the markup is payable only after 50% of the facility
under note 6 has been discharged. As per the new terms the loan carries markup on the basis of 6 month KIBOR as on the
date of execution of the agreement, to be reset every 6 month, plus 100 bps.
- note 6
- note 8
2010
Rupees
10.1
7.2
2009
Rupees
The bridge loan is repayable by 30 September, 2010.

10.5
Securities
The facilities availed from Bank-Al Habib Limited are under common security, through a first charge over current assets of
the company for Rs. 530 million and personal guarantee of Mr Taimur Dawood for Rs 120 million. The Bill discounting
facility is further secured by way of ranking charge over the fixed assets of the company for Rs 150 million and lien over the
bills of a customer.
The bridge loan from KASB bank is secured against ranking charge over present & future fixed assets of the company
(including land, building, plant & machinery) for Rs 134 million and a personal guarantee of Mr Abdul Razak Dawood.
Of the aggregate facility of Rs 75 million (2009 : Rs 75 million) for opening of letter of credit for import of machinery, raw
material and stores and Rs 50.027 million (2009 : Nil) for letter of guarantee from a consortium of banks the amount utilized
at June 30, 2010 was Rs 60,791 million (2009: Rs 26.685) and Rs 50.027 (2009 : Nil) respectively.
29
Annual Report 2010
Freehold land
247,430,720
101,315,554
33,331,661
(149,189,803)
1,217,715
2,117,846,296
248,648,435
101,315,554
Cost as at
June 30,
2010
46,745,619
3,960,294
Accumulated
depreciation
as on
July 1, 2009
135,196,505
(6,993,265)
12,554,377
Depreciation
charge/
(deletions)
for the year
174,948,859
16,514,671
Accumulated
depreciation
as on
June 30, 2010
1,942,897,437
232,133,764
101,315,554
Net book
value
as on
June 30, 2010
6.25
Rate of
depreciation
%
51,237
18,263
10,522,411
9,476,630
77,031,221
3,053,981
6,974,977
83,029,858
-
97,582,590
92,506,488
Contingencies and commitments

Contingencies
(i)
(ii)
Guarantee issued to Sui Northern Gas Pipeline against the performance of a contract amounting to Rs 48.64 million
(2009: Rs 48.64 million).
Claims not acknowledged as debts amounting to Rs Nil (2009: Rs 15.150 million)
13.2
Commitments
The company has the following commitments in respect of:

Letters of credit other than capital expenditure Rs 44.126 million (2009: Rs 28.930 million).
Contract for capital expenditure amounting to Rs Nil (2009: Rs 3.222 million) .
(Rupees)
13.1
2010
As at June 30
Additions/
(deletions)
18,263
Cost as at
July 1,
2009
18,263
32,974
14.
Buildings on freehold land
2,233,704,438
6.25
Plant, machinery and equipment
12,821,515
20
1,150,488
51,161
893,991
19,026
256,497
15,109
13,972,003
3,917
427,781
70,187
13,544,222
6.25
As at July 01
Add: provision for the year
Finances under markup arrangements - secured

Long term finances
- secured
- unsecured
Liabilities against assets subject to finance lease - secured
30
Lab equipment
70,187
3,570,766
Workers' welfare fund
(i)
(ii)
Material handling
324,615
11.4
2009
Rupee
236,193
2010
Rupees
88,422
This includes an amount of Rs Nil (2009: Rs 199.871 thousand) payable to the company's provident fund.
3,895,381
983,432
25,424,230
3,895,381
(2,316)
985,748
Tools and equipment
20
11.3
23,742,161
754,387
927,682
33.33
204,142
20
Descon Chemicals Private Limited

Descon Corporation Private Limited
Descon Engineering Limited
1,802,533
172,144
3,425,846
10
These are interest free and represent expenses incurred by related

parties on behalf of the company:
3,091,522
75,257
1,266,571
6,666,830
20
11.2
2009
Rupee
1,550,714
96,887
919,254
(25,520)
663,426
2,174,343
2010
Rupees
1,540,808
376,286
372,837
544,012
(7,027)
1,883,040
Trade creditors includes interest free amount due to associated companies amounting to Rs 9.85 million (2009: 281.248
million) and is in the normal course of business.
4,894,055
4,692,417
126,441
893,976
(357,500)
404,005,888
350,227
24,800
(43,800)
7,330,256
1,346,564
2,307,063,891
157,611,939
4,543,828
4,711,417
5,512,137
(281,100)
4,057,383
200,034,362
- note 11.4
374,637,005
4,872,806
983,432
23,075,525
229,259
18,263
189,598
Computer equipment
Office equipment
2,099,219
794,000
(825,000)
152,879,388
(7,383,312)
- note 11.2
- note 11.3
77,155,136
19,885,331
7,287,573
25,424,230
27,686,067
122,365
51,237
-
376,286
Furniture and fixture
4,088,383
54,538,286
- note 11.1
Electrical equipment
Vehicles
2,507,098,253
11.1
13.
41,658,321
(150,339,703)

Trade creditors
Bills payable
Advances from customers
Associated undertakings
Accrued and other liabilities
Withholding tax payable
Workers' welfare fund
Other payables
12.
2,615,779,635
11.
2009
Rupees
2010
2010
Rupees
31
Cost of goods sold

Distribution and selling cost
The depreciation charge has been allocated as follows:
2,526,785,304
(35,284)
2,615,779,635
-
1,346,564
54,538,286
-
817,677
53,433,243
(10,474)
528,887
1,115,517
-
- note 27
- note 28
- note 29
126,441
105,461
20,980
152,879,388
151,775,051
1,050,252
54,085
2010
Rupees
372,837
333,626
(10,474)
49,685
Cost
Cost
6,993,265
depreciation
Accumulated
depreciation
467,500
142,196,538
Book value
Book value
281,102
568,804
142,196,532
Sale proceeds
Sale proceeds
Negotiation
Negotiation
Disposal
14.1
89,029,615
-
4,088,383
2,099,219
96,887
66,669
30,218
149,189,803
357,500
292,353
143,046,438
Mode of
825,000
32,547
142,956,391
Rupees
324,900
7,383,312
2009
4,088,383
1,750,869
4,711,417
376,286
1,540,808
1,055,061
485,747
33.33
20
20
10
20
3,003,020
279,399
4,338,580
1,972,778
2,741,819
53,433,243
50,392,639
2,983,937
56,667
2009
Rupees
2,561,241,349
-
6.25
3,806,959
Sold to
Disposal of Property, plant and equipment
Particulars of assets
Outside parties
150,339,703
Rate of
depreciation
%
6.25
Vehicles
348,350
4,493,636
(35,284)
154,086
4,543,828
88,422
88,422
20
66,270
14.2
Plant and Machinery
Furniture and fixture
253,065
222,200
Electrical equipment
2,462,968
3,895,381
3,917
3,917
6.25
13,287,725
Net book
value
as on
Jun 30, 2010
Orix Leasing
Office equipment
2,080,860
Computer equipment
3,895,381
70,187
6.25
2,186,958,819
Accumulated
depreciation
as on
June 30, 2010
137,012,283
(Outside parties)
Tools and equipment
70,187
101,315,554
243,470,426
Rate of
depreciation
%
Net book
value as on
June
30, 2009
Depreciation
charge/
(deletions)
for the year
5,184,249
137,012,283
-
Vehicles
Material handling
256,497
256,497
13,544,222
13,544,222
46,745,619
46,745,619
2,233,704,438
2,233,704,438
3,960,294
3,960,294
247,430,720
247,430,720
101,315,554
19,278,797
Accumulated
depreciation
as on
June 30, 2009
Accumulated
depreciation
as on
July 1, 2009
5,184,249
5,184,249
-
Mr. Adnan
Lab equipment
Buildings on freehold land
82,036,757
Depreciation
charge/
(deletions)
for the year
Cost as at
June 30,
2010
5,184,249
-
Other Assets having book value below Rs. 50,000
Freehold land
Additions/
(deletions)
Accumulated
depreciation
as on
July 1, 2008
Cost as at
June 30,
2009
(Rupees)
Additions/
(deletions)
142,196,532
(Rupees)
Cost as at
July 1,
2009
142,196,532
142,196,532
-
Assets subject to finance lease
142,196,532
-
15.
2010
2010
2009
32
15.1 The amortization charge for the year has been allocated to cost of sales as referred to in note 27.
Cost as at
July 1,
2008
2009

Annual Report 2010
33
Annual Report 2010
2010
Rupees
16.
16.1.4
Capital work-in-progress
Civil works
Unallocated expenditure
Advances
16.1
- note 16.1
- note 16.2
40,341,262
3,062,042
-
37,529,742
3,062,042
10,594,043
43,403,304
51,185,827
Unallocated expenditure incurred to date

Unallocated expenditure capitalized
16.2
3,062,042
- note 16.1.1
- note 16.1.2
- note 16.1.3
- note 16.1.4
109,739,978
12,778,418
106,338
1,031,090
365,452
568,365
2,756,820
7,590,527
9,954,815
2,103,312
1,205,384
2,060,784
3,062,042
-
132,174,675
5,580,876
1,325,131
36,493,789
2,253,104
218,348,880
328,088,858
(325,026,816)
3,062,042
3,062,042
Salaries, wages and other benefits include Rs Nil (2009: Rs 481.513 thousand) in respect of defined contribution scheme.
16.1.2
Markup on long term loan is net of markup income on bank deposits amounting to Rs Nil (2009: Rs 856.409 thousand)
16.1.3
Trial run operating loss

2010
Rupees
-
Sales
- note 16.1.3.1
17.
274,457
3,203,114
7,116,472
10,594,043
2010
Rupees
2009
Rupees
83,329,342
(17,856,288)
72,376,438
16,905,000
(5,952,096)
65,473,054
83,329,342
Intangible asset
Cost as at July 01
Additions during the year
Amortization during the year
Cost as at June 30
This represents non-exclusive and non-transferable right and license for the production of hydrogen peroxide acquired from
Chematur Ecoplanning Oy, Finland and is being amortized over 5 years.
18.
- note 18.1
Cost as at June 30
18.1
19.
2010
Rupees
2009
Rupees
12,917,133
83,845,879
(17,183,390)
865,093
12,052,040
-
79,579,622
12,917,133
(417,739,828)
502,986,399
(426,306,592)
454,178,716
85,246,571
27,872,124
Long term deposits

Cost as at July 01
Security deposits paid during the year
Security deposits repaid/adjusted during the year
These are in the normal course of business and interest free.
Deferred taxation
The asset for deferred taxation comprises temporary differences in:
Accelerated tax depreciation
Unused tax losses
2009
Rupees
45,412,020
48,854,143
12,745,430
162,890
174,547
232,367
233,056
3,818,898
10,726,801
25,376,626
2,997,399
1,720,716
1,246,384
813,670
109,102,927
(2,027,963)
107,074,964
(25,169,155)
81,905,809
(36,493,789)
2009
Rupees
Advances
Civil works
Plant and machinery
Others
16.1.1
Cost of goods sold

Raw material consumed
Salaries, wages and other benefits
Medical facility
Vehicle running and maintenance
Communication
Printing and stationery
Traveling and entertainment
Contractor services charges
Electricity
Rent and rates
Insurance
Repair and maintenance
Miscellaneous
Cost of goods manufactured
Less: Work in process at conclusion of trial production run
Cost of goods produced during trial production run
Less: Finished goods at conclusion of trial production run
This includes borrowing cost capitalized of Rs Nil (2009: Rs 184.002 million) in aggregate.
2010
Rupees
Unallocated expenditure
Opening balance
Expenses incurred during the year:
Medical facility
Communication
Traveling and entertainment
Contractor services charges
Electricity
Rent and rates
Insurance
Legal and professional fee
Markup on:
Long term loan - secured
Finances under markup arrangement - secured
Site development
Miscellaneous
34
16.1.3.1 Salaries, wages and other benefits include Rs Nil (2009: Rs 326.099 thousand) in respect of defined contribution scheme.
2009
Rupee
Tax losses amounting to Rs 98.608 million and Rs 87.097 million expire in the year 2015 and the year 2016, respectively. The
company has not recognized deferred tax assets of Rs 64.997 million (2009: Rs 36.963 million) and Rs 10.269 million (2009: Nil) in
respect of the business tax loss and minimum tax under section 113 of the income tax ordinance available for carry forward based on
prudence principle as sufficient tax profits may not be available to set these off.
20.
Stores and spares

Stores and spares include working solution of Rs 68.240 million (2009: Rs 68.816 million) and items which may result in fixed
capital expenditure but are not distinguishable.
21.
Stock in trade
Raw materials [including in transit of Rs 21.153 million (2009: 2.494 million)]
Packing material
Work-in-process
Finished goods [including in transit of Rs Nil (2009: Rs 2.144 million)]
33,034,744
674,738
3,125,173
14,160,334
15,811,981
202,193
2,604,030
37,450,921
50,994,989
56,069,125
35
Annual Report 2010
22.
These are unsecured considered good receivables including Rs 328,887 due from Descon Engineering Limited, an associated of the
company.
2010
Rupees
26.
2010
Rupees
23.
2009
Rupees
Available for sale - at cost

Add : fair value gain during the year
11,221,051
11,221,051
437,146
11,658,197
This relates to investment in an open ended mutual fund maintained by MCB by the name of cash optimizer fund. It is a
money market fund which makes investments in fixed income instruments with a maximum maturity of 180 days and
weighted average maturity up to 90 days. The fund has been maintained to meet the company's liquidity requirements. The
return on the fund is in the form of bonus units and cash dividend.
2010
2009
Rupees
Rupees
Advances, deposits, prepayments and other receivables.
Sales
Gross sales:
- Local
- Export
Investment - available for sale
2009
Rupees
Less: Commission on sales

Less: Trade discount
677,711,429
41,217,121
718,928,550
(9,256,387)
-
191,970,480
22,828,199
214,798,679
(2,672,938)
(20,791,125)
709,672,163
191,334,616
23.1
24.
Advances to suppliers
Advances to employees
Prepayments
Recoverable from government:
- Income tax
- Special excise duty
- Sales tax
- note 24.1
Security deposits
Other receivables
24.1
9,693,755
92,500
1,777,822
6,416,312
10,000
6,884,871
18,128,204
83,815,240
101,943,444
14,889,366
12,449,013
98,826,121
126,164,500
1,393,297
-
1,274,441
11,376
114,900,818
140,761,500
These are interest free advances for traveling and general expenses. These include an aggregate amount of Rs Nil (2009: Rs
10,000) receivable from the executives of the company. Maximum aggregate amount due from executives of the company
at the end of any month during the current year was Rs Nil (2009: Rs 189,290 thousand)
2010
Rupees
25.
2009
Rupees

At banks on:
- Saving accounts
- Current accounts
- Term deposit accounts
In hand
36
- note 25.1
- note 25.2
48
43,513,897
16,500,000
60,013,945
154,129
355
3,228,089
3,228,444
60,683
60,168,074
3,289,127
25.1
Profit on balances in savings accounts ranges from 5% to 12% per annum (2009: 5% to 12% per annum)
25.2
This represents amount in Habib Metropolitan Bank Limited for deposit account, redeemable in one month. It carries markup at the rate of 10.25 %
2010
Rupees
27.
2009
Rupees
(Restated)
Cost of sales
Raw materials consumed
Repair and maintenance
Production supplies
Fuel and power
Services through contractors
Traveling
Communication
Rent and rates
Depreciation on property, plant and equipment
Depreciation on assets subject to finance lease
Amortization on intangible assets
Insurance
Loading and unloading
Safety items consumed
Miscellaneous
Add: Opening work in process
Work in process at conclusion of trial production run
Less: Closing work in process
Cost of goods produced
Add: Opening finished goods
Finished goods at conclusion of trial production run
Less: Closing finished goods
27.1
- note 27.1
- note 14.1
- note 15
- note 17
254,049,994
40,379,640
15,744,719
13,011,605
98,670,894
563,289
54,998,033
224,461
553,835
151,775,052
5,184,249
17,856,288
5,246,664
535,605
2,309,791
661,104,119
2,604,030
(3,125,173)
(521,143)
660,582,976
37,653,114
(14,835,072)
22,818,042
110,105,439
14,257,106
1,642,516
6,887,390
35,506,850
475,664
5,722,527
2,732,899
183,670
2,554,220
50,392,639
5,952,096
1,778,900
1,433,414
367,524
1,232,075
241,224,929
2,027,963
(2,604,030)
(576,067)
240,648,862
25,169,155
(37,653,114)
(12,483,959)
683,401,018
228,164,903
Salaries, wages and other benefits include provident fund contribution of Rs 1,585.45 thousand (2009: Rs 260.338
thousand ) by the company.
37
Annual Report 2010
2010
Rupees
28.
2009
Rupees
30.
Salaries, allowances and other benefits
Services through contractor
Medical facility
Entertainment
Communication
Printing and stationary
Traveling and conveyance
Charity and donation
Insurance
Fees and subscriptions
Rent and Rates
Legal and professional fee
Advances written off
Others
28.1
28.2
- note 28.1
- note 28.2
- note 14.1
17,443,688
360,807
44,475
757,738
327,857
1,028,634
499,443
116,515
5,316,531
9,382,007
1,050,252
820,691
1,513,856
13,516,133
3,900,944
296,433
65,094
891,086
403,259
1,126,419
2,352,645
33,633
86,827
88,494
504,348
6,510,699
2,983,937
1,401,357
38,662,494
34,161,308
Workers' Welfare Fund

Exchange loss
2010
Rupees
Statutory audit
Half yearly review
Certification Charges
Out of pocket expenses
1,041,472
831,383
- note 29.1
Gain on sale of fixed assets

Scrap sales
Others
- note 14.1
1,502,710
49,012
25,882
115,296
454,517
636,340
12,460
4,813
6,758,619
56,667
857,201
42,583,427
10,473,517
Salaries, wages and other benefits include provident fund contribution of Rs 104.39 thousand (2009: Rs 51.548 t h o u s a n d )
by the company.
35,096
2009
Rupees
51,746
1,246,051
1,297,797
90,047
5,645,147
4,512
5,739,706
7,037,503
2010
Rupees
592
592
592
2009
Rupees
Finance cost
Interest and mark-up on:
- Long term finances
- secured
- unsecured
- Finances under markup arrangement - secured
- Liabilities against assets subject to finance lease
Bank charges and others
2009
Rupees
11,369,696
128,478
18,829
55,480
476,308
20,000
268,625
15,396
29,854,583
54,085
321,947
101,460
Income from non-financial assets
32.1
- note 32.1
226,673,029
3,053,981
46,857,190
6,974,977
4,506,355
79,385,748
15,549,306
1,284,516
288,065,532
96,219,570
This includes penalties levied by lenders of Rs 747,625 due to delayed payments.
Distribution and selling cost

Salaries, allowances and other benefits
Medical facility
Entertainment
Communication
Traveling and conveyance
Advertisement
Insurance
Loading and unloading charges
Freight and forwarding
Others
18,263
16,833
Other operating income
Interest on bank deposits

Gain on sale of investment
2009
Rupees
600,000
200,000
31,383
32,974
68,486
Income from financial assets
32.
650,000
250,000
100,000
41,472
2010
Rupees
29.1
- note 11.4
2010
Rupees
31.
2009
Rupees
Other operating expenses
Salaries, wages and other benefits include provident fund contribution of Rs 215.34 thousand (2009: Rs 435.687 thousand)
by the company.
Auditors remuneration
The charges for legal and professional services include the following in respect of auditors services for:
29.
2010
Rupees
2010
Rupees
33.
Taxation
2009
Rupees
(Restated)
For the year

- Current
- Deferred
Prior year
- Current
- Deferred
33.1
(10,681,278)
80,098,184
69,416,906
228,282
(23,477,343)
(23,249,061)
(22,723,737)
(22,723,737)
(4,394,781)
(4,394,781)
46,693,169
(27,643,842)
In view of the available income tax losses, the provision for current taxation represents tax under 'Final Tax Regime' and tax
on minimum turnover under section 113 of the Income Tax Ordinance, 2001. Minimum tax under section 113 is available for
set off for 5 years against normal tax liability arising in future years whereas tax under 'Final Tax Regime' is not available for
set off against normal tax liabilities arising in future years.
For the purposes of current taxation, the tax losses available for carry forward including pre-commencement expenditure as
at June 30, 2010 are estimated approximately at Rs 1,622.809 million (2009: Rs 1,375 million).
38
39
Annual Report 2010
33.2
2010
%
Tax charge reconciliation
2009
%
(Restated)
36.
Remuneration of Chief Executive, Directors and Executives
Numerical reconciliation between the average effective tax rate and the applicable tax rate
Applicable tax rate
Tax effect under presumptive regime
Tax losses for which no deferred tax asset is recognized
Effect of change in prior years tax and rounding off
35.00
(5.28)
(9.07)
(6.76)
(21.11)
35.00
(4.30)
(17.61)
2.46
(19.45)
Average effective tax rate charged to profit and loss account
13.89
15.55
2010
Rupees
34.
Loss per share

34.1
Rupees
Weighted average number of ordinary shares

in issue during the year
Number
Loss per share
Rupees
(289,411,096)
102,000,000
(2.84)
(150,075,344)
37.
2010
Rupees
Profit/(loss) before working capital changes
1,400,995
128,976
28,520
-
3,752,953
214,797
18,857
60,000
81,139
753,992
6,174
35,923
-
14,190,779
647,464
194,295
1,524,835
21,107,273
1,149,091
435,689
800,092
1,031,908
1,558,491
4,127,746
796,089
16,557,373
24,524,053
17
20
96,746,575
(1.55)
i. Associated undertakings
- note 14
- note 15
- note 17
- note 31
- note 30
- note 30
- note 31
- note 28
- note 32
2009
Rupees
(Restated)
(336,104,265)
(177,719,186)
152,879,388
5,184,249
17,856,288
(90,047)
32,974
68,486
(51,746)
820,691
(1,246,051)
283,559,166
53,433,243
5,952,096
2,026,965
498,850
18,263
16,833
(592)
94,935,054
122,909,133
(20,838,474)
ii. Post employment benefit

plans
Purchase of goods and services

Purchases in respect of
Fixed capital expenditure
Sale of goods
Disposal of asset
Share of common expenses
Mark-up expense
Sale of scrap
Expense charged in respect of retirement
contribution plans
Increase in current liabilities

- Creditors, accrued and other liabilities
Cash generated from operations
(2,482,055)
5,074,136
(25,616,780)
16,812,977
10,716,807
49,497,724
7,609,625
398,223
281,100
24,693,043
3,053,981
-
662,843,752
2,961,802
1,905,176
1,555,185
All transactions with related parties are carried out on commercial terms and conditions.
38.
Cash and cash equivalents

Finances under mark up arrangements - secured
39.
- note 25
- note 10
(118,022,718)
(56,069,125)
(1,103,554)
(94,186,213)
60,168,074
(286,473,215)
3,289,127
(259,319,520)
(226,305,141)
(256,030,393)
Capacity and production

Planned
Production
Capacity
(Increase)/ decrease in current assets

Stores, spares and loose tools
Stock in trade
Trade debts
Advances, deposits, prepayments and other receivables
Executives
30 June
30 June
2010
2009
Transactions with related parties
Effect on cash flow due to working capital changes:
Directors
The related parties comprise of associated undertakings, key management personnel and post-employment benefit plan. The company
in the normal course of business carries out transactions with various related parties. Amounts due from and due to related parties are
shown under receivables and payables and remuneration of the key management personnel is disclosed in note 37. Other significant
transactions with related parties are as follows:
2010
2009
Rupees
Rupees
Diluted earnings per share
Cash flow from operating activities

Loss before taxation
Adjustment for:
- Depreciation on property, plant and equipment
- Depreciation on assets subject to finance lease
- Amortization of intangible assets
- Provision for accumulating compensated absences
- Gain on disposal of fixed assets
- Provision for leave fare assistance
- Provision for workers welfare fund
- Net exchange loss
- Interest from bank deposits
- Advances written off
- Gain on sale of investment
- Finance cost
30 June
2009
No. of persons
Diluted earnings per share has not been presented as the company doesn't have any convertible instrument in issue as at
June 30, 2010 and June 30, 2009 which would have any effect on the earnings per share if the option to convert is exercised.
35.
30 June
2010
The company provides company maintained car to the Chief Executives and certain executives.
Basic loss per share

Loss for the year
34.2
2009
Rupees
(Restated)
Remuneration
Provident Fund
Medical facility
Leave passage
Reimbursable expenses
Chief Executive
30 June
30 June
2010
2009
Production of hydrogen peroxide

(on 100% concentration and
based on 360 working days)
Metric
Tonnes
Production of packing material

(based on 360 working days)
Number
Commercial
production
2010
Trial
production
2009
Commercial
production
2009
15,000
10,070
1,194
3,945
1,080,000
561,837
86,116
231,794
The shortfall is due to stoppages in supply of gas.

25,104,695
18,892,973
334,356,210
64,974,600
141,802,106
44,136,126
40.
Financial risk management objectives

40.1
Financial risk factors

The company's activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and
40
41
Annual Report 2010
interest rate risk), credit risk and liquidity risk. The company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance.
(b)
Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. Company's credit risk is primarily attributable to its trade debts and its balances at
banks. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was as follows:
2010
2009
Rupees
Rupees
Risk management is carried out by the Board of Directors (the Board).

(a)
Market risk
(I)
Currency risk
Credit risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that
exist due to transactions in foreign currencies. The company is exposed to foreign currency exchange risk in respect of
commitments against Letter of Credits in foreign currency. The management does not view hedging as being financially
feasible.
The company's foreign exchange risk exposure is limited to the outstanding foreign currency balances payable or
receivable at any balance sheet date. The company has no outstanding foreign currency balances as at June 30, 2010.
(ii)
Other price risk
(iii)
Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused
by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments
traded in the market. The company is not exposed to equity price risk as it does not have any exposure in equity securities.
Interest rate risk
Trade debts
Long term deposits
Advances, deposits, prepayments and
other receivables
Investment - Available for sale
Bank balances
Rating
Short term
Habib Metropolitan Bank Limited
Habib Bank Limited
KASB Bank Limited
Allied Bank Limited
Bank AlHabib Ltd.
At the balance sheet date, the interest rate profile of the company's interest bearing financial instruments was:
Floating rate instruments

Financial liabilities
Long term finances
- secured
- unsecured
Finances under markup arrangement - secured
48
16,500,000
2009
Rupees
(c)
1,469,818,187
259,319,520
-
2,307,272,766
1,729,137,707
1,274,441
3,228,444
18,647,620
A1+
A1+
A1
A1+
A1+
Rating
Long term
Agency
AA+
AA+
A
AA
AA+
Pacra
Pacra/JCR
Pacra
Pacra
Pacra
2010
Rupees
22,491,790
3,796,281
48
23,117,809
10,608,017
60,013,945
2009
Rupees
669,725
374,096
355
2,184,268
3,228,444
Due to the company's long standing business relationships with these counterparties and after giving due consideration
to their strong financial standing, management does not expect non-performance by these counter parties on their
obligations to the company. Accordingly, the credit risk is minimal.
355
1,469,818,187
408,784,832
286,473,215
142,196,532
1,393,297
11,658,197
60,013,945
179,420,957
The credit quality of cash and bank balances that are neither past due nor impaired can be assessed by reference to
external credit ratings (if available) or to historical information about counterparty default rate:
Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Borrowings obtained at variable rates expose the company to cash flow interest rate risk.
Fixed rate instruments

Financial assets
Saving bank accounts
Term deposit account
1,227,602
12,917,133
The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The
company believes that it is not exposed to major concentration of credit risk as its exposure is spread over a large
number of counter parties and trade debts are subject to specific credit ceilings.
As the company has no significant interest-bearing assets, the company's income and operating cash flows are substantially
independent of changes in market interest rates.
2010
Rupees
26,775,896
79,579,622
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.
The company manages liquidity risk by maintaining sufficient cash and bank balances and the availability of funding
through an adequate amount of committed credit facilities. At June 30, 2010 the company had borrowing limits available
from financial institutions at Rs 58.970 million, investment available for sale at Rs 11.658 million and Rs 60.168 million in
cash and bank balances. The company follows an effective cash management and planning policy to ensure availability of
funds and to take appropriate measures for new requirements.
Fair value sensitivity analysis for fixed rate instruments

All of the following financial liabilities are exposed to profit / mark-up rate risk except trade and other payables
The company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a
change in interest rate at the balance sheet date would not affect profit or loss of the company.
Cash flow sensitivity analysis for variable rate instruments
If interest rates on saving bank accounts, long term loan and finances under mark-up arrangement, at the year end date, had
been 1% higher / lower with all other variables held constant, loss after taxation for the year would have been Rs 15.494 million
(2009: Rs 9.452 million) higher / lower, mainly as a result of higher / lower interest expense on floating rate borrowings.
42
43
Annual Report 2010
Carrying
amount
Less than
one year
(Rupees)
FORM OF PROXY
More than
one year
IMPORTANT
The following are the contractual maturities of financial liabilities as at June 30, 2010:
Short term running finance
Long term finances
- secured
- unsecured
286,473,215
97,582,590
157,611,939
286,473,215
97,582,590
157,611,939
1,469,818,187
408,784,832
189,596,591
-
1,280,221,596
408,784,832
142,196,532
1,005,494
141,191,038
2,562,467,295
732,269,829
1,830,197,466
This form of proxy, in order to be effective, must be deposited

duly completed, at the Companys Registered Office at Descon
Head Quarter, 18-KM, Ferozepur Road, Lahore not less than 48
hours befre the time of holding the meeting.
A Proxy must be member of the Company. Signature should
agree with the specimen register with the Company
Please quote registered Folio / CDC Account numbers
The following are the contractual maturities of financial liabilities as at June 30, 2009:
Short term running finance
Long term loan
40.2
40.3
259,319,520
92,506,488
404,005,888
1,469,818,187
259,319,520
92,506,488
404,005,888
-
1,469,818,187
2,225,650,083
755,831,896
1,469,818,187
Fair values of financial assets and liabilities
I/We
of
The carrying values of all financial assets and liabilities reflected in the financial statements approximate their
fair values. Fair value is determined on the basis of objective evidence at each reporting date.
being a member of Descon Oxychem Limited entitled to vote and holder of
Capital risk management
ordinary shares, hereby appoint Mr./Mrs/Mst.
The company's objectives when managing capital are to safeguard the company's ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. Borrowings represent long term loan obtained by the company as
referred to in notes 6 and 7. Total capital employed includes equity as shown in the balance sheet, plus total long
term borrowings.
The gearing ratio for the year is 79% (2009: 63%). This increase is due to losses during the year and additions to
long term borrowings during the year.
of
who is also a member of the Company, as my/our proxy in my/our absence to attend and vote for me/us on
my/our behalf at the Sixth Annual General Meeting of the Company to be held at Descon Headquarters, 18-KM
Ferozepur Road, Lahore on Wednesday, October13, 2010 at 10:00 hrs. and at any adjournment thereof.
As witness my/our hand this
41.
day of
2010
Date of authorization for issue
Signed by the said
in the presence of
These financial statements were authorized for issue on August 30, 2010 by the Board of Directors
42.
Subsequent events
There are no subsequent events occurring after balance sheet date.
43.
Corresponding figures
(Members Signature)
Previous year's figures have been rearranged, wherever necessary for the purposes of comparison. However, no
significant re-arrangements have been made.
Place
Date
44
Affix Rs. 5/Revenue Stamp which

must be cancelled either by
signature over it or by
some other means
(Witnesss Signature)
45

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DESCON OXYCHEM LIMITED

Annual Report 2010

Vision and Mission Statement

Notice of Annual General Meeting

Directors Report to the Shareholders

Statement of Compliance with Code of Corporate Governance

Review Report to the Members on Statement of Compliance with the

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

Annual Report 2010