ICI Pakistan Limited

Balance Sheet
As at December 31, 2010 Amounts in Rs '000 Note EQUITY AND LIABILITIES Share Capital and Reserves Authorised capital 1,500,000,000 ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Capital reserves Unappropriated profit Total Equity Surplus on Revaluation of Property, Plant and Equipment LIABILITIES Non-Current Liabilities Provisions for non-management staff gratuity and eligible retired employees' medical scheme Deferred tax liability - net 3 4 2010 2009

15,000,000 1,388,023 465,845 12,694,225 14,548,093

15,000,000 1,388,023 465,845 11,628,928 13,482,796

907,352

931,846

6 7

222,942 870,248 1,093,190

183,019 1,025,098 1,208,117

Current Liabilities Trade and other payables Contingencies and Commitments Total Equity and Liabilities 1 8 9 22,030,672 21,422,657 5,482,037 5,799,898

ICI Pakistan Limited

Balance Sheet
As at December 31, 2010 Amounts in Rs '000 Note ASSETS Non-Current Assets Property, plant and equipment Intangible assets 10 11 8,895,091 180,102 9,075,193 712,500 324,264 40,458 1,077,222 10,152,415 Current Assets Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and short-term prepayments Other receivables Taxation recoverable Cash and bank balances 15 16 17 18 19 20 21 450,596 3,786,345 792,867 590,722 443,674 606,280 545,951 4,661,822 11,878,257 22,030,672 496,401 3,244,525 919,463 406,739 452,438 677,111 460,240 4,468,251 11,125,168 21,422,657 9,225,110 9,225,110 712,500 330,801 29,078 1,072,379 10,297,489 2010 2009

Long-term investments Long-term loans Long-term deposits and prepayments

12 13 14

Total Assets

The annexed notes 1 to 46 form an integral part of these financial statements.

________________ M J Jaffer Chairman / Director

_______________ Waqar A Malik Chief Executive 2

____________________ Feroz Rizvi Chief Financial Officer

ICI Pakistan Limited

Profit and Loss Account
For the year ended December 31, 2010 Amounts in Rs '000 Note Turnover Sales tax, excise duty, commission and discounts Net sales, commission & toll income Cost of sales Gross profit Selling and distribution expenses Administration and general expenses Operating result Financial charges Other operating charges 28 29 24 23 2010 39,532,506 (4,402,526) 35,129,980 (28,443,690) 6,686,290 (1,674,719) (1,299,005) 3,712,566 (163,880) (303,426) (467,306) 486,256 3,731,516 31 (1,302,690) 2,428,826 (Rupees) Earnings per share - Basic and diluted 32 17.50 2009 32,399,181 (3,969,284) 28,429,897 (22,754,005) 5,675,892 (1,470,174) (1,178,064) 3,027,654 (167,541) (247,590) (415,131) 459,983 3,072,506 (1,027,768) 2,044,738 (Rupees) 14.73

24

26 27

Other operating income Profit before taxation Taxation Profit after taxation

30

The annexed notes 1 to 46 form an integral part of these financial statements.

________________ M J Jaffer Chairman / Director

_______________ Waqar A Malik Chief Executive 3

___________________ Feroz Rizvi Chief Financial Officer

ICI Pakistan Limited

Statement of Comprehensive Income
For the year ended December 31, 2010 Amounts in Rs '000 2010 2009

Profit for the year Other comprehensive income Total comprehensive income for the year

2,428,826 2,428,826

2,044,738 2,044,738

The annexed notes 1 to 46 form an integral part of these financial statements.

M J Jaffer Chairman / Director

______________________ Waqar A Malik Chief Executive 4

Feroz Rizvi Chief Financial Officer

ICI Pakistan Limited

Cash Flow Statement
For the year ended December 31, 2010 Amounts in Rs '000 2010 Cash Flows from Operating Activities Profit before taxation Adjustments for: Depreciation and amortisation Gain on disposal of property, plant and equipment Provision for non-management staff gratuity and eligible retired employees' medical scheme Mark-up on bank deposits and loan to subsidiary Interest / mark-up expense Movement in: Working capital Long-term loans Long-term deposits and prepayments Cash generated from operations Payments for : Non-management staff gratuity and eligible retired employees' medical scheme Taxation Interest / mark-up Profit / mark-up received on bank deposits Net cash generated from operating activities Cash Flows from Investing Activities Payments for capital expenditure Proceeds from disposal of property, plant and equipment Profit / mark-up received on loan to subsidiary Loan / Standby finance facility to subsidiary company - net Net cash used in investing activities 5 (854,342) 33,033 68,479 (752,830) (826,402) 17,148 58,211 (187,000) (938,043) 943,811 (10,211) 58,991 (351,957) 101,888 4,474,038 (730,786) (15,685) (11,380) 3,716,187 870,688 (5,293) 56,008 (228,624) 88,118 3,853,403 1,083,497 (196) 1,606 4,938,310 3,731,516 3,072,506 2009

(19,068) (1,543,251) (101,888) 282,448 2,334,428

(15,239) (513,680) (97,097) 163,937 4,476,231

ICI Pakistan Limited

Cash Flow Statement
For the year ended December 31, 2010 Amounts in Rs '000 2010 Cash Flows from Financing Activities Dividend paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 - note 21 Movement in Working Capital (Increase) / decrease in current assets Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and short-term prepayments Other receivables 45,805 (541,820) 126,596 (161,761) 8,764 71,861 (450,555) 42,139 (292,569) (112,851) (26,485) (47,776) 78,753 (358,789) (1,388,027) (1,388,027) 193,571 4,468,251 4,661,822 (1,041,018) (1,041,018) 2,497,170 1,971,081 4,468,251 2009

(Decrease) / Increase in current liabilities Trade and other payables (280,231) (730,786) 1,442,286 1,083,497

The annexed notes 1 to 46 form an integral part of these financial statements.

________________ M J Jaffer Chairman / Director

_____________ Waqar A Malik Chief Executive 6

__________________ Feroz Rizvi Chief Financial Officer

ICI Pakistan Limited

Statement of Changes in Equity
For the year ended December 31, 2010

Amounts in Rs '000 Issued, subscribed and paid-up capital Capital reserves Unappropriated profit Total

Balance as on January 1, 2009 Final dividend for the year ended December 31, 2008 @ Rs 4.00 per share Interim dividend for the year 2009 @ Rs 3.50 per share Transactions with owners, recorded directly in equity Total comprehensive income for the year ended December 31, 2009 Transfer from surplus on revaluation of property, plant and equipment incremental depreciation for the period - net of deferred tax - note 5

1,388,023 -

465,845 -

10,594,258 (555,209) (485,808) (1,041,017) 2,044,738

12,448,126 (555,209) (485,808) (1,041,017) 2,044,738

1,388,023

465,845

30,949 2,075,687 11,628,928

30,949 2,075,687 13,482,796

Balance as on December 31, 2009

Final dividend for the year ended December 31, 2009 @ Rs 4.50 per share Interim dividend for the year 2010 @ Rs 5.50 per share Transactions with owners, recorded directly in equity Total comprehensive income for the year ended December 31, 2010 Transfer from surplus on revaluation of property, plant and equipment incremental depreciation for the period - net of deferred tax - note 5

(624,610) (763,413) (1,388,023) 2,428,826

(624,610) (763,413) (1,388,023) 2,428,826

1,388,023

465,845

24,494 2,453,320 12,694,225

24,494 2,453,320 14,548,093

Balance as on December 31, 2010

The annexed notes 1 to 46 form an integral part of these financial statements.

________________ M J Jaffer Chairman / Director

_____________ Waqar A Malik Chief Executive 7

__________________ Feroz Rizvi Chief Financial Officer

Amounts in Rs '000 3. Issued, Subscribed and Paid-up Capital 2010 (Numbers) Ordinary shares of Rs 10 each fully paid in cash Ordinary shares of Rs 10 each issued as fully paid for consideration other than cash under scheme of arrangement for amalgamation Ordinary shares of Rs 10 each issued as fully paid bonus shares Ordinary shares issued pursuant to the Scheme as fully paid for consideration of investment in associate (note 3.1) 2009 2010 2009

125,840,190

125,840,190

1,258,402

1,258,402

318,492

318,492

3,185

3,185

25,227

25,227

252

252

12,618,391 138,802,300 3.1

12,618,391 138,802,300

126,184 1,388,023

126,184 1,388,023

With effect from October 1, 2000 the Pure Terephthalic Acid (PTA) Business of the Company was demerged under a Scheme of Arrangement (the Scheme) dated December 12, 2000 approved by the shareholders and sanctioned by the High Court of Sindh. ICI Omicron B.V., which is a wholly owned subsidiary of AkzoNobel N.V., held 105,229,125 (2009: 105,229,125) ordinary shares of Rs 10 each at December 31, 2010. AkzoNobel N.V., acquired ICI PLC, UK, effective January 2, 2008, the parent company of ICI Omicron B.V., and became the ultimate holding company of ICI Pakistan Limited. ICI Pakistan Limited continues to be the direct subsidiary of ICI Omicron B.V.. Capital Reserves Share premium - note 4.1 Capital receipts - note 4.2 465,259 586 465,845 465,259 586 465,845

3.2

4.

4.1

Share premium includes the premium amounting to Rs 0.902 million received on shares issued for the Company's Polyester Plant installation in 1980 and share premium of Rs 464.357 million representing the difference between nominal value of Rs 10 per share of 12,618,391 ordinary shares issued by the Company and the market value of Rs 590.541 million of these shares corresponding to 25% holding acquired in LOTTE Pakistan PTA Limited, an ex-associate, at the date of acquisition i.e. November 2, 2001 and the number of shares that have been issued were determined in accordance with the Scheme in the ratio between market value of the shares of two companies based on the mean of the middle market quotation of the Karachi Stock Exchange over the ten trading days between October 22, 2001 to November 2, 2001.

4.2

Capital receipts represent the amount received from various ICI PLC, UK, group companies overseas for the purchase of property, plant and equipment. The remitting companies have no claim to their repayments. Surplus on Revaluation of Property, Plant and Equipment Balance as on January 1 Less: Transfer to unappropriated profit in respect of incremental depreciation charged during the year net of deferred tax Balance as on December 31 931,846 962,795

5.

(24,494) 907,352

(30,949) 931,846

15

Amounts in Rs '000 2010 6. Provisions for non-management staff gratuity and eligible retired employees' medical scheme - note 6.1 Staff Retirement Benefits 2010 Funded Pension Gratuity Total The amounts recognised in the profit and loss account against defined benefit schemes are as follows: Current service cost Interest cost Expected return on plan assets Termination cost Recognition of actuarial loss Net charge for the year 6.1.2 47,010 156,844 (133,250) 105,175 175,779 31,885 56,301 (39,920) 12,060 60,326 78,895 213,145 (173,170) 117,235 236,105 2009 Unfunded Pension Funded Gratuity Unfunded Total 222,942 2009 183,019

6.1

6.1.1

9,741 40,426 8,824 58,991

24,526 153,634 (98,449) 13,043 101,997 194,751

26,223 62,926 (31,903) 13,582 70,828

50,749 216,560 (130,352) 13,043 115,579 265,579

7,535 41,173 7,300 56,008

Movements in the net asset / (liability) recognised in the balance sheet are as follows: Opening balance Net Charge for the year - note 6.1.1 Contributions / payments during the year Closing balance 319,437 (175,779) 198,926 342,584 33,867 (60,326) 46,294 19,835 353,304 (236,105) 245,220 362,419 (183,258) (58,991) 19,068 (223,181) * 238,716 (194,751) 275,472 319,437 62,148 (70,828) 42,547 33,867 300,864 (265,579) 318,019 353,304 (142,489) (56,008) 15,239 (183,258) *

6.1.3

The amounts recognised in the balance sheet are as follows: Fair value of plan assets - note 6.1.5 Present value of defined benefit obligation - note 6.1.4 (Deficit) Unrecognised actuarial loss Recognised asset / (liability) 1,380,173 (1,547,841) (167,668) 510,252 342,584 391,304 (553,363) (162,059) 181,894 19,835 1,771,477 (2,101,204) (329,727) 692,146 362,419 (381,842) (381,842) 158,661 (223,181) * 1,037,319 (1,285,827) (248,508) 567,945 319,437 317,150 (462,971) (145,821) 179,688 33,867 1,354,469 (1,748,798) (394,329) 747,633 353,304 (340,084) (340,084) 156,826 (183,258) *

6.1.4

Movement in the present value of defined benefit obligation: Opening balance Current service cost Interest cost Benefits paid Termination cost Actuarial loss Present value of the defined benefit obligation at the end of the year 1,285,827 47,010 156,844 (64,610) 122,770 1,547,841 462,971 31,885 56,301 (30,744) 32,950 553,363 1,748,798 78,895 213,145 (95,354) 155,720 2,101,204 340,084 9,741 40,426 (19,068) 10,659 381,842 1,117,525 24,526 153,634 (286,286) 13,043 263,385 1,285,827 442,477 26,223 62,926 (103,768) 35,113 462,971 1,560,002 50,749 216,560 (390,054) 13,043 298,498 1,748,798 259,784 7,535 41,173 (15,239) 46,831 340,084

6.1.5

Movement in the fair value of plan assets: Opening balance Expected return Contributions Benefits paid Actuarial gain Fair value of plan assets at the end of the year 1,037,319 133,250 198,926 (64,610) 75,288 1,380,173 317,150 39,920 46,294 (30,744) 18,684 391,304 1,354,469 173,170 245,220 (95,354) 93,972 1,771,477 815,658 98,449 275,472 (286,286) 134,026 1,037,319 310,404 31,903 42,547 (103,768) 36,064 317,150 1,126,062 130,352 318,019 (390,054) 170,090 1,354,469 -

6.1.6

Historical information As at December 31 Present Value of defined benefit obligation Fair value of plan assets Deficit Experience adjustments on plan liabilities Experience adjustments on plan assets 2010 2,483,046 1,771,477 711,569 7% 5% 2009 2,088,882 1,354,469 734,413 3% 13% 2008 1,819,786 1,126,062 693,724 13% (27%) 2007 1,555,387 1,312,938 242,449 16% 7% 2006 1,236,483 1,067,109 169,374 1% (9%)

6.1.7

Major categories / composition of plan assets are as follows: 2010 Debt instruments Equity at market value Cash Mortality of active employees and pensioners will be represented by the LIC(96-98) Table. The table has been rated down three years for mortality of female pensioners and widows. The return on plan assets was assumed to equal the discount rate. Actual (loss) / return on plan assets during 2010 was Rs 267.142 million (2009: Rs 300.442 million). 62% 30% 8% 2009 50% 32% 18%

6.1.8

The principal actuarial assumptions at the reporting date were as follows: Discount rate Expected return on plan assets Future salary increases Future pension increases 14.25% 14.25% 12.00% 8.75% 12.75% 12.75% 10.60% 7.38%

6.1.9

Medical cost trend is assumed to follow inflation. The sensitivity to reflect the effect of a 1% movement in the assumed medical cost trend were as follows: 2010 8.75% Effect on the aggregate of the current service cost and interest cost Effect on the defined benefit obligation 35,905 291,807 Increase 9.75% 44,139 335,025 Decrease 7.75% 32,003 255,287

These figures are based on the latest actuarial valuation, as at December 31, 2010. The valuation uses the Projected Unit Credit method. Actuarial gains and losses are amortised over the expected future service life of current members. * The unfunded liability included in the above table includes Rs 0.239 million (2009: Rs 0.239 million) pertaining to ICI Pakistan PowerGen Limited. 6.1.10 The Company contributed Rs 62.698 million (2009: Rs 55.553 million) and Rs 35.269 million (2009: Rs 29.321 million) to the provident fund and the defined contribution superannuation fund respectively during the year. 16

Amounts in Rs '000 2010 Reversal 2009 Charge

7.

Deferred Tax (Liability) / Asset - net Deductible temporary differences Tax losses carried forward Provisions for retirement benefits, doubtful debts and others Taxable temporary differences Property, plant and equipment

Opening

Closing

Opening

Closing

336,321

133,784

470,105

272,421 355,745

(272,421) (19,424)

336,321

(1,361,419) (1,025,098)

21,066 154,850

(1,340,353) (870,248)

(1,098,870) (470,704)

(262,549) (554,394) 2010 1,020,565 1,987,933 125,567 305,109 1,155,649 30,316 204,104 76,153 80,700 11,653 253,752 4,544 99,184 20,000 106,808 5,482,037

(1,361,419) (1,025,098) 2009 963,992 2,270,321 177,618 299,647 1,150,995 35,975 164,599 119,760 71,993 10,103 248,727 4,548 136,810 20,000 124,810 5,799,898

8.

Trade and Other Payables Trade creditors - note 8.1 Bills payable Sales tax, excise and custom duties Accrued interest / return on unsecured loan - note 8.2 Accrued expenses Technical service fee / royalty Workers' profit participation fund - note 8.3 Workers' welfare fund Distributors' security deposits - payable on termination of distributorship - note 8.4 Contractors' earnest / retention money Advances from customers Unclaimed dividends Payable for capital expenditure Provision for compensated absences - note 8.5 Others

8.1

The above balances include amounts due to following associated undertakings: ICI Paints UK (part of AkzoNobel group) ICI Paints (Asia Pacific) PTE Ltd (part of AkzoNobel group) AkzoNobel Paints Malaysia Marine Protective International Coating Malaysia (part of AkzoNobel group) C&P Residual (part of AkzoNobel group) AkzoNobel NV AkzoNobel Functional Chemicals International Paint Netherland (part of AkzoNobel group) ICI Packaging Coatings (part of AkzoNobel group) AkzoNobel Functional Chemicals BV AkzoNobel Functional Chemicals Pte Ltd AkzoNobel Surface Chemistry Pte Ltd ICI Paints Thailand (part of AkzoNobel group) ICI Paints Indonesia (part of AkzoNobel group) CR Netherlands (part of AkzoNobel group) AkzoNobel Car Refinishes BV 174 15 1,197 36,280 3,995 154 197 11,592 2,827 3,014 25 23,103 82,573 6,911 26,105 3,392 1,400 101 5,339 43,248

8.2 8.3

This represents amount payable to Mortar Investments International Limited. Workers' profit participation fund Balance as on January 1 Allocation for the year - note 29 Interest on funds utilised in the Company's businesses at 60.00 percent (2009: 41.25 percent) per annum - note 28 Less: - Amount paid on behalf of the Fund - Deposited with the Government of Pakistan 164,599 196,761 361,360 6,948 368,308 72,017 92,187 164,204 204,104 148,214 161,822 310,036 2,105 312,141 72,260 75,282 147,542 164,599

Balance as on December 31 8.4 8.5 9. 9.1 Interest on security deposits from certain distributors is payable at 11.5 percent (2009: 7.5 percent) per annum as specified in the respective agreements. This figure is based on the actuarial valuation, as at December 31, 2009. Contingencies and Commitments Claims against the Company not acknowledged as debts are as follows: Local bodies Sales Tax authorities Others

14,178 91,336 137,934 243,448

14,631 93,323 53,396 161,350

9.2

A notice was issued by the Environmental Protection Authority (EPA) against the Paints factory located at Ferozpur Road, Lahore. Pursuant to this an order was passed by the EPA for violation of certain provisions of the 'Act'. The Company is of the opinion that the order was not justified and has filed an appeal against the order in the Environmental Tribunal in Lahore, which is pending. Guarantees issued by the Company in respect of financial and operational obligations of LOTTE Pakistan PTA Limited pursuant to the Scheme of arrangement, amounting to Rs 2,190 million (2009: Rs 2,280 million) against which LOTTE Pakistan PTA Limited and KP Chemical Corporation Limited have issued counter guarantees to the Company.

9.3

9.4 9.5 9.6 9.7

Guarantee issued by the Company to a bank in respect of financing obtained by Senior Executives amounted to Rs 35 million (2009: Rs 35 million), in accordance with the terms of employment. Guarantee issued by the Company of Rs 133 million (2009: Rs 133 million) to a bank on behalf of its subsidiary ICI Pakistan PowerGen Limited for availing funded facility. Commitments in respect of capital expenditure amounted to Rs 138.35 million (2009: Rs 23.875 million). Commitments for rentals under operating lease / ijarah contracts in respect of vehicles amounting to Rs 164.159 million (2009: Rs 195.166 million) are as follows: Year 2010 2011 2012 2013 2014 67,470 56,785 32,769 7,135 164,159 67,470 96,689 164,159 17 66,746 58,165 45,305 23,680 1,270 195,166 66,746 128,420 195,166

Payable not later than one year Payable later than one year but not later than five years

Amounts in Rs '000 2010 10. 10.1 Property, Plant and Equipment The following is a statement of property, plant and equipment: Operating property, plant and equipment - note 10.2 Capital work-in-progress - note 10.6 8,677,493 217,598 8,895,091 10.2 The following is a statement of operating property, plant and equipment: 8,835,201 389,909 9,225,110 2009

Land Freehold Leasehold

Lime beds on freehold land

Buildings On On freehold leasehold land land

Plant and machinery

Railway sidings

Rolling stock and vehicles

Furniture and equipment

Total

2010 Net carrying value basis Year ended December 31, 2010 Opening net book value (NBV) Addition/transfer (at cost) Disposal/transfer (at NBV) Depreciation charge Closing net book value (NBV) 836,702 27,934 864,636 2,837 (72) 2,765 68,515 30,980 (32) (9,800) 89,663 223,211 47,455 (36,307) 234,359 725,377 48,633 (68,775) 705,235 6,789,648 523,166 (18,871) (734,939) 6,559,004 26,082 8,724 (2,865) (10,498) 21,443 162,829 92,283 (1,054) (53,670) 200,388 8,835,201 779,175 (22,822) (914,061) 8,677,493

Gross carrying value basis At December 31, 2010 Cost/Revaluation Accumulated Depreciation Net book value 864,636 864,636 567,799 (565,034) 2,765 164,750 (75,087) 89,663 949,309 (714,950) 234,359 1,341,783 (636,548) 705,235 17,267,715 (10,708,711) 6,559,004 297 (297) 126,071 (104,628) 21,443 719,335 (518,947) 200,388 22,001,695 (13,324,202) 8,677,493

Depreciation rate % per annum

2 to 4

3.33 to 7.5

5 to 10

2.5 to 10

3.33 to 10 2009

3.33

10 to 25

10 to 33.33

Net carrying value basis Year ended December 31, 2009 Opening net book value (NBV) Addition/transfer (at cost) Disposal/transfer (at NBV) Depreciation charge Closing net book value (NBV) 836,702 836,702 7,149 (4,312) 2,837 78,256 (9,741) 68,515 224,676 30,721 (32,186) 223,211 455,945 332,621 (63,189) 725,377 5,753,476 1,743,504 (9,229) (698,103) 6,789,648 31,742 7,560 (2,077) (11,143) 26,082 128,812 78,880 (549) (44,314) 162,829 7,516,758 2,193,286 (11,855) (862,988) 8,835,201

Gross carrying value basis At December 31, 2009 Cost/Revaluation Accumulated Depreciation Net book value 836,702 836,702 567,799 (564,962) 2,837 133,820 (65,305) 68,515 901,854 (678,643) 223,211 1,293,917 (568,540) 725,377 16,790,858 (10,001,210) 6,789,648 297 (297) 120,598 (94,516) 26,082 668,909 (506,080) 162,829 21,314,754 (12,479,553) 8,835,201

Depreciation rate % per annum

2 to 4

3.33 to 7.5

5 to 10

2.5 to 10

3.33 to 10

3.33

10 to 25

10 to 33.33

10.3

Subsequent to revaluation on October 1, 1959 and September 30, 2000, which had resulted in a surplus of Rs 14.207 million and Rs 1,569.869 million respectively, the land and plant and machinery were revalued again on December 15, 2006 resulting in a net surplus of Rs 667.967 million. The valuation was conducted by independent valuers. Valuations for plant and machinery was the open market value of the asset based on estimated gross replacement cost, depreciated to reflect the residual service potential of the asset having paid due regard to age, condition and obsolescence. Land was valued on the basis of fair market value. As at December 31, 2010 plant and machinery included equipments held with Searle Pakistan Limited and Maple Pharmaceutical (Private) Limited (toll manufacturers), having cost and net book values as follows: 2010 Cost Net book value 18 4,100 3,100 2009 3,200 2,500

10.4

Amounts in Rs '000 10.4.1 Had there been no revaluation, the net book value of specific classes of operating property, plant and equipment would have amounted to: Net Book Value Freehold land Plant and machinery Rolling stock and vehicles Furniture and equipment 2010 48,863 6,381,889 21,443 200,388 6,652,583 2009 20,929 6,575,035 26,082 162,829 6,784,875

10.5

The depreciation charge for the year has been allocated as follows: Cost of sales - note 25 Selling and distribution expenses - note 26 Administration and general expenses - note 27 858,479 10,956 44,626 914,061 815,543 12,726 34,719 862,988

10.6

The following is a statement of capital work-in-progress: Civil works and buildings Plant and machinery Miscellaneous equipment Advances to suppliers / contractors 39,836 130,655 8,993 38,114 217,598 50,634 183,965 33,664 121,646 389,909

10.7

Details of operating property, plant and equipment disposals having net book value in excess of Rs 50,000 are as follows: 2010 Mode of sale Cost Accumulated depreciation Plant and machinery Gas condenser & Various items Tender 27,095 12,157 14,938 4,917 Alfa Laval Middleeast Ltd. and Muhammad Akram Ghouri, Mandi Bahauddin Al Habib, Awami Paints, Saad contractor, Asian Paints, Roomi Paints, Khurram Contractors, Lahore Net book value Sale proceeds Particulars of buyers

Tinting Machines & Dispenser

Negotiation

4,180

788

3,392

3,111

Rolling stock and vehicles Honda City & Toyota Corolla Auction 1,510 192 1,318 1,924 Murtaza Khan Babar and Syed Farhat Abbas Jafri, Karachi Syed Ghulam Mustafa, Lahore

Honda Motorcycle

Auction

80

77

70

Furniture and equipment Water cooling coil and Chiller Auction 467 323 144 194 Habibullah Khan, Karachi

2009 Plant and machinery Dust extraction unit and other items Tinting Machines Rolling stock and vehicles Toyota Corolla - 2 nos Hino Dump Trucks Negotiation Auction 1,481 8,808 734 7,519 747 1,289 2,088 1,902 Tufail Iqbal & M Inam, Lahore Hi-Tech Electronics & Machinery, Karachi Auction Negotiation 28,576 4,429 23,089 710 5,487 3,719 3,338 3,719 Hi-Tech Electronics & Machinery, Karachi Jaffer and Sons., Chaudhry Paint House, Color Bank and Awan Brothers, Lahore

19

Amounts in Rs '000 11. Intangible Assets 2010 Net carrying value basis Year ended December 31 Opening net book value (NBV) Additions (at cost) Amortisation charge Closing net book value (NBV) Gross carrying amount At December 31 Cost Accumulated amortisation Net book value Rate of amortisation % per annum 20 226,145 (177,386) 48,759 87,136 (21,145) 65,991 20 to 50 65,352 65,352 378,633 (198,531) 180,102 Software Licenses Under development 87,136 (21,145) 65,991 65,352 65,352 Total

57,364 (8,605) 48,759

209,852 (29,750) 180,102

2009 Net carrying value basis Year ended December 31 Opening net book value (NBV) Additions (at cost) Amortisation charge Closing net book value (NBV) Gross carrying amount At December 31 Cost Accumulated amortisation Net book value Rate of amortisation % per annum 20 168,781 (168,781) 2010 11.1 The amortisation charge for the year has been allocated as follows: Cost of sales - note 25 Selling and distribution expenses - note 26 Administration and general expenses - note 27 7,746 2,565 19,439 29,750 3,636 639 3,425 7,700 2009 168,781 (168,781) 7,700 (7,700) 7,700 (7,700) -

12.

Long Term Investments - at cost Unquoted Subsidiary - ICI Pakistan PowerGen Limited (wholly owned) - note 12.1 7,100,000 ordinary shares (2009: 7,100,000) of Rs 100 each Others Equity security available for sale - Arabian Sea Country Club Limited

710,000

710,000

2,500 712,500

2,500 712,500

12.1

The value of the Company's investment on the basis of net assets of the Subsidiary as disclosed in the audited financial statements for the year ended December 31, 2010 amounted to Rs. 306.706 million (2009: Rs 258.426 million). Long-Term Loans - Considered good Due from Subsidiary - Unsecured - Long term portion - note 13.1 Due from Executives and Employees - note 13.2

13.

177,778 146,486 324,264

200,000 130,801 330,801

13.1

This represents loan given to ICI Pakistan PowerGen Limited (wholly owned subsidiary) of Rs 200 million carrying mark-up at 3 months KIBOR + 2%. This loan is repayable in nine equal semi annual installments commencing from October 1, 2011. Due from Directors, Executives and Employees Motor car House building 51,568 25,424 26,144 Total Total

13.2

Due from Directors and Executives - note 13.3 Less: Receivable within one year - note 18

101,847 19,270 82,577

153,415 44,694 108,721 65,762 27,997 37,765 146,486

121,756 25,119 96,637 54,237 20,073 34,164 130,801

Due from Employees Less: Receivable within one year - note 18

Outstanding for period: - less than three years but over one year - more than three years 20

69,306 77,180 146,486

70,338 60,463 130,801

Amounts in Rs '000 2010 13.3 Reconciliation of the carrying amount of loans to Directors and Executives: Opening balance at beginning of the year Disbursements Repayments Balance at end of the year 121,756 84,215 (52,556) 153,415 102,117 79,293 (59,654) 121,756 2009

The above loan balance includes an amount of Rs 0.319 million (2009: Rs 1.595 million) in respect of house building relating to key management personnel. Loan outstanding during the year relates to Mr. Ali A. Aga (Director), who was provided this loan as per his terms of employment.

13.4

Loans for purchase of motor cars and house building are repayable between two to ten years. These loans are interest free and granted to the employees including executives of the Company in accordance with their terms of employment. The maximum aggregate amount of long-term loans due from the Executives at the end of any month during the year was Rs 161.509 million (2009: Rs 125.362 million).

13.5

14.

Long-Term Deposits and Prepayments Deposits Prepayments

22,873 17,585 40,458

21,211 7,867 29,078

15.

Stores and Spares Stores (include in-transit Rs 20.058 million; 2009: Rs 11.688 million) Spares Consumables Less: Provision for slow moving and obsolete items - note 15.1 36,801 512,019 77,547 626,367 175,771 450,596 37,613 493,799 76,660 608,072 111,671 496,401

15.1

Movement of provision in stores and spares Provision as at January 1 Charge for the year - note 27 Write-off Provision as at December 31 111,671 64,100 175,771 104,661 40,000 (32,990) 111,671

16.

Stock-in-Trade Raw and packing material (include in-transit Rs 436.887 million; 2009: Rs 219.873 million) - note 16.2 Work-in-process Finished goods (include in-transit Rs 9.490 million; 2009: Rs 9.23 million) 1,786,092 1,282,701

48,553

83,229

2,107,225 3,941,870

1,997,408 3,363,338

Less: Provision for slow moving and obsolete stocks - note 16.1 - Raw material - Finished goods

87,463 68,062 155,525 3,786,345 21

63,944 54,869 118,813 3,244,525

Amounts in Rs '000 16.1 Movement of provision in stock-in-trade 2010 Provision as at January 1 Charge for the year - note 27 Reversal Write-off Provision as at December 31 118,813 55,510 (18,798) 155,525 2009 113,865 38,617 (5,000) (28,669) 118,813

Stocks amounting to Rs Nil (2009: Rs 18.663 million ) are measured at net realisable value and has been written down by Rs Nil (2009: Rs 1.62 million ) to arrive at its net realisable value. 16.2 Raw and packing materials include Rs 283.341 million (2009: Rs. 148.524 million) which are held with toll manufacturers namely Searle Pakistan Limited, Maple Pharmaceutical (Private) Limited, Epla Laboratories (Private) Limited, Breeze Pharma (Private) Limited, NovaMed Pharmaceuticals and Polymer International (Private) Limited. Trade Debts Considered good - Secured - Unsecured Considered doubtful Less: Provision for: - Doubtful debts - note 39.6 - Discounts payable on sales

17.

267,755 974,365 1,242,120 343,490 1,585,610 343,490 449,253 792,743 792,867

356,608 812,677 1,169,285 277,631 1,446,916 277,631 249,822 527,453 919,463

18.

Loans and Advances Considered good Loans due from: Directors and Executives - note 13.2 Employees - note 13.2 Due from Subsidiary: - Current portion of long term loan - note 13.1 - Unsecured - note 18.1 Advances to: Directors and Executives - note 18.2 Employees Contractors and suppliers Others 44,694 27,997 22,222 283,000 377,913 5,003 2,761 200,128 4,917 212,809 590,722 10,620 601,342 10,620 590,722 25,119 20,073 283,000 328,192 6,012 6,626 60,355 5,554 78,547 406,739 8,120 414,859 8,120 406,739

Considered doubtful Less: Provision for doubtful loans and advances - note 39.6

18.1

A standby finance facility of Rs 300 million (2009: Rs 300 million) is provided to ICI Pakistan PowerGen Limited (wholly owned subsidiary) which is repayable on demand at a markup rate of 3 months Kibor + 1.65% (2009: 3 months Kibor + 1.65%).

18.2

The maximum aggregate amount of advances due from the Directors and Executives at the end of any month during the year were Rs 3.245 million and Rs 7.364 million (2009: Rs 3.967 million and Rs 4.446 million) respectively. Trade Deposits and Short-Term Prepayments Trade deposits Short-term prepayments 22,245 421,429 443,674 22 21,700 430,738 452,438

19.

Amounts in Rs '000 20. Other Receivables 2010 Considered good Duties, sales tax and octroi refunds due Due from Associate - note 20.1 & 20.2 Insurance claims Commission receivable Interest income receivable from subsidiary Interest income receivable Rebates receivable Others 269,815 78,721 9,965 47,341 16,805 4,516 179,117 606,280 16,982 623,262 16,982 606,280 2009 212,244 85,225 11,887 39,829 16,233 4,058 123,427 184,208 677,111 17,383 694,494 17,383 677,111

Considered doubtful

Less: Provision for doubtful receivables - note 20.3

20.1

The maximum aggregate amount due from ICI Omicron B.V. at the end of any month during the year was Rs 80.755 million (2009: Rs 81.978 million).

20.2

The above balances include amounts due from following associated undertakings: ICI Omicron B.V. wholly owned subsidiary of AkzoNobel N.V. ICI Swire Paints (Shanghai) Limited (part of AkzoNobel group) AkzoNobel Functional Chemicals 78,586 89 46 78,721 80,420 4,805 85,225

20.3

Movement of provision for doubtful receivables Provision as at January 1 Charge for the year - note 27 Reversal Provision as at December 31 17,383 1,004 (1,405) 16,982 17,533 (150) 17,383

21.

Cash and Bank Balances Short term deposits - note 21.1 Current accounts In hand - Cheques - Cash 2,927,000 1,489,720 230,942 14,160 4,661,822 3,350,000 936,795 169,633 11,823 4,468,251

21.1

These are placed with various banks with maturity up to January 2011. The markup return on these deposits ranges between 11.30% to 11.71%.

22.

Short-Term Financing The facilities for running finance available from various banks amounted to Rs 2,471 million (December 31, 2009: Rs 2,691 million) and carried mark-up during the period ranging from relevant KIBOR + 0.75% to 3.47% per annum with an average mark-up rate as on December 31, 2010 at relevant KIBOR + 1.30% per annum (December 31, 2009: 12.64 to 17.37 percent per annum). The facilities are secured by hypothecation charge over the present and future stock-in-trade and book debts of the Company and first pari passu charge over plant and machinery of Soda Ash Business of the Company.

23

23.

Operating Segment Results Polyester Note Sales Afghanistan Bangladesh India South Africa United Arab Emirates Others Inter-segment Local 18,033,688 18,033,688 Commission / Toll income Turnover 18,033,688 13,242,345 13,242,345 13,242,345 1,210 156,953 419,359 97,790 28,934 14,242 718,488 7,350,542 8,069,030 8,069,030 86,476 27,882 76,605 16,556 3,989 211,508 6,360,285 6,571,793 6,571,793 105,623 105,623 6,516,258 6,621,881 6,621,881 88,800 88,800 6,136,722 6,225,522 6,225,522 4,115,180 4,115,180 4,115,180 810 810 3,740,030 3,740,840 3,740,840 1,692 11,207 12,899 417,420 2,580,289 3,010,608 99,539 3,110,147 6,888 158 18,055 25,101 276,573 2,508,705 2,810,379 84,875 2,895,254 2010 2009 2010 Soda Ash 2009 2010 Paints 2009 Life Sciences 2010 2009 Chemicals 2010 2009

Amounts in Rs '000 Company 2010 Company 2009

106,833 158,645 419,359 97,790 28,934 25,449 837,010 417,420 38,595,957 39,850,387 99,539 39,949,926

88,800 93,364 27,882 76,605 16,714 22,854 326,219 276,573 31,988,087 32,590,879 84,875 32,675,754

Sales tax Excise Duty Commission and discounts to distributors and customers

1,263,579 60,160

1,073,105 52,328

900,599 54,115

811,979 49,947

1,119 -

290,709 7,546

272,088 7,010

2,456,006 121,821

2,157,172 109,285

52,933 52,933

44,517 44,517

282,270 1,606,009

107,539 1,232,972

986,298 1,941,012

1,006,822 1,868,748

352,587 353,706

374,927 374,927

150,611 448,866

169,022 448,120

1,824,699 4,402,526

1,702,827 3,969,284

Net sales, commission & toll income 17,980,755 13,197,828 6,463,021 5,338,821 4,680,869 4,356,774 3,761,474 3,365,913 2,661,281 2,447,134 35,547,400 28,706,470

Cost of sales

25

15,620,929

11,794,598

5,074,124

3,896,339

3,333,661

2,986,743

2,681,386

2,383,614

2,151,010

1,969,284

28,861,110

23,030,578

Gross profit

2,359,826

1,403,230

1,388,897

1,442,482

1,347,208

1,370,031

1,080,088

982,299

510,271

477,850

6,686,290

5,675,892

Selling and distribution expenses 26 72,543 75,236 203,173 112,223 765,075 725,114 493,036 424,700 140,892 132,901 1,674,719 1,470,174

Administration and general expenses 27 265,191 239,111 290,708 291,821 448,873 381,949 148,242 137,107 145,991 128,076 1,299,005 1,178,064

Operating result

2,022,092

1,088,883

895,016

1,038,438

133,260

262,968

438,810

420,492

223,388

216,873

3,712,566

3,027,654

23.1 23.2

Segment assets Unallocated assets

1,172,960

6,262,004

6,369,128

6,042,615

6,007,580

2,317,535

2,872,583

1,429,433

1,344,384

767,910

17,766,635 4,264,037 22,030,672

16,819,497 4,603,160 21,422,657

23.3 23.4

Segment liabilities Unallocated liabilities

2,236,516

2,297,646

1,955,050

1,998,609

480,080

753,310

1,131,839

1,331,383

462,089

322,872

6,265,574 309,653 6,575,227

6,703,820 304,195 7,008,015

23.5

Non-cash items (Provision for non-management staff gratuity and eligible retired employees' medical scheme) 10,795 10,249 28,493 27,052 8,554 8,121 5,309 5,041 5,840 5,545 58,991 56,008

23.6

Depreciation & amortisation

335,033

326,976

475,600

436,885

90,644

72,376

15,645

14,507

26,889

19,944

943,811

870,688

23.7

Capital expenditure

109,785

83,573

469,040

461,508

176,238

148,599

25,883

16,489

35,770

36,015

816,716

746,184

23.8

Inter-segment pricing Transactions among the business segments are recorded at arm's length prices using admissible valuation methods.

23.9 24. 24.1

There was no major customer of the Company which formed 10 per cent or more of the Company's revenue. Reconciliations of reportable segment turnover, cost of sales, assets and liabilities Turnover Total turnover for reportable segments - note 23 Elimination of inter-segment turnover Total turnover

39,949,926 (417,420) 39,532,506

32,675,754 (276,573) 32,399,181

24.2

Cost of sales Total cost of sales for reportable segments - note 25 Elimination of inter-segment revenue Total cost of sales

28,861,110 (417,420) 28,443,690

23,030,578 (276,573) 22,754,005

24.3

Assets Total assets for reportable segments Taxation recoverable Bank deposits - note 21 Due from Associates - note 20.2 Long term Investments - note 12 Total Assets 24

17,766,635 545,951 2,927,000 78,586 712,500 22,030,672

16,819,497 460,240 3,350,000 80,420 712,500 21,422,657

Amounts in Rs '000 Company 2010 Company 2009

24.4

Liabilities Total liabilities for reportable segments Accrued interest / return on unsecured loan - note 8.2 Unclaimed dividends - note 8 Total liabilities

6,265,574 305,109 4,544 6,575,227

6,703,820 299,647 4,548 7,008,015

25.

Cost of Sales Polyester 2010 2009 2010 Soda Ash 2009 2010 Paints 2009 Life Sciences 2010 2009 Chemicals 2010 2009 Company 2010 Company 2009

Raw and packing materials consumed Opening stock Purchases Inter-segment Others 13,674,630 13,674,630 14,286,980 Closing stock - note 16 Raw material consumed Salaries, wages and benefits Stores and spares consumed Conversion fee paid to contract manufacturers Oil, gas and electricity Rent, rates and taxes Insurance Repairs and maintenance Depreciation & amortisation charge - note 10.5 & 11.1 Technical fees Royalty General expenses Opening stock of work-in-process Closing stock of work-in-process - note 16 Cost of goods manufactured Opening stock of finished goods Finished goods purchased 509,236 91,316 16,345,956 Closing stock of finished goods - note 16 Provision for obsolete stocks - note 27 15,620,929 25.1 Staff retirement benefits Salaries, wages and benefits include Rs 162.681 million (2009: Rs 193.055 million) in respect of staff retirement benefits. 25 11,794,598 (2,615) 5,074,124 3,896,339 (21,969) 3,333,661 (24,332) 2,986,743 (10,676) 2,681,386 (9,285) 2,383,614 (20,250) 2,151,010 (5,000) 1,969,284 (55,510) 28,861,110 (38,617) 23,030,578 (725,027) (509,236) (58,912) (207,554) (246,547) (246,586) (774,839) (837,505) (233,838) (141,658) (2,039,163) (1,942,539) 392,244 12,303,834 207,554 5,135,651 33,140 4,103,893 246,586 64,800 3,602,177 221,852 85,700 3,257,661 837,505 1,583,188 3,466,901 476,184 1,826,217 3,230,404 141,658 1,193,235 2,405,098 271,797 882,262 2,115,942 1,942,539 2,932,539 30,955,783 1,395,217 2,794,179 25,011,734 (24,388) 15,745,404 (54,163) 11,911,590 4,928,097 4,070,753 (10,976) 3,290,791 (15,600) 2,950,109 (12,464) 1,046,208 (11,811) 928,003 (725) 1,070,205 (1,655) 961,883 (48,553) 26,080,705 (83,229) 20,822,338 54,163 108,866 15,600 19,851 11,811 5,024 1,655 496 83,229 134,237 319,963 106,805 320,585 92,148 455,542 83,627 423,211 64,268 75,205 23,270 67,637 60,803 19,279 57,373 428 1,815 2,076 400 694 1,445 1,008 452 15,087 5,750 24,862 10,965 13,886 3,010 24,470 10,431 866,225 30,835 26,938 269,434 819,179 23,734 25,478 224,672 1,394,075 1,234 17,722 1,670 841,024 846 15,497 950 1,962,927 1,379 16,236 695 1,406,785 655 12,755 43 28,851 15,893 27,849 15,585 28,235 6,210 26,518 18,190 201,368 2 9 186,899 3 11 4,341 7,523 8,612 973 3,242 4,416 8,128 9,857 300 3,174 205,709 3,393,376 27,118 62,782 21,201 191,315 2,284,172 17,568 55,073 22,368 (867,612) 13,419,368 336,069 118,723 10,263,852 10,263,852 10,775,932 (612,350) 10,163,582 332,146 90,109 1,877,621 1,877,621 1,952,057 (203,975) 1,748,082 540,016 119,593 1,251,854 1,251,854 1,622,841 (74,436) 1,548,405 499,952 114,679 417,420 2,489,024 2,906,444 3,191,812 (259,951) 2,931,861 96,312 3,704 276,573 2,328,255 2,604,828 2,928,908 (285,368) 2,643,540 81,234 4,476 973,217 973,217 1,119,706 (282,021) 837,685 3,078 776,709 776,709 887,730 (146,489) 741,241 3,037 930,155 930,155 1,030,269 (85,070) 945,199 39,211 3,510 840,470 840,470 944,804 (100,114) 844,690 37,879 2,801 417,420 19,944,647 20,362,067 21,580,824 (1,698,629) 19,882,195 1,014,686 245,530 276,573 15,461,140 15,737,713 17,160,215 (1,218,757) 15,941,458 954,248 212,065 612,350 512,080 74,436 370,987 285,368 324,080 146,489 111,021 100,114 104,334 1,218,757 1,422,502

Amounts in Rs '000 26. Selling and Distribution Expenses Polyester 2010 2009 2010 Soda Ash 2009 2010 Paints 2009 Life Sciences 2010 2009 Chemicals 2010 2009 Company 2010 Company 2009

Salaries and benefits Repairs and maintenance Advertising and publicity expenses Rent, rates and taxes Insurance Lighting, heating and cooling Depreciation & amortisation charge - note 10.5 & 11.1 Outward freight and handling Travelling expenses Postage, telegram, telephone and telex General expenses

46,473 14 1,163 15

40,591 122 15,480 17

21,759 1,079 10,948 1,282 1,028 1,088

24,581 1,063 896 922 434 873

220,879 3,933 253,121 19,323 6,683

195,676 3,537 262,189 23,491 4,807

197,442 2,179 86,049 5,897 6,522 2,297

184,344 1,862 64,513 4,404 3,866 1,969

61,696 1,381 817 739 3,530 2,164

63,531 1,033 987 1,182 3,340 1,980

548,249 8,586 352,098 27,241 11,080 12,247

508,723 7,617 344,065 29,999 7,640 9,646

9,626 7,022

59 7,078 3,206

277 149,095 2,703

327 69,972 1,882

179,945 30,082

172,953 30,588

11,093 35,329 68,932

11,195 22,395 63,407

2,151 31,538 12,171

1,784 28,089 11,567

13,521 405,533 120,910

13,365 300,487 110,650

529 7,701 72,543

423 8,260 75,236

1,325 12,589 203,173

774 10,499 112,223

7,046 44,063 765,075

5,801 26,072 725,114

10,728 66,568 493,036

9,759 56,986 424,700

3,688 21,017 140,892

3,447 15,961 132,901

23,316 151,938 1,674,719

20,204 117,778 1,470,174

26.1

Staff retirement benefits Salaries, wages and benefits include Rs 81.569 million (2009: Rs 67.593 million) in respect of staff retirement benefits.

27.

Administration and General Expenses Polyester 2010 2009 2010 Soda Ash 2009 2010 Paints 2009 Life Sciences 2010 2009 Chemicals 2010 2009 Company 2010 Company 2009

Salaries and benefits Repairs and maintenance Advertising and publicity expenses Rent, rates and taxes Insurance Lighting, heating and cooling Depreciation & amortisation charge - note 10.5 & 11.1 Provision for doubtful debts - trade - note 39.6 - others - note 20.3 & 39.6 Provision for obsolete stocks - Note 16.1 Provision for obsolete spares - Note 15.1 Travelling expenses Postage, telegram, telephone and telex General expenses

129,271 2,986 1,837 2,675 735 3,637

134,531 2,715 2,855 2,551 552 3,172

191,647 3,930 3,681 2,954 1,858 6,200

193,284 3,478 6,013 2,877 1,454 5,273

168,579 9,147 1,372 5,060 692 4,655

134,481 8,828 1,807 6,302 7,438 3,518

85,980 1,872 788 649 3,857 4,664

93,672 1,352 1,134 543 2,137 3,590

81,934 1,003 866 680 425 1,416

72,479 780 1,452 587 316 1,077

657,411 18,938 8,544 12,018 7,567 20,572

628,447 17,153 13,261 12,860 11,897 16,630

15,070

6,332

19,781

13,347

15,439

11,573

4,124

2,618

9,651

4,274

64,065

38,144

59,100 10,138

5,610 40,000 6,491

381 2,615 9,652

8,142

138,262 2,500 21,969 5,000 12,732

69,040 24,332 14,626

477 623 10,676 6,192

7 9,285 5,631

401 20,250 6,791

641 5,000 5,349

139,140 3,504 55,510 64,100 45,505

75,298 38,617 40,000 40,239

2,329 37,413 265,191

1,337 32,965 239,111

3,948 44,061 290,708

2,149 55,804 291,821

5,814 57,652 448,873

8,999 91,005 381,949

2,891 25,449 148,242

2,516 14,622 137,107

1,678 20,896 145,991

1,148 34,973 128,076

16,660 185,471 1,299,005

16,149 229,369 1,178,064

27.1

Staff retirement benefits Salaries, wages and benefits include Rs 148.813 million (2009: Rs 132.772 million) in respect of staff retirement benefits.

26

Amounts in Rs '000 2010 28. Financial Charges Mark-up on short-term financing Interest on workers' profit participation fund - note 8.3 Discounting charges on receivables Exchange losses Interest on security deposits and others 6,948 94,940 59,564 2,428 163,880 1,587 2,105 82,383 74,454 7,012 167,541 2009

29.

Other Operating Charges Auditors' remuneration - note 29.1 Donations - note 29.2 Workers' profit participation fund - note 8.3 Workers' welfare fund 8,235 22,277 196,761 76,153 303,426 6,600 16,464 161,822 62,704 247,590

29.1

Auditors' remuneration Audit and Group reporting fee Half yearly review and other certifications Out of pocket expenses 5,770 1,815 650 8,235 4,950 1,015 635 6,600

29.2

Donations include Rs 15.795 million (2009: Rs 13.97 million) to ICI Pakistan Foundation (Head office, Karachi) Mr. Waqar A Malik, Chief Executive; Mr. Ali Asrar Aga and Mr. Feroz Rizvi, Directors of the Company and Mr. Suhail Aslam Khan and Ms.Seemi Saad, Executives of the Company are amongst the Trustees of the Foundation. Other Operating Income Income from related parties Return on loan due from Subsidiary Service fees from related parties - note 30.1 Return from other financial assets Profit on short-term and call deposits Income from non-financial assets Scrap sales Gain on disposal of property, plant and equipment Others Provisions and accruals no longer required written back Income on technical assistance Income on sale of Adhesive to Henkel Sundries

30.

69,051 1,980

60,629 4,636

282,906

167,995

48,724 10,211

56,988 5,293

15,964 57,420 486,256

104,768 244 14,662 44,768 459,983

27

Amounts in Rs '000 30.1 This represents amount charged by the Company for certain management and other services rendered to its related parties (Lotte Pakistan PTA Limited, upto September 2009, and ICI Pakistan PowerGen Limited), in accordance with the Service Agreements based on commercial terms between the companies. 2010 31. Taxation Current Prior years Total current tax charge Deferred - note 7 Net tax charged - note 31.1 31.1 Tax reconciliation Profit before tax Tax @ 35% Prior years' tax charge Tax impact on income under FTR of the current year Permanent difference Other Net tax charged 32. Earnings per share - Basic and diluted Profit after taxation for the year 2,428,826 2,044,738 3,731,516 1,306,031 2,992 (6,333) 1,302,690 3,072,506 1,075,377 (17,439) (40,712) 5,762 4,780 1,027,768 1,457,540 1,457,540 (154,850) 1,302,690 490,813 (17,439) 473,374 554,394 1,027,768 2009

Number of shares Weighted average number of ordinary shares in issue during the year 138,802,300 138,802,300

Rupees Earnings per share 28 17.50 14.73

Amounts in Rs '000 33. Remuneration of Directors and Executives The aggregate amounts charged in the financial statements for the remuneration, including all benefits, to the Chairman, Chief Executive, Directors and Executives of the Company were as follows: Chairman 2010 2009 Managerial remuneration Retirement benefits Group insurance Rent and house maintenance Utilities Medical expenses 1,230 1,230 1 1,162 1,162 1 Chief Executive 2010 2009 25,363 6,362 42 6,022 775 91 38,655 1 21,135 5,321 42 5,268 647 203 32,616 1 Directors 2010 2009 34,209 7,555 84 221 42,069 4 33,863 7,383 126 419 41,791 5 Executives 2010 2009 501,721 144,796 5,062 148,163 36,656 19,661 856,059 381 418,814 107,981 4,512 122,368 30,310 15,410 699,395 328 Total 2010 562,523 158,713 5,188 154,185 37,431 19,973 938,013 387 2009 474,974 120,685 4,680 127,636 30,957 16,032 774,964 335

Number of persons

33.1

In addition to this, an amount of Rs 228.9 million (2009: Rs 209.8 million) on account of variable pay, to employees, has been recognised in the current year. This amount is payable in 2011 after verification of achievements against target. Further, a special bonus of Rs 12.0 million (2009: Rs 28.9 million) payable to certain employees has been recognised in the financial statements which is payable in 2011. Out of variable pay recognised for 2009 and 2008 following payments were made: Paid in 2010 relating to 2009 Chief Executive Directors Executives Other employees 13,163 33,529 125,444 9,192 181,328 Paid in 2009 relating to 2008 11,765 11,400 92,752 37,131 153,048

33.2

The Directors and certain Executives are provided with free use of Company cars in accordance with their entitlement. The Chief Executive is provided with Company maintained furnished accommodation and free use of Company car. Aggregate amount charged in the financial statements for remuneration to three Non-executive Directors was Rs 3.225 million (2009: Rs 3.228 million). This includes fees paid to directors amounting to Rs. 0.220 million (2009: Rs. 0.249 million) for attending board and other meetings which is not included above.

33.3

33.4

The above balances include an amount of Rs 188.114 million (2009: Rs 141.359 million) on account of remuneration of key management personnel out of which Rs 26.274 million (2009: Rs 24.356 million) relates to post employment benefits. Transactions with Related Parties The related parties comprise parent company (ICI Omicron B.V.), ultimate parent company (AkzoNobel N.V.), related group companies, local associated company, directors of the Company, companies where directors also hold directorship, key employees (note 33) and staff retirement funds (note 6). Details of transactions with related parties, other than those which have been specifically disclosed elsewhere in these financial statements are as follows:

34.

2010 Subsidiary Company Purchase of goods, materials and services Provision of services and other receipts Return on loan to Subsidiary Loan to subsidiary company - (net of repayment) Stand by finance facility availed by Subsidiary Associated companies Purchase of goods, materials and services Provision of services and other receipts Sale of goods and materials Dividends Donations 29 118,487 4,600 131,099 1,052,291 15,795 956,672 1,980 69,051 -

2009

676,003 1,980 60,629 96,000 283,000

5,750,335 6,440 126,429 789,218 13,970

Amounts in Rs '000 35. Plant Capacity and Annual Production - in metric tonnes except Paints which is in thousands of litres: 2010 Annual Name Plate Capacity Polyester Soda Ash - note 35.1 Paints - note 35.2 Chemicals - note 35.2 Sodium Bicarbonate 35.1 35.2 36. 122,000 350,000 20,000 Production 2009 Annual Name Plate Capacity 122,000 350,000 20,000 Production

129,445 278,650 34,748 9,082 23,700

123,642 269,500 33,741 8,477 22,580

Production was below name plate capacity due to gas curtailment. The capacity of Paints and Chemicals is indeterminable because these are multi-product plants. Fair Value of Financial Assets and Liabilities The carrying amounts of the financial assets and financial liabilities approximate their fair values and is determined on the basis of non observable market data.

37.

Financial Risk Management The Company's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management policy focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance.

37.1

Risk Management Framework The Board of Directors has overall responsibility for establishment and over sight of the Company's risk management framework. The executives management team is responsible for developing and monitoring the Companys risk management policies. The team regularly meets and any changes and compliance issues are reported to the Board of Directors through the audit committee. Risk management systems are reviewed regularly by the executive management team to reflect changes in market conditions and the Companys activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The audit committee oversees compliance by management with the Companys risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

38.

Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of interest rate risk, currency risk and other price risk.

30

38.1

Amount in Rs '000 Interest Rate Risk Interest rate risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At the reporting date the interest rate profile of Company's interest-bearing financial instruments were: Carrying Amount 2010 Fixed rate instruments Financial assets - Note 21 Financial liabilities - Note 8 2009

2,927,000 (80,700) 2,846,300

3,350,000 (71,993) 3,278,007

Variable rate instruments Financial assets - Note 13 & 18

483,000

483,000

Sensitivity analysis for fixed rate instruments 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 rates at the reporting date would not affect profit or loss. Sensitivity analysis for variable rate instruments If KIBOR had been 1% higher / lower with all other variables held constant, the impact on the profit after tax for the year would have been Rs 4.83 million (2009: Rs 4.83 million). 38.2 Foreign currency risk Foreign 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. Foreign currency risk arises mainly where receivables and payables exist due to transactions entered in foreign currencies. The Company is exposed to foreign currency risk on sales, purchases and borrowings, which, are entered in a currency other than Pak Rupees. However, the forward foreign exchange contracts were not available for imports in 2010 in accordance with State Bank of Pakistan instructions.

Amounts in Rs '000 SGD EURO USD 2010 GBP JPY

Trade debts Other receivables Due from Associates - note 20.2 Cash and bank balances Trade and other payables Accrued interest / return on unsecured loan - note 8.2 Due to Associates - note 8.1

15 15 (15)

10,859 10,859 107,789 59,580 167,369 (156,510)

9,641 17,665 135 98,227 125,668 1,235,916 305,109 21,607 1,562,632 (1,436,964)
2009

11,812 78,586 90,398 662,294 1,371 663,665 (573,267)

Gross balance sheet exposure

Trade debts Other receivables Due from Associates - note 20.2 Cash and bank balances Trade and other payables Accrued interest / return on unsecured loan - note 8.2 Due to Associates - note 8.1

4,719 26,105 30,824 (30,824)

2,800 2,800 57,646 5,340 62,986 (60,186)

11,667 123,427 4,805 62,287 202,186 1,687,759 299,647 4,774 1,992,180 (1,789,994)

80,420 80,420 504,207 7,029 511,236 (430,816)

5,293 5,293 (5,293)

Gross balance sheet exposure Significant exchange rates applied during the year were as follows:

Average rate for the year

Spot rate as at December 31

2010 Rupees per EURO USD GBP JPY SGD 31 Rupees 113.09 85.18 131.75 0.97 62.55

2009 113.84 81.69 127.85 0.87 56.52

2010 Rupees 114.30 85.75 132.72 1.05 66.87

2009 121.37 84.24 137.81 0.91 60.06

Amount in Rs '000 Sensitivity analysis Every 1% increase or decrease in exchange rate with all other variables held constant will increase or decrease profit after tax for the year by Rs 21.7 million (2009: Rs 23.2 million). 39. Credit Risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter-parties failed completely to perform as contracted. The Company does not have significant exposure to any individual counterparty. To reduce exposure to credit risk the Company has developed a formal approval process whereby credit limits are applied to its customers. The management also continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery. To mitigate the risk, the Company has a system of assigning credit limits to its customers based on an extensive evaluation based on customer profile and payment history. Outstanding customer receivables are regularly monitored. Business with customers is also secured, where possible, by way of inland letters of credit, cash security deposit and bank guarantees.

The Company's maximum exposure to credit risk at the reporting date is as follows: 2010 39.1 Financial Assets Long Term Investments - note 12 Long term loans - note 13 Long term deposits - note 14 Trade debts - note 17 Loans and advances - note 18 Trade deposits - note 19 Other receivables - note 20 Bank balances - note 21 2009

712,500 324,264 22,873 792,867 590,722 22,245 336,465 4,647,662 7,449,598

712,500 330,801 21,211 919,463 406,739 21,700 464,867 4,456,428 7,333,709

39.2 39.3

The Company has placed its funds with banks which are rated A-1 by Standard & Poor's and P-1 by Moody's. Financial Assets - Secured - Unsecured

494,696 6,954,902 7,449,598

545,239 6,788,470 7,333,709

39.4

The ageing of bank balances, trade debts and loans and advances at the reporting date is as follows: Not past due Past due but not Impaired: Not more than three months Past due and Impaired: more than three months and not more than six months more than six months and not more than nine months more than nine months and not more than one year More than one year Less: Provision for: - Doubtful debts - Doubtful loans and advances 5,893,674 122,131 30,893 12,327 27,165 299,171 491,687 343,490 10,620 354,110 6,031,251 5,461,849 281,317 63,002 25,352 43,378 193,483 606,532 277,631 8,120 285,751 5,782,630

39.5

The maximum exposure to credit risk for past due and impaired at the reporting date by type of counterparty was: Wholesale customers Retail customers End-user customers Less: Provision for: - Doubtful debts - Doubtful loans and advances 202,884 109,691 179,112 491,687 343,490 10,620 354,110 137,577 138,510 284,408 183,614 606,532 277,631 8,120 285,751 320,781

39.6

Movement of provision for trade debts and loans and advances Trade Debts Loans and Advances 8,120 2,500 10,620 Total Total

Opening Additional provision - note 27 (Write off) / Provision utilised against write-offs Provision no longer required

277,631 139,140 (57,409) (15,872) 343,490

285,751 141,640 (57,409) (15,872) 354,110

201,483 75,298 9,646 (676) 285,751

39.6.1 The recommended approach for provision is to assess the top layer (covering 50%) of trade receivables on an individual basis and apply a dynamic approach to the remainder of receivables. The procedure introduces a company-standard for dynamic provisioning: Provide impairment loss for 50% of the outstanding receivable when overdue more than 90 days, and Provide an impairment loss for 100% when overdue more than 120 days 32

Amount in Rs '000 39.7 Concentration Risk The sector wise analysis of receivables, comprising trade debts, loans and advances and bank balances are given below:

2010

2009

Textile Glass Ceramics Paper and Board Chemicals Pharmaceuticals Construction Transport Paints Bank Subsidiary Others

66,590 14,415 24,641 240,731 36,880 12,701 36,976 621,046 4,647,662 283,000 400,719 6,385,361 343,490 10,620 354,110 6,031,251

217,085 22,679 2,985 18,137 232,624 18,799 31,972 60,264 516,308 4,456,428 283,000 208,100 6,068,381 277,631 8,120 285,751 5,782,630

Less: Provision for: - Doubtful debts - Doubtful loans and advances

40.

Liquidity Risk Liquidity Risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. Company's treasury aims at maintaining flexibility in funding by keeping committed credit lines available. The table below analyse the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the maturity date.

Carrying amount

Contractual cash flows 2010

Less than one year

Financial liabilities Trade creditors - note 8 Bills payable - note 8 Accrued interest / return on unsecured loan - note 8.2 Accrued expenses - note 8 Technical service fee / Royalty - note 8 Distributors' security deposits - payable on termination of distributorship - note 8 & note 8.4 Contractors' earnest / retention money - note 8 Unclaimed dividends - note 8 Payable for capital expenditure - note 8 Others - note 8 1,020,565 1,987,933 305,109 1,155,649 30,316 80,700 11,653 4,544 99,184 106,808 4,802,461 1,020,565 1,987,933 305,109 1,155,649 30,316 89,981 11,653 4,544 99,184 106,808 4,811,742 (1,020,565) (1,987,933) (305,109) (1,155,649) (30,316) (89,981) (11,653) (4,544) (99,184) (106,808) (4,811,742)

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amount.

2009 Financial liabilities Trade creditors - note 8 Bills payable - note 8 Accrued interest / return on unsecured loan - note 8.2 Accrued expenses - note 8 Technical service fee / Royalty - note 8 Distributors' security deposits - payable on termination of distributorship - note 8 & note 8.4 Contractors' earnest / retention money - note 8 Unclaimed dividends - note 8 Payable for capital expenditure - note 8 Others - note 8 963,992 2,270,321 299,647 1,150,995 35,975 71,993 10,103 4,548 136,810 124,810 5,069,194 33 963,992 2,270,321 299,647 1,150,995 35,975 77,392 10,103 4,548 136,810 124,810 5,074,593 (963,992) (2,270,321) (299,647) (1,150,995) (35,975) (77,392) (10,103) (4,548) (136,810) (124,810) (5,074,593)

41.

Capital Risk Management The Company's objective when managing capital is to safe guard the Company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong capital base to support the sustained development of its businesses.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders or issue new shares.

42.

Accounting Estimates and Judgements Income Taxes The Company takes into account the current income tax law and 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 view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities (unless there is remote possibility of transfer of benefits). The Income Tax Appellate Tribunal earlier set aside the assessment for the assessment year 1998-99 on the issues of date of commissioning of PTA plant & depreciation thereon, restriction of cost of capitalisation of PTA plant and addition to income in respect of trial production stocks. The re-assessment was finalised by the department during the year giving rise to an additional tax demand. The Company has filed an appeal against the said order before the CIT(Appeals), hearing of appeal has been completed and the order is awaited.

The tax department reopened the income tax assessment for the assessment year 2001-2002 on the ground that demerger of PTA business from ICI Pakistan Ltd. was effective from the completion date i.e. August 6, 2001. This was challenged by the Company in the High Court which upheld the Companys contention that the department did not have the right to reopen this finalised assessment. The department filed an appeal in the Supreme Court against the High Courts order. The appeal was dismissed by the Supreme Court.

For the assessment year 2002-2003 on receipt of notice under section 62 of the Income Tax Ordinance, 1979, the Company had filed a writ petition in the Supreme Court challenging the tax departments notice that the effective date of PTAs demerger was August 6, 2001 rather than the effective date given in the Scheme of Arrangement as October 1, 2000. That notice had raised certain issues relating to vesting of PTA assets by the company which has been settled in the assessment year 2001-2002. While this case is pending for adjudication, in view of the Supreme Court's decision relating to assessment year 2001-2002 it is unlikely that the department can take an adverse action.

Whilst amending the assessment for the Tax Year 2003 and 2004, tax department has taken certain action in the order, considered by the department as protective assessment on the matter of unabsorbed depreciation carried forward. It is the Companys contention that such an action is unwarranted. An appeal before the CIT (Appeals) , on the matter has been filed which is pending. The very basis of such an action have also been challenged before the High Court of Sindh which are pending for hearing. While this case is pending for adjudication, in view of the Supreme Court's decision relating to assessment year 2001-2002 it is unlikely that the department can take an adverse action. Notice under section 221 of the Income Tax Ordinance 2001 for rectification of deemed assessment order for the Tax Year 2005 has been issued to disallow unabsorbed depreciation carried forward. A writ petition against the said notice has been filed with the High Court of Sindh which is pending for hearing. While this case is pending for adjudication, in view of the Supreme Court's decision relating to assessment year 2001-2002 it is unlikely that the department can take an adverse action. Pension and Gratuity Certain actuarial assumptions have been adopted as disclosed in note 6 to the financial statements for valuation of present value of defined benefit obligations and fair value of plan assets. Any changes in these assumptions in future years might affect unrecognised gains and losses in those years. Property, plant and equipment The estimates for revalued amounts, if any, of different classes of property, plant and equipment, are based on valuation performed by external professional valuers and recommendation of technical teams of the Company. The said recommendations also include estimates with respect to residual values and depreciable lives. Further, the Company reviews the value of the assets for possible impairment on an annual basis. The future cash flows used in the impairment testing of assets is based on management's best estimates which may change in future periods. Any change in the estimates in future years might affect the carrying amounts of the respective items of property, plant and equipments with a corresponding affect on the depreciation charge and impairment.

34

43.

Standards or Interpretations not yet effective The following standards, amendments and interpretations of approved accounting standards are effective for accounting periods beginning on or after January 1, 2011. These standards are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements:

Amendment to IAS 32 Financial Instruments: Presentation Classification of Rights Issues (effective for annual periods beginning on or after February 01, 2010). The IASB amended IAS 32 to allow rights, options or warrants to acquire a fixed number of the entitys own equity instruments for a fixed amount of any currency to be classified as equity instruments provided the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. This interpretation has no impact on the Company's financial statements. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 01, 2010). This interpretation provides guidance on the accounting for debt for equity swaps. This interpretation has no impact on Company's financial statements. IAS 24 Related Party Disclosures (revised 2009) effective for annual periods beginning on or after January 01, 2011. The revision amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. The amendment in future may result in certain changes in disclosures. Amendments to IFRIC 14 IAS 19 The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after January 01, 2011). These amendments remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognised as an asset rather than an expense. This amendment is not likely to have any impact on Company's financial statements. Improvements to IFRSs 2010 In May 2010, the IASB issued improvements to IFRSs 2010, which comprise of 11 amendments to 7 standards. Effective dates, early application and transitional requirements are addressed on a standard by standard basis. The majority of amendments are effective for annual periods beginning on or after January 1, 2011. The amendments include list of events or transactions that require disclosure in the interim financial statements and fair value of award credits under the customer loyalty programmes to take into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. Certain of these amendments will result in increased disclosures in the financial statements. Amendments to IAS 12 deferred tax on investment property (effective for annual periods beginning on or after January 1, 2012). The 2010 amendment provides an exception to the measurement principle in respect of investment property measured using the fair value model in accordance with IAS 40 Investment Property. The amendment has no impact on financial statements of the Company. Amendments to IFRS 7 - Disclosures Transfers of Financial Assets (effective for annual periods beginning on or after July 1, 2011). The amendments introduce new disclosure requirements about transfers of financial assets including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. These amendments will result in increased disclosures in the financial statements.

44.

Dividend The directors in their meeting held on February 16, 2011 have recommended a final dividend of Rs ____ per share (2009: Rs 4.50 per share) in respect of year ended December 31, 2010. The financial statements for the year ended December 31, 2010 do not include the effect of the above dividend which will be accounted for in the period in which it is approved.

45.

Date of Authorisation These financial statements were authorised for issue in the Board of Directors meeting held on February 16, 2011.

46. 46.1 46.2

General Figures have been rounded off to the nearest thousand rupees except stated otherwise. Corresponding Figures Corresponding figures have been rearranged and reclassified, wherever necessary, for better presentation and disclosure.

Reclassification from component

Reclassification to component

Amounts in Rs '000

Administration and General Expenses -General expenses Selling and Distribution Expenses -General expenses

Administration and General Expenses -Advertising and publicity expenses Selling and Distribution Expenses -Lighting, heating and cooling

1,807

1,774

________________ M J Jaffer Chairman / Director

_____________ Waqar A Malik Chief Executive 35

__________________ Feroz Rizvi Chief Financial Officer