Rafhan-AR-2010

Years at a Glance10

2010 2009 2008 2007 2006 2005 2004 2003 2002* 2001 Net Sales 13,913 11,428 10,747 7,578 6,127 5,194 4,534 4,031 4,390 3,126Rs. Million Cost of Sales 10,615 8,993 8,006 5,480 4,556 3,997 3,259 3,001 3,329 2,345Rs. Million Gross Profit 3,298 2,435 2,741 2,098 1,571 1,198 1,275 1,030 1,061 781Rs. Million %age of Sales 24 21 26 28 26 23 28 26 24 25 Profit After Tax 1,838 1,297 1,492 1,089 809 615 670 521 527 347Rs. Million Capital Expenditure 582 848 606 114 122 302 448 415 239 121Rs. Million Dividend Amount 924 831 924 831 647 323 286 259 259 134Rs. Million Dividend Percentage 1,000 900 1,000 900 700 350 310 280 280 145 Earnings per Share 198.99 140.43 161.57 117.92 87.62 66.57 72.51 56.43 57.06 37.62Rupees * Data for 15 months

Innovation

Technology

Team Work

Ingredients

Solutions

Quality

Custo

mer S

atisfaction

Annual Reportfor the year ended December 31, 2010

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In the name of Allah The Most Merciful, The Compassionate

02 Company Information

03 Notice of Meeting

06 Chief Executive’s Review

15 Major Events 2010

16 Horizontal Analysis - P&L and B / S

17 Vertical Analysis - P&L and B / S

18 Directors’ Report

24 Forward Looking Statements

26 Stakeholders’ Information

27 Summary of Cash Flow Statements

28 Statement of Value Added & its Distribution

29 Review Report

30 Statement of Compliance

31 Auditors’ Report

32 Balance Sheet

34 ProfitandLossAccount

35 Statement of Comprehensive Income

36 Cash Flow Statement

37 Statement of Changes in Equity

38 Notes to the Financial Statements

61 Pattern of Shareholding

Proxy Form

Contents

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Company Information

Business Strategy and Planning Committee

John F. Saucier Rashid Ali Ansar Yahya Anis A. Khan Shares Transfer Committee

Rashid Ali Ansar Yahya Anis A. KhanSh. Gulzar Hussain

Bankers

Citibank, N.A. Habib Bank Ltd. Meezan Bank Ltd. MCB Bank Ltd. National Bank of Pakistan Standard Chartered Bank (Pakistan) Ltd. Auditors

KPMG Taseer Hadi & Co. Chartered Accountants Lahore – Karachi

Legal Advisor

M. Ali SeenaC/o Surridge & Beecheno,Karachi

Shares Registrar

FAMCO Associates (Pvt.) Ltd.1st Floor, State Life Building 1-A,I.I. Chundrigar Road, Karachi-74000:Tel: (92-21) 32427012 - 32425467Fax: (92-21) 32426752 - 32428310

Registered Office

1st Floor, Finlay House,I.I. Chundrigar Road,Karachi-74000, PakistanPh: (92-21) 32442516 – 32410848Fax: (92-21) 32428651

Head Office & Shares Department

Rakh Canal East Road, Faisalabad,PakistanPh: (92-41) 8540121-22-23 Fax: (92-41) 8711016 - 8502197Website: www.rafhanmaize.comE-mail: [email protected]

Chairman

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

Chief Executive & Managing Director

Ansar Yahya - Executive

Directors

Cheryl K. Beebe - Non-ExecutiveMary A. Hynes - Non-ExecutiveZulfikarMannoo - Non-ExecutiveMian M. Adil Mannoo - Non-ExecutiveWisal A. Mannoo - Non-ExecutiveAnis A. Khan - ExecutiveSh. Gulzar Hussain - Non-Executive Chief Financial Officer

Anis A. Khan Secretary

M. Yasin Anwar

Audit Committee

Cheryl K. Beebe - Non-ExecutiveRashid Ali - Non-ExecutiveZulfikarMannoo - Non-ExecutiveSh. Gulzar Hussain - Non-Executive


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Notice of Meeting

Notice is hereby given that the 118th General Meeting (Annual Ordinary) of the shareholders of Rafhan Maize Products Co. Ltd. will be held on Tuesday, March 29, 2011 at 10:00 a.m. at the Overseas Investors Chamber of Commerce and Industry’s Hall, Talpur Road, Karachi to transact the following business:

1. ToconfirmminutesofthelastGeneralMeeting(AnnualOrdinary) of the shareholders of the Company held on Monday, March 29, 2010 at Karachi.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended December 31, 2010 together with the Directors and Auditors Reports thereon.

3. To approve final cash dividend @550% for the yearended December 31, 2010 as recommended by the Board of Directors.

4. To appoint auditors and fix their remuneration. Thepresent auditors Messrs KPMG Taseer Hadi & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment. The Board of Directors, on recommendations of the Audit Committee, has proposed appointment of Messrs KPMG Taseer Hadi & Co., Chartered Accountants for the year 2011.

By order of the Board

M. Yasin Anwar Company SecretaryKarachiMarch 7, 2011

Notes:

1. The Share Transfer Book of the Company will remain closed from 21st to 29th March, 2011 (both days inclusive) and no transfer will be accepted for registration during this period.

2. A member entitled to attend, speak and vote at the meeting shall be entitled to appoint another person as his/her proxy to attend, speak and vote instead of him/her, and a proxy so appointed shall have such rights with respect to attending, speaking and voting at the meeting as are available to a member. Proxies in order to be effective must be received by the Company not less than 48 hours before the meeting. A proxy need not be a member of the Company. Form of proxy is attached.

3. Shareholders are requested to notify change of address, if any, to Company’s Shares Registrar immediately.

4. CDC shareholders desiring to attend the meeting are requested to bring their original Computerized National Identity Cards, Account and Participant’s ID numbers, for identification purpose, and in case of proxy, toenclose an attested copy of his/her CNIC.

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Vision

Mission Statement

To be the Premier Provider of Refined Agriculturally Based

Products and Ingredients in the Region.

To grow business consistently through positive relationship with customers to attain full customer satisfaction and to

bring continual improvement by adopting only those business practices which add value to our customers, employees and

shareholders.

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Our Core Values

Safety

Quality

Respect Excellence

Integrity

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

Quality: Our focus every day is on quality: Quality of the ingredients we make; of the services we provide; and of the relationships that we build. When we do things right, our customers and our colleagues haveconfidenceinus,andthatgivesusthefoundationonwhichwewillcontinuetobuildourCompany.

Integrity: Honesty and trust are the foundations of our business. The people of Corn Products International will maintain the highest standards of business conduct, not only because it is expected of them, but because it is the right thing to do. Our customers, employees, shareholders, partners and neighborscanbeconfidentthattheyareworkingwithpeoplewhostandbytheirproducts,liveup to their promises, keep their word, and do business in an honorable fashion.

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

Excellence: Wewillrelentlesslypursueexcellenceinallthatwedo,continuingtofindnew,innovativesolutionsfor our customers. We will provide our employees with the tools, training and resources they need to excel.

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Chief Executive’s Review

By the grace of Almighty Allah, your Company has made steady progress in its financial performance and managed to improve itsnetsalesby22%ascomparedto lastyear.The profit after tax improved to Rs.1,838 million against Rs.1,297 million of last year. Your Company retained its strong position as the supplier of choice by focusing on good management practices, commitment to quality and better marketing mix.

BUSINESS REVIEW

Your Company has been engaged in a long journey during the last several years to achieve excellence and consistent growth in its business. A major key to our success has been continuous development of innovative ingredients to meet our customers’ requirements while reducing their cost. Our product portfolio spans three major categories - Industrial, Food and Animal Nutrition & Health Ingredients which are supplied to multiple industries.

Year ended December 31 2010 2009

Net Sales Rs. (Million) 13,913 11,428

Net Income after Tax Rs. (Million) 1,838 1,297

Earnings per Share Rupees 198.99 140.43

ECONOMIC ENVIRONMENT

The year 2010 proved to be very challenging for the economy of Pakistan. In the beginning of the year, the economy was on track and performed better than in the previous year. However, the worst flooding ever damaged about one fourth of the country’s agriculture heartland and destroyed over three million bales of cotton resulting in a cumulative loss of about 1.5% to GDP. The severeenergy crisis continued to impact the manufacturing sector and overall business activities. Consequently, the country’s economy continued to remain under stress and according to the State Bank’s projections will miss three targets - GDP growth, fiscal deficit and inflation. Despite better performance of the services sector, GDP growth is expectedbetween2to3%againstgrowthtargetof4.5%.Higher cost of imports, energy, commodities products and rising demand significantly contributed to raise the inflation to16%.The taskofeconomic recovery isdifficultbut thegovernment is making efforts to restore macroeconomic stability and the confidence of business.

It gives me great pleasure to present the Annual Report and review of the performance of your Company for the financial year ended Dec 31, 2010. By the grace of Almighty Allah, your Company has continued its journey on the road to excellence during the year 2010 although the country’s overall economic situation and business environment made business growth difficult.

OPERATING RESULTS


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Our brands are our customers’ preferred choices in the respective categories due to your Company’s focus on the changing needs of our customers. We aim to be real business partners and solution providers to our customers through strong business relationships and our continued quest for innovative ways of doing business in order to expand into new markets and product applications.

INDUSTRIAL BUSINESS

The Company offers a diversified range of products to the Industrial sector. The growth in this sector is the result of sharpening our focus on customers needs, exploring growth opportunities and promoting timely delivery of our products across the country. Our diversified range of regular and modified starches under the brand names of Rafhan®, Penetrose®, Amisol®, Tex-o-Film® and Coratex® are consumed in textile weaving and processing as most favored ingredients. The textile mills sector has shown recovery from the global demand recession due to progress in its export base. However, short availability of cotton coupled with a drastic increase in prices of cotton yarn, the liquidity crunch and frequent disruptions in electricity and gas supply affected the operation of downstream textile units. Paper and paperboard demand in Pakistan has grown in line with the overall improvement in educational and industrial consumption. Large investments are being made by manufacturers in this sector to enhance the domestic capacities of quality paper and paperboard to meet the growing demand, which in turn helped to generate demand

for your Company’s Q-Tac® starches. The corrugation and paper sack industries also operated at a normal pace to cover demand for packaging of industrial, electronics and food products; creating demand for the sale of Tex-o-Film® and Coragum® starches and Dextrins.

We consider diversification of our product-line to be a major factor for growth and viability in the ever changing market scenario. Over the years, the Company has continued to focus on innovation in its product line for the industrial sector to fulfill the modern needs of our customers for new applications.

FOOD BUSINESS

Despite a challenging market situation, your Company was successful in growing the food ingredient business with proactive strategies, service excellence and efforts to expand our customer base. The Company successfully continued to deliver supplies of sweeteners to our customers despite logistical constraints, through our coordinated supply chain. The major part of demand came from the export-led sugar confectionery segment for liquid glucose. However, small and medium confectioners were impacted by growing inflationary pressure on input costs, a rise in utilities’ prices and frequent power breakdowns.

Our food business is characterized by a diversified portfolio of customers. Our product-line covers a wide range of products including Globe® and Snowflake® starches,

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Rafhan® Liquid Glucose, Cerelose® Dextrose Monohydrate, Rafhan® Liquid Caramel and Golden Syrup. Despite adverse economic factors, demand from major food industries has shown marginal improvement. Your Company continued as a trusted supplier to the food segment. Innovative solutions provided to the food sector have opened the door for other opportunities. Your Company remains committed to further expanding its product-lines for different applications in food products.

ANIMAL NUTRITION AND HEALTH BUSINESS

The Animal Nutrition ingredients include Prairie Gold® and Rafhan® Maize Gluten Meals, Buffalo™ Maize Bran, Rafhan® Maize Germ Cake, Enzose® Hydrol and Rafhan® Crude Corn Oil. This segment delivered good performance because of stable demand from poultry, livestock and aquaculture segments. The poultry business has shown strength despite high inflation. Similarly growth in fish farming and dairy cattle segments continued to drive demand.

During the past few years, the dairy sector has shown progress due to the government’s incentives to promote dairy farming to meet a growing demand for milk and milk-based products. Consequently, the use of formula feed rations has shown an upward trend.

EXPORTS

Your Company continues to align its strategic plans to take advantage of emerging global trends and opportunities. In 2010, the Company has made continuous efforts to increase sales by enhancing its presence in the export markets. At the same time, we remained focused on fresh challenges and opportunities within and beyond the territorial limits of the country. We believe that your Company is well positioned to take advantage of its experience and diversified product-line to explore regional markets. At the same time, our people are constantly engaged in assessing customers’ needs and market dynamics in export markets to develop our core competencies.

RAW MATERIAL - MAIZE

For the past 57 years, your Company has won as one of the most recognized and respected name among agro-based industries in Pakistan. We were the first Company to conceptualize and execute the unique idea of spring maize (corn) cultivation. Throughout this long history, the story of success still continues. Your Company is committed to play a leading role in agricultural advancement in Pakistan by providing integrated solutions and agronomical assistance to the farming community to meet growing maize consumption demand in the country. We provide to the farmers expert advice free of cost through our agricultural experts who are based in the field. Our maize production and purchase teams proactively play an integral role by helping farmers to improve crop yield and productivity by sharing best practices. Through our agricultural efforts, we have strategically been able to increase the area under cultivation in addition to improving the crop yields.


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In our quest for professional excellence, your Company is striving for continuous improvement in the procurement process to cope with the present challenging economic environment where strategic procurement is as important as strategic selling. With growing demand of maize from different sectors, the need for quality raw material and enhancement in yields has become all the more important for a stable supply chain.

The year under review was not good for maize cultivation. The spring crop was impacted by unfavorable weather at the time of pollination, and less availability of water for irrigation due to power load-shedding. The winter crop was partly damaged in KP and southern Punjab due to floods. Lower than target production against strong demand from livestock and other sectors pushed the price of maize to all time high level during the year 2010.

INVESTMENT

Your Company has always followed its policy to invest into new technologies and product innovation which is the core strength of its business. We are well cognizant of market needs and changing business dynamics to continuously enhance our competencies to meet customers’ needs with higher product standards. Our goal is to provide customized solutions to our customers to support market growth.

We are determined to optimize our manufacturing capabilities and to maintain Company’s position as one of the leading ingredient suppliers. Over the years, the plant capacity has gradually been increased and your Company now operates from two locations with sufficient manufacturing capacity to meet market demand. Construction work on our third plant in the South region is in progress to meet the growing demand and potential growth in the Southern markets. Your Company has embarked upon an expansion program and spent an amount of Rs. 582 million during the year 2010.

We are confident that continued investment in our people and technologies would enable us to achieve our strategic goals. We shall continue to pursue our expansion and diversification projects in an anticipation to meet the growing demand from local resources.

OPERATIONS

Our strategies have repeatedly proven effective at achieving sustained and quality output from our plants. This is a result of our commitment towards operational efficiency of manufacturing facilities. Our plants have shown a solid production performance over the years driven by continuous production enhancement, process optimization and efficiency improvements in all plants. We have equipped our plants with state-of-the-art facilities which combine competent people, technology and management system to achieve profitable growth in line with our growth strategy from year over year.

Multiple steps were taken to recover production losses due to energy shortage in the country and several energy saving measures were taken to improve energy optimization. Processes were reengineered and employees trained for coordinated efforts and teamwork to enhance productivity. Extended electricity and gas load-shedding affected the overall productivity. Each rupee of the investment was spent in the right place. However, your Company maintained its momentum to produce according to market demand and customer needs which helped maintain market leadership. The management developed a system for close monitoring of critical and important operations and took timely versatile measures to reduce production losses and improve/maintain efficiency of machines.

INTEGRATED QUALITY AND ENVIRONMENTAL MANAGEMENT SYSTEM

Quality and Safety are key indicators in our core values and, therefore, are of high priority at all levels. Quality

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management is an integral part of our business strategy. We have been able to consistently achieve the level of quality required to satisfy our customers and to pursue further improvements. Our quality policy reflects our commitment to quality. The satisfaction of our customers is the measure for the quality of our products and services.

We recognize that our strength lies in the strength of our customers and are committed to provide them with best quality and service. Product quality is consistently maintained and monitored at every stage. All processes are consistently monitored, measured and evaluated to guarantee a consistent high level of performance. The Company has already implemented ISO certification at all departments and facilities. During this year, certification of QMS to its new version ISO-9001:2008 was achieved and also qualified for Surveillance Audits of EMS, OHSAS and Halal certification. Recertification was also achieved without any non conformity for OHSAS 18001. We endeavor to maintain this record in the future. The working on implementation of FSMS ISO-22000 has been completed and certification process is targeted to be completed by the end of the current year. Furthermore, in-house training session and seminars on GMP and HACCP implementation were held, a step forward to achieve ISO-22000:2005 Food Safety Management System certification. Besides, we qualified a number of customers’ audits from multinational pharmaceutical and food companies and obtained excellent ranking which clearly indicate Company’s commitment to its quality management systems.

PRODUCT DEVELOPMENT

Innovation is a key to our success. We consider diversification of our product-line as a major factor to continue to compete effectively. There is a constant endeavor at all levels of the organization to enhance Company’s performance by offering upgraded range of its products and services. Research and Development is an integral part of our operations designed to keep pace with the technological advancement and maintain the

Company’s competitiveness in the market. Our production facilities are supported by our research and development team to meet the particular requirements of our customers.

Company R&D capability is one of the principal reasons for the Company’s strong business relationship with our valued customers. We want our customers to get the best value of their money spent. Our R&D expertise allows us to actively engage in business development activities and makes us enable to identify and enhance the product portfolio to remain a supplier of choice for our customers.

O C C U P A T I O N A L HEALTH & SAFETY

Your Company continues to strive for excellence in Occupational Health and Safety. Safety is the most important and first core value of the Company. We are committed to provide clean, healthy and safe conditions to our employees, contractors, visitors and the community in which we operate. A safety culture is inculcated through employees’

participation in training sessions, inspections, audits, competitions, other activities in compliance with safety procedures and monthly meetings of Safety Committees.

The landmarks achieved during the year 2010 are as under:

• Thegoal of zero loss timeaccidentduring2010wassuccessfully achieved. Over 8.3 million exposure hours without a lost workday accident were achieved for Company employees and 6.8 million hours for contractors’ employees at Rakh Canal Plant. Over


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13.5 million exposure hours without a lost workday accident have been achieved at Cornwala Plant for Company and contractors’ employees.

• “Safety and Environment Month” was observed inOctober. Safetysloganfortheyearwas“SafetyYourLife’s Value - Someone is waiting for You”. Practicaldemonstrations and drills on fire fighting, rescue, first-aid and confined space entry were arranged by full participation of employees in coordination with the Civil Defence Department.

ENVIRONMENT STEWARDSHIP PROGRAM

Environment Stewardship Program was continued during the year 2010. The management maintained its strong commitment for safe environment in its operations throughout the years. We continued to demonstrate our strong sense of responsibility to the society and environment. Environment slogan for the yearwas “ManySpecies,OnePlanet,OneFuture”.Forthesecondtime,theCompany received the “Environment Excellence Award”from National Forum for Environment and Health (NFEH) on account of its excellent environmental initiatives and successful implementation of environmental management system. Environment stewardship program was extended to offices, plants and warehouses to improve overall the environment.

CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABILITY

Your Company is fully conscious of its responsibility towards communities and sustainable environment. The most important part of this responsibility is training of employees on ethical practices, CSR and sustainability to make them good citizens, act as role model for others and ambassadors of good practices in the society.

The following additional actions were taken in the area of CSR and Sustainability:

• The Company contributed Rs.1.9 million to the fundfor rehabilitation of flood affected people.

• Contributed in the uplift of country’s economy byproviding free agricultural advisory service to the farmers of various provinces.

• NewplantisbeingsetupintheSouthregionforsocioeconomic uplift of the area.

• Green belts of 49,182 and 32,400 square feetdeveloped outside the plants were maintained for public use.

• 248 plants were planted in the green fields of neighboring farmers during 2010 making the total 1,098 plants.

• Public primary school and post office built on yourCompany’s donated land are being maintained.

• 37studentsofdifferentprofessional institutionswereprovided internship training and trained professionally and ethically.

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• Your Company is recognized as the employer of equal opportunity in the area with fairly good compensation and benefits and working conditions.

• Employees’ participation in the community welfareactivities is encouraged.

• Green Chemistry - introducing new environmentfriendly and bio degradable products for supply to customers as replacement of synthetic products.

• Awareness and participation of employees wasenhancedbyobserving “EarthDay”, “WorldHepatitisDay”and“WorldEnvironmentDay”.

• Afullyequippeddispensaryisalsomaintainedtofaceany emergency and general health care of employees and their dependants.

• Apprenticeship training is provided to school/collegeleaving students for 2 to 3 years - 13 apprentices are on roll for practical training.

INFORMATION TECHNOLOGY

The Company recognizes information technology is an essential tool for future progress. Marked efforts have been made to introduce a streamlined and integrated IT infrastructure within the organization to support our growing business needs. We make full use of IT resources available. The production facilities and our offices in different locations are connected through dedicated communication channels.

In line with our Company’s vision and the long term strategy, your Company achieved another milestone by implementing the world renowned SAP/ERP System. The project was started in January 2010 and completed within the seven month’s planned time. The scope of the new SAP System covers majority of the business areas like Financial Accounting, Sales, General Purchase, Materials Management, Materials Requirement Planning, Production Planning, Quality Management and Plant Maintenance. The new system will provide support to the related business areas to manage and achieve Company goals in more effective way.

HR MANAGEMENT AND EMPLOYEES RELATIONS

Our people are our identity and most precious asset. Our employees’ team consists of a very dynamic and vibrant workforce with a positive attitude to face the emerging challenges. These people are highly professional, ethical and result oriented. We acknowledge that sustained growth and excellence depends on the recruitment, development and retention of competent human resources.

Focusing on teamwork in all areas of our business is the key driving force in achieving high performance. Your Company’s workforce works tirelessly to translate its strength into tangible results. The workforce is spread all across the country and playing concrete roles to achieve the Company’s goals and targets. The ultimate objective is to have the right people in the right place, at the right time with the right pay, and make the Company an employer of choice.

The Company has taken a number of measures to develop its employees to meet the challenges of today’s competitive business world. We maintain a robust leadership strategy to identify and use a systematic approach by providing growth oriented and varied career opportunities to employees, thereby obtaining exceptional performance. We recognize that continuous improvement in management capability is a vital ingredient for growth.

The Company rewarded its 152 employees for their long service ranging from 10-40 years. This year, a number of education scholarships were also given to deserving children of employees to recognize their efforts in achieving excellence in education.

TRAINING & MANAGEMENT DEVELOPMENT

Over the years, the Company has maintained a distinctive corporate culture driven and influenced by our dedicated and energetic workforce. All Company employees are given appropriate opportunities for self-development and career growth. We strongly believe that training and development is an investment rather than an expense. Formal assessments are carried out for training needs and the employees are exposed to various kinds of training, including, as appropriate, technical courses, management courses, workshops and seminars both at home and abroad. Extensive in-house training and development programs are one of the tools used for development of our winning team. A number of in-house courses and workshops

were held including environment and safety.

The training program of the Company is designed on annual basis focusing on the customer and business needs and

One day Seminar on GMP & HACCP conducted by Corporate Hygienist, Nestle Pakistan Ltd

SAP Go Live 5th July 2010


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challenges. As the year 2010 was full of challenges due to escalating costs of energy, raw materials and spares, full emphasis was focused on the cost savings in designing our in-house training programs by including following topics:

1. Standard Operating Procedures2. Control of Critical Parameters3. Personal Hygiene at Plant4. Data Logging and Analysis5. Energy, Water Conservation and Waste Control6. Control of Manufacturing Supplies Material

Consumptions7. Development of Spares and Enhancing their Working

Life8. Re-engineering of Processes9. Root Cause Analysis to Improve Efficiency of Equipment

About 200 in-house training sessions were conducted for 2,144 operators/workers at Faisalabad and Cornwala Plants. The above mentioned training programs helped our employees to partially off-set the impact of escalating costs of inputs by cutting down the manufacturing and other costs. Training was provided to management and non-management employees on the following topics:

1. Management and Technical Skills Development2. HACCP and GMP3. Zero Defect Production Program4. Product Yield Control5. Food Product Safety 6. Vibration Monitoring and Balancing of Rotary

Equipment7. Electrical Safety and Arc Flash

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

fast growing challenges. Our team members are aware of their corporate and social responsibilities to promote your Company’s reputation as a model corporate citizen.

VALUES AND BUSINESS CONDUCT POLICIES

Your Company’s Core Values and Business Conduct Policies are critical in establishing an ethical and honest culture.Thetrainingprogramtitled“PILLARS-VALUESANDBUSINESSCONDUCTWORKSHOP”continuedduring theyear and a number of sessions were held to promote the understanding of the Core Values and their compliance by employees. The training included all employees, at all levels of the Company.

BUSINESS RISKS, CHALLENGES AND FUTURE PROSPECTS

The economic outlook for 2011 remains problematic. Some of the major challenges are: low growth, high inflation, rising unemployment, continued fiscal indiscipline, surging food and energy prices, expensive credit to private sector and low foreign investment. Whereas a sustained flow of home remittances from overseas Pakistanis happens to be a consolation, food and oil imports are likely to put pressure on the balance of payments. The State Bank of Pakistanhasalreadyrevisedtheinflationrateto16%whichwould continue to impact the cost of production. However, the performance of the commodity producing sectors of the economy is expected to improve in the months ahead. Large scale manufacturing growth is expected to turn positive as strong agri-prices support demand and with the additional capacities coming on line in some major industries. As such the macroeconomic imbalances in the economy are still manageable provided immediate steps are taken to implement critical structural adjustments. Pakistan’s economy has always shown resilience during unfavorable business environments and we are hopeful that the initiatives being taken by the Government and the

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political parties on the agenda for economic reforms would be helpful in reviving economic growth.

In view of the prevalent market circumstances, the performance of consuming segments may remain depressed which may impact overall demand for our products especially from downstream consuming industries. Inflationary pressure on the cost of maize, utilities and other overhead will continue, however, it may be difficult to include the total impact of cost increases in the prices of our products.

The management of your Company is fully aware of the challenges ahead and is taking measures to face those challenges by adopting market driven strategies, optimizing manufacturing capabilities, striving for continued differentiation of our products and services and continuing our operational excellence and prudent use of our resources. We are confident that our journey on the track of progress will continue and we will continue to create value for all our stakeholders.

CORPORATE DISTINCTIONS

Your Company continued to be recognized for high performance by receiving the “Top 25 Companies ofPakistan Award” from the Karachi Stock Exchange forthe fourteenth year in a row. The same was the case with the Best Corporate Reports Award from the Institute of Chartered Accountants of Pakistan and Institute of Cost & Management Accountants of Pakistan, which your Company has received for the tenth consecutive year.

The Special Merit Trophy Award from the Federation of Pakistan Chambers of Commerce & Industry for export of maize derived products was another landmark. In addition to the above, your Company also received the following awards and distinctions during the year:

• “Corporate Social Responsibility National ExcellenceAward–2009”.

• Annual Award on “Best Practices in OccupationalHealth, Safety and Environment (OHSE) in a competition arranged by Employers’ Federation of Pakistan.

• “7th Environment Excellence Award 2010” ina competition arranged by National Forum for Environment and Health.

• “1st Global HR Recognition Award 2010” in acompetition arranged by Global Media Links. We also received special Award for “Best EmployeeEngagementStrategy”.

• “5th Corporate Social Responsibility NationalExcellence Award – 2010” in a competition arrangedby Help International.

ACKNOWLEDGEMENT

We take this opportunity to thank our valued customers who have shown great confidence in our products and continue to provide sustained support in ensuring the progress of the Company. We also would like to take advantage of this opportunity to thank our business partners and those who continue to lead the Company forward with their support and conviction. We are grateful to the Board of Directors for their guidance, trust and support in steering the Company to grow. We also acknowledge the support and cooperation received from our esteemed suppliers, dealers, bankers and other stakeholders.

We are also thankful for trust reposed by the shareholders on the management and the Board of Directors of the Company. Your Company is immensely proud of its employees, I would like to take this opportunity to extend my compliments and gratitude for the devoted and sincere efforts of employees of the Company at all levels. The Company’s achievement and impressive results have not been possible without their contributions.

Looking forward, the coming days would be more challenging. The uncompromising commitment of our dedicated employees and their efforts will continue, Insha Allah, to make your Company as one of the PREMIER PROVIDER OF REFINED AGRICULTURALLY BASEDPRODUCTSANDINGREDIENTSINTHEREGION.

Please join me in praying Almighty Allah to give us courage and wisdom to face those challenges and work with more zeal for the prosperity of the Company and to create value for its stakeholders. A’meen!

Ansar YahyaFaisalabad Chief Executive andFebruary 14, 2011 Managing Director

Corporate Excellence Award from The Management Association of Pakistan


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Rafhan Calendar of Major Events - 2010

January 11 SAP Kick-off Meeting.

March 20 In-house Seminar on Six Sigma for employees.

March 24 Safety Training Program for employees and contractors at Cornwala Plant.

April 23 – 24 In-house Training Program on Awareness, Implementation & Auditing of ISO 2000:2005 Food Safety

Management System (FSMS) at Cornwala Plant.

April 28 “BestPracticesinOccupationalSafety,Health&Environment(OHSE)Award2009”fromtheEmployers’

Federation of Pakistan and International Labour Organization.

May 27 – 29 IMSAuditbyMoodyInternationalCertificationforRakhCanalandCornwalaPlants.

June 14 Hajj balloting was held where 17 lucky winners amongst staff and workers were selected to perform Hajj.

June 30 Safety & Environment Training Program for employees and contractors was held at Cornwala Plant.

July 05 SAP Go-Live Day.

July 08 “GlobalHRRecognitionAward2010”byGlobalMediaLinksandBetterPakistanForumandSpecial

Awardfor“BestEmployeeEngagementStrategy”.

July 27 Referendum for election of Collective Bargaining Agents (CBA).

August 02 “EnvironmentExcellenceAward-2010”fromtheNationalForumforEnvironment&Health(NFEH).

September 08 Nominationfor“Top25CompaniesAward”bytheKarachiStockExchange(Guarantee)Ltd.

October 05 “SpecialMeritExportTrophyAward”fromtheFederationofPakistanChambersofCommerce&Industry

on export of Corn (Maize) derived products.

October 13 One day seminar on GMP & HACCP Implementation Guidelines (ISO-22000 FSMS) was conducted at

Cornwala Plant.

October 22 “BestCorporateReportAward–2009”andgotIstPositioninMiscellaneousSectorfromtheJoint

Committee of Institute of Chartered Accountants of Pakistan and Institute of Cost & Management

Accountants of Pakistan.

October Octoberwasobservedas“SafetyMonth”atbothplants.Thesafetysloganfortheyearwas“Safety,

YourLife’sValue–someoneiswaitingforYou”.

July – November “Pillars-ValuesandBusinessConductPolicies”Workshops.

November 17 The Board of Directors of CPI adopted a Resolution in favour of Rafhan Maize Products Co. Ltd.,

Faisalabad Plant for achieving the safety milestone of THREE YEARS without a Lost Workday accident.

November 23 “CorporateExcellenceAward(CertificateofExcellenceinFoodProducersSector)”fromThe

Management Association of Pakistan.

December 05 PicnicPartyofmanagers/officersandstaff.

December 15 Nominatedfor“5thCorporateSocialResponsibilityNationalExcellenceAward–2010”byCSR

Association of Pakistan.

16 |

Horizontal Analysis of Profit and Loss Account

2010 2009 2008 2007 2006 2005

Sales 122% 106% 142% 124% 118% 115%Costofsales 118% 112% 146% 120% 114% 123%Grossprofit 135% 89% 131% 134% 131% 94%Distributioncost 113% 73% 84% 179% 128% 142%Administrativeexpenses 113% 113% 108% 107% 105% 119%Operatingprofit 139% 88% 138% 133% 135% 89%Otheroperatingincome 105% 87% 145% 141% 95% 147%Financecost 65% 135% 306% 58% 247% 162%Otheroperatingexpenses 138% 88% 137% 135% 145% 82%Profitbeforetaxation 139% 88% 137% 134% 131% 91%Taxation 135% 89% 136% 134% 131% 89%Profitaftertaxation 142% 87% 137% 135% 132% 92% (Note: 2004 has been taken as base year and percentage variations have been worked out on year on year basis.)

Horizontal Analysis of Balance Sheet 2010 2009 2008 2007 2006 2005

NON CURRENT ASSETS

Property,plantandequipment 123% 114% 103% 112% 113% 91% Intangible assets – – – – – –Capitalwork-in-progress 98% 196% 566% 33% 55% 38% Employeesretirementbenefits 411% 22% 75% 290% 94% –Longtermloans 82% 451% 54% 58% 103% 90%

CURRENT ASSETS

Storesandspares 112% 99% 128% 125% 109% 114%Stockintrade 268% 48% 177% 117% 84% 116%Tradedebts 120% 92% 105% 123% 123% 130%Loansandadvances 1055% 48% 143% 197% 152% 72%Tradedepositsandprepayments 115% 85% 123% 84% 100% 75%Otherreceivables 191% 102% 1609% 104% 48% 300%Cashandbankbalances 6% 4905% 4% 129% 1631% 44% TOTAL ASSETS 138% 100% 134% 112% 100% 113%

CURRENT LIABILITIES

Tradeandotherpayables 151% 96% 130% 107% 99% 113%Markupaccruedonshorttermrunningfinances 96% 101% 13970% 3% 61% 1245%Shorttermrunningfinances-secured – – – – 102% (Refer note below) Provisionfortaxation 86% 143% 188% 143% 84% 201%

NON CURRENT LIABILITIES

Deferredtaxation 135% 111% 93% 133% 132% 94% SHARE CAPITAL AND RESERVES

Sharecapital 100% 100% 100% 100% 100% 100%Reserves 124% 112% 119% 111% 107% 114% TOTAL LIABILITIES 138% 100% 134% 112% 100% 113% Note: 1. Nopercentagehasbeenworkedoutwheretherewerenofiguresincurrentorcorrespondingyear.2. 2004 has been taken as base year and percentage variations have been worked out on year on year basis.


| 17

Vertical Analysis of Profit and Loss Account

2010 2009 2008 2007 2006 2005

Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Costofsales 76.3% 78.7% 74.5% 72.3% 74.4% 76.9%Grossprofit 23.7% 21.3% 25.5% 27.7% 25.6% 23.1%Distributioncost 0.9% 1.0% 1.5% 2.5% 1.7% 1.6%Administrativeexpenses 1.5% 1.6% 1.5% 2.0% 2.3% 2.6%Operatingprofit 21.2% 18.6% 22.5% 23.2% 21.6% 18.8%Otheroperatingincome 0.6% 0.7% 0.8% 0.8% 0.7% 0.9%Financecost 0.2% 0.4% 0.3% 0.2% 0.3% 0.2%Otheroperatingexpenses 1.5% 1.3% 1.6% 1.6% 1.5% 1.2%Profitbeforetaxation 20.1% 17.6% 21.4% 22.2% 20.4% 18.3%Taxation 6.9% 6.3% 7.5% 7.8% 7.2% 6.5%Profitaftertaxation 13.2% 11.3% 13.9% 14.4% 13.2% 11.8%

Vertical Analysis of Balance Sheet 2010 2009 2008 2007 2006 2005

NON CURRENT ASSETS Property,plantandequipment 29.9% 33.3% 29.4% 38.1% 38.2% 33.6%Intangibleassets 0.4% – – – – –Capitalwork-in-progress 13.4% 18.6% 9.5% 2.3% 7.7% 14.0%

Employeesretirementbenefits 0.9% 0.3% 1.4% 2.4% 0.9% 1.0%Longtermloans 0.0% 0.1% 0.0% 0.0% 0.1% 0.1% CURRENT ASSETS Storesandspares 4.3% 5.2% 5.3% 5.5% 5.0% 4.6%Stockintrade 43.1% 22.0% 45.5% 34.5% 32.8% 39.1%Tradedebts 5.2% 5.9% 6.5% 8.3% 7.6% 6.1%Loansandadvances 1.7% 0.2% 0.5% 0.4% 0.2% 0.2%Tradedepositsandprepayments 0.4% 0.4% 0.5% 0.5% 0.7% 0.7%Otherreceivables 0.2% 1.2% 1.2% 0.1% 0.1% 0.2%Cashandbankbalances 0.5% 12.7% 0.3% 7.7% 6.7% 0.4% TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

CURRENT LIABILITIES Tradeandotherpayables 15.3% 14.0% 14.6% 14.8% 15.7% 15.8%Markupaccruedonshorttermrunningfinances 0.1% 0.2% 0.2% 0.0% 0.1% 0.1%Shorttermrunningfinances-secured 8.7% 0.0% 9.3% 0.0% 0.0% 5.4%Provisionfortaxation 2.8% 5.5% 3.9% 2.0% 1.5% 1.8% NON CURRENT LIABILITIES Deferredtaxation 4.8% 5.0% 4.5% 6.4% 5.4% 4.1% SHARE CAPITAL AND RESERVES Sharecapital 1.3% 1.8% 1.8% 2.3% 2.6% 2.6%Reserves 67.0% 74.6% 66.7% 74.4% 74.7% 70.1% TOTAL LIABILITIES 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

18 |

Corporate Governance

Your Company is committed to maintain high standards of good corporate governance without any exception. The Directors are pleased to state that your Company is compliant with the provisions of the Code of Corporate Governance as required by SECP and formed as part of stock exchanges listing regulations. The statement of compliance with Code of Corporate Governance is annexed.

Disclosures under Code of Corporate Governance

Corporate and Financial Reporting Framework

(a) ThefinancialstatementspreparedbythemanagementoftheCompany,fairlypresentstateofitsaffairs,theresultofitsoperations,cashflowandchangesinequity.

(b) Proper books of accounts of the Company have been maintained.

(c) Appropriate accounting policies have been consistently applied in preparation of financialstatementsandaccountingestimatesarebasedonreasonableandprudentjudgment.

(d) International Accounting Standards, as applicable in Pakistan, have been followed in preparationoffinancialstatementsandanydeparturetherefromhasbeenadequatelydisclosed.

(e) The system of internal control is sound in design and has been effectively implemented and monitored.

(f) TherearenosignificantdoubtsupontheCompany’sabilitytocontinueasagoingconcern.

(g) There has been no material departure from the best practices of corporate governance as detailed in the listing regulations.

Directors’ Report

The Directors of your Company feel pleasure in presenting the annual audited accounts along with auditors’ report thereon for the year ended December 31, 2010.

Financial Results

ProfitandAppropriations Year ended December 31

2010 2009

(Rupees in Thousands)

Profitaftertaxation 1,837,937 1,297,080

Actuarial gains/(losses) of employees

retirementbenefits 31,861 (36,513)

Un-appropriatedprofitbroughtforward 3,877,272 3,447,983

5,747,070 4,708,550

Appropriations

FinalDividend2009@400% (2008:@400%) 369,457 369,457

1stInterimDividend2010@350% (2009:@250%) 323,275 230,911

2ndInterimDividend2010@250% (2009:@250%) 230,911 230,910

923,643 831,278

Un-appropriatedProfit 4,823,427 3,877,272

Earnings per Share (Rupees) 198.99 140.43 Chief Executive’s Review

The Directors of the Company endorse the contents of the Chief Executive’s Review which cover your Company’s business review, salient activities in different fields of operations, outlook and investment plans for strategic growth.

Distribution of Sales(Percentage)

73.40%8.40%

13.21%

4.75%

Material & Services

Taxation

Dividend & Retention

0.23%

0.01%

Employee Cost

Finance Cost

Society Welfare


| 19

Key operating and financial data of last six years are as follows:

2010 2009 2008 2007 2006 2005

Net Sales (Rs’Mio) 13,913 11,428 10,747 7,578 6,127 5,194

Cost of Sales (Rs’Mio) 10,615 8,993 8,006 5,480 4,556 3,997

GrossProfit (Rs’Mio) 3,298 2,435 2,741 2,098 1,571 1,198

%ageofSales 24 21 26 28 26 23

OperatingProfit (Rs’Mio) 2,955 2,131 2,415 1,755 1,321 978

%ageofSales 21 19 22 23 22 19

ProfitBeforeTax (Rs’Mio) 2,800 2,012 2,299 1,681 1,252 953

ProfitAfterTax (Rs’Mio) 1,838 1,297 1,492 1,089 809 615

Earnings per Share Rupees 198.99 140.43 161.57 117.92 87.62 66.57

Dividend Amount (Rs’Mio) 924 831 924 831 647 323

Dividend Percentage 1,000 900 1,000 900 700 350

Capital Expenditure (Rs’Mio) 582 848 606 114 122 302

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

0 3000 6000 9000 12000 15000

Sales(Rupees in Million)

13,9132010

2009

2008

2007

2006

2005

11,428

10,747

7,578

6,127

5,194

0 500 1000 1500 2000

Profit after Tax(Rupees in Million)

1.8382010

2009

2008

2007

2006

2005

1,297

1,492

1,089

809

615

20 |

Value of investments of employees retirement funds:

2010 2009

Rs. in million

Provident Fund as at June 30 622.891 683.457 Gratuity Fund as at December 31 507.583 464.553 Superannuation Fund as at December 31 298.473 271.036

Board of Directors

The Board of Directors comprises two executive and eight non-executive directors. The current members of the Board of Directors have been listed in the Company Information. During the year under review, no casual vacancy occurred on the Board.

Attendance at Board Meetings

During the year ended December 31, 2010, four meetings of Board of Directors were held and attended as follows: Name of No. of meetings

Name of Director Alternate Director attended

John F. Saucier M. Maqbool Ahmad 4 Rashid Ali 3 Ansar Yahya 4 Cheryl K. Beebe S. Yousuf Hashmi 3 Mary A. Hynes Abdul Khalil 4 ZulfikarMannoo 4 Mian M. Adil Mannoo 2 Wisal A. Mannoo 3 Anis A. Khan 4 Sh. Gulzar Hussain 3

Transactions in Company’s Shares

CEO, Directors, CFO, Company Secretary and their spouses and minor children have made no transactions in the Company’s shares during the year except as stated below:

No. of Shares

Purchased

Mr. Rashid Ali Vice Chairman 265Mr.ZulfikarMannoo Director 100Mian M. Adil Mannoo Director 1,451 Mr. Wisal A. Mannoo Director 3,055Sh. Gulzar Hussain Director 924

Parent Company

CornProductsInternational,Inc.,USAisholdingmajoritysharesoftheCompany.

Directors’ Report


| 21

Directors’ Report

Auditors

The retiring auditors, Messrs KPMG Taseer Hadi & Co., Chartered Accountants, being eligible, offer themselves for re-appointment. The Board of Directors, on recommendations of Audit Committee, has proposed appointment of Messrs KPMG Taseer Hadi & Co., Chartered Accountants for the year 2011.

Audit Committee

The Board of Directors has established an Audit Committee in compliance with the Code of Corporate Governance with the following members -

Cheryl K. Beebe Chairperson (Non Executive Director)Rashid Ali Member (Non Executive Director)Zulfikar Mannoo Member (Non Executive Director)Sh. Gulzar Hussain Member (Non Executive Director)

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

to accounts and audit were discussed. The Audit Committee alsoreviewedinternalauditfindingsandheldseparatemeetingswith internal and external auditors as required under the Code of Corporate Governance. The Audit Committee also discussed with the external auditors their letter to the management. Related Parties Transactions were also placed before the Audit Committee. The Audit Committee has fully adopted the terms of reference as specifiedinCodeofCorporateGovernance.

Business Strategy & Planning Committee

The Board of Directors has established Business Strategy & Planning Committee comprising of following Board members -

John F. Saucier ChairmanRashid Ali Vice ChairmanAnsar Yahya MemberAnis A. Khan Member

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

0 50 100 150 200

Earnings Per Share(Rupees)

198.992010

2009

2008

2007

2006

2005

140.43

161.57

117.92

87.62

66.57

0 200 400 600 800 1000

Capital Expenditure(Rupees in Million)

5822010

2009

2008

2007

2006

2005

848

606

114

122

302

22 |

Directors’ Report

Shares Transfer Committee

The Board of Directors has established Shares Transfer Committee comprising of following Board members -

Rashid Ali ChairmanAnsar Yahya MemberAnis A. Khan MemberSh. Gulzar Hussain Member

Ten meetings of the Shares Transfer Committee were held during the year. The Committee met from time to time to consider and approve valid transfers and transmissions of shares or any business related thereto.

Corporate Executive Management Committees

In order to strengthen team spirit and encourage participation in management decisions, following Corporate Executive Management Committees have been formed -

Executive Management Committee

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&DirectorM. Saleem Rana Director Operations, Safety & Environment

Allbusinessdecisionsarefinalizedbythisteam.Thiscommitteecollaborates to achieve and improve overall performance of the Company, develop and implement approved business plan objectives and strategies, identify potential problems, monitor investment projects, review expenditures, identify opportunities/projects and implement good governance throughout Rafhan Maize.

Business Strategy Committee

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&DirectorM. Saleem Rana Director Operations, Safety & EnvironmentAbdul Khalil Deputy Director FinanceMuhammad Sarwar Deputy Director Marketing & Business DevelopmentTerms of Reference:

• ToconsiderallmatterspertainingtoCompany’soperations,day-to-day affairs requiring collective wisdom of the senior management.

• Preparation of annual business plan, budget, operationalmodel and structure.

• Evaluatemarket,financialandoperationalrisks,threatsandopportunities and devise ways to mitigate the effects of risks onCompany’sperformanceefficientlyandeffectively.

• Monitorperformanceagainstachievementofgoals.• Providesinputsonnewinitiatives,productsandprojects.

Remuneration & Compensation Committee:

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&Director

M. Saleem Rana Director Operations, Safety & EnvironmentM. A. Haq Siddiqui Senior Manager HR & Admin.

Terms of Reference:

TheCompanybelievesinhappyandsatisfiedworkforce.Inorderto ensure recruitment of dedicated and devoted employees and also retain existing ones, the responsibility of this committee is to formulate and implement packages for new employees, consider promotions of existing workforce through prescribed appraisal forms and review their remunerations.

Crisis Management Committee:

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&DirectorM. Saleem Rana Director Operations, Safety & EvironmentMuhammad Sarwar Deputy Director Marketing & Business

DevelopmentS. Raza Haider Plant ManagerIftikhar Anwer Khan P&A & Commercial Manager–South RegionM. A. Haq Siddiqui Senior Manager HR & Admin.M. Yasin Anwar CompanySecretary&ComplianceOfficerM. Farooq A. Mian Manager Warehouses & Stores

Terms of Reference:

• To assure that Rafhan Maize can effectively manage anyunexpected crisis.

• ToprepareCompanyasthoroughlyaspossibleinadvancefor any crisis; whether involving personnel, plant, product, natural disaster or any unexpected event of similar nature.

• Compliance of Crisis Management Procedures as perCompany’s Crisis Management Manual and Emergency Action Plans.

Systems & Information Technology Committee

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&DirectorM. Saleem Rana Director Operations, Safety & EnvironmentM. Tayyab Raza Chief Information Manager (IT)

Terms of Reference:

Rapid changes and improvements are taking place in the IT world. The role of the committee is to adopt latest technologies and modern systems for overall improvement in the IT area.

Policies on Business Conduct Compliance Committee:

Ansar Yahya Chief Executive & Managing Director Anis A. Khan ChiefFinancialOfficer&DirectorM. Saleem Rana Director Operations, Safety & EnvironmentMuhammad Sarwar Deputy Director Marketing & Business DevelopmentM. A. Haq Siddiqui Senior Manager HR & Admin.M. Yasin Anwar CompanySecretary&ComplainceOfficerIftikhar Hussain Internal Auditor


| 23

Terms of Reference:

• Effective communication of Policies on Business Conductand Core Values.

• Review of implementation and compliance of Companypolicies.

• Promotecomplianceand investigateviolationofpolicies, ifany.

• Recommendappropriatedisciplinaryactionsforviolation of policies, if any.

In addition to Corporate Executive Committees, Divisional Committees have also been formed which meet once in a month to reviewtheperformanceoftherespectivedivisionsandfindwaysandmeans to further improve and achieve even better results. The Team Leaders are responsible to hold the meetings of the Committees.

Divisional Committees include -

1. Finance & IT Committee2. CAPEX & Projects Review Committee3. Human Resources Committee4. Manufacturing Optimization and Regulatory Affairs

Committee5. Supply Chain Task Force6. Quality Excellence Committee7. Business Segmentation & New Ingredients Development

Committee

One sub-committee under Finance & IT and one under Manufacturing Optimization and Regulatory Affairs have been formed. Moreover, following three additional sub-committees have also been formed to include the bottom line management in decisions making –

1. Logistics & Inventory Control2. Quality3. Products Development

Pattern of Shareholding

Pattern of Shareholding as on December 31, 2010 according to requirements of Code of Corporate Governance and a statement reflecting distribution of shareholding appears at the end of thisreport.

Contribution to National Exchequer

Your Company has contributed Rs.1,773 million (2009:Rs.1,299 million) during the year 2010 to the national exchequer on payments towards sales tax, income tax, import duties and statutory levies. An amount of Rs.129 million (2009: Rs.131million) was also paid as withholding income tax deducted by the Company from shareholders, employees, suppliers and contractors.

Corporate Social Responsibility

Your Company is fully aware of its responsibilities being a responsible corporatecitizen.Detailedstepswithfigureshavebeenmentionedinthe Chief Executive’s Review. A few steps taken by the Company are being given below –

- Provided sites to a local bank, government primary school andapostofficetofacilitateservicetothegeneralpublic.

- Providesfinancialsupporttothegovernmentschool.- Fully equipped dispensaries at Rakh Canal Plant, Faisalabad

and Cornwala Plant, Jaranwala are being maintained.- Plantationdriveattheplantsandsurroundingagrifieldsto

protect the environment.- Scholarships provided to various talented students to

promote higher education. - Promoting maize cultivation in Punjab, Sindh and KP to

enhance agri-based contribution to national economy.- Several cost and energy savings measures have been taken.- Integrated Management System (IMS) has four international

certificationswhichincludeQMS,EMA,OHSMSandHALAL2009.

- Safety slogan for 2010 was ‘Safety, Your Life’s Value’. Safety month was observed during 2010.

- Rs.1.5 million donated to Chief Minister’s Fund for Flood Relief and Rehabilitation.

- Internship provided to 37 students from professional institutions during 2010.

- Installation of water pumps alongside Rakh Canal for free supply of drinking water to the local community.

Dividend

TheCompanyhasalreadypaidtwointerimdividendsof350%and250%.TheDirectorsnowproposeafinaldividendof550%makingthetotal1150%fortheyear.

On behalf of the Board

Ansar YahyaFaisalabad Chief Executive andFebruary 14, 2011 Managing Director

24 |

Forward Looking Statements

in worldwide markets for corn and other commodities, and the

associatedrisksofhedgingagainstsuchfluctuations;fluctuations

in the markets and prices for our co-products, particularly

corn oil; fluctuations in aggregate industry supply and market

demand; the behavior of financial markets, including foreign

currency fluctuations and fluctuations in interest and exchange

rates; continued volatility and turmoil in the capital markets; the

commercial and consumer credit environment; general political,

economic, business, market and weather conditions in the various

geographic regions and countries in which we manufacture and/or

sellourproducts;futurefinancialperformanceofmajorindustries

which we serve, including, without limitation, the food and

beverage, pharmaceuticals, paper, corrugated, textile and brewing

industries; energy costs and availability, freight and shipping

costs, and changes in regulatory controls regarding quotas, tariffs,

duties, taxes and income tax rates; operating difficulties; boiler

reliability; our ability to effectively integrate and operate acquired

businesses, including National Starch; labor disputes; genetic and

biotechnology issues; changing consumption preferences and

trends; increased competitive and/or customer pressure in the

corn-refiningindustry;andtheoutbreakorcontinuationofserious

communicable disease or hostilities including acts of terrorism. Our

forward-looking statements speak only as of the date on which

they are made and we do not undertake any obligation to update

anyforward-lookingstatementtoreflecteventsorcircumstances

after the date of the statement as a result of new information or

future events or developments. If we do update or correct one

or more of these statements, investors and others should not

conclude that we will make additional updates or corrections.

This Annual Report contains or may contain forward looking

statements. The Company intends these forward-looking

statements to be covered by the safe harbor provisions for such

statements. These statements include, among other things, any

predictionsregardingtheCompany’sprospectsorfuturefinancial

condition, earnings, revenues, tax rates, capital expenditures,

expenses or other financial items, any statements concerning

the Company’s prospects or future operations, including

management’s plans or strategies and objectives therefor and any

assumptions, expectations or beliefs underlying the foregoing.

These statements can sometimes be identified by the use of

forwardlookingwordssuchas“may,”“will,”“should,”“anticipate,”

“believe,” “plan,” “project,” “estimate,” “expect,” “intend,”

“continue,” “pro forma,” “forecast” or other similar expressions

or the negative thereof. All statements other than statements of

historical facts in this report or referred to in or incorporated by

referenceintothisreportare“forward-lookingstatements.”These

statements are based on current expectations, but are subject to

certaininherentrisksanduncertainties,manyofwhicharedifficult

to predict and are beyond our control. Although we believe our

expectations reflected in these forward-looking statements are

based on reasonable assumptions, stockholders are cautioned

that no assurance can be given that our expectations will prove

correct. Actual results and developments may differ materially from

the expectations expressed in or implied by these statements,

based on various factors, including the effects of global economic

conditions and their impact on our sales volumes and pricing of

our products, our ability to collect our receivables from customers

and our ability to raise funds at reasonable rates; fluctuations

24

| 25

26 |

Stakeholders’ InformationSix Years Summary

2010 2009 2008 2007 2006 2005

Investors’ Information

Grossprofitratio Percentage 23.70 21.31 25.51 27.69 25.64 23.06

EBITDA margin to Sales Percentage 21.48 19.35 23.03 24.14 23.84 21.76

NetprofittoSales Percentage 13.21 11.35 13.89 14.37 13.21 11.84

Return on assets Percentage 25.32 24.73 28.54 27.60 22.95 17.44

Return on equity Percentage 41.02 34.20 45.20 37.87 30.59 25.52

Return on capital employed Percentage 34.64 30.39 39.13 33.23 27.75 22.69

Weighted average cost of debt Percentage 13.35 13.73 12.66 8.91 9.28 6.17

Inventory turnover ratio Times 3.09 6.23 2.98 3.47 3.41 2.60

No. of days in inventory Days 118.12 58.59 122.48 105.19 107.04 140.38

Debtors turnover ratio Times 36.91 36.24 31.28 23.08 22.97 24.01

No. of days in receivables Days 9.89 10.07 11.67 15.81 15.89 15.20

Creditors turnover ratio Times 9.58 12.25 10.45 9.30 8.24 7.18

No. of days in payables Days 38.10 29.80 34.93 39.25 44.30 50.84

Operating cycle Days 61.31 63.89 77.78 73.43 85.11 96.38

Total assets turnover ratio Times 1.92 2.18 2.06 1.92 1.74 1.47

Fixed assets turnover ratio Times 6.40 6.47 6.92 5.05 4.56 4.38

Current ratio Times 2.05 2.53 2.19 3.38 3.08 2.21

Quick/ Acid test ratio Times 0.30 1.05 0.29 1.01 0.89 0.33

Price earning ratio Times 10.60 10.57 14.74 19.12 10.27 10.52

Cash dividend per share Rupees 100.00 90.00 100.00 90.00 70.00 35.00

Bonus shares issued Percentage - - - - - -

Dividend yield ratio Percentage 5.00 6.00 4.00 4.00 8.00 5.00

Dividend payout ratio Percentage 50.25 64.09 61.89 76.32 79.89 52.58

Dividend cover ratio Times 1.99 1.56 1.62 1.31 1.25 1.90

Debt : Equity ratio - - - - - -

Interest cover Times 89.75 42.26 64.65 143.38 62.38 116.33

Break-up value per share - Refer note below

-Withoutsurplusonrevaluationoffixedassets Rupees 536.34 433.91 387.43 327.58 295.21 277.72

- Including the effect of surplus on revaluation

offixedassets Rupees 536.34 433.91 387.43 327.58 295.21 277.72

Market value per share Rupees 2,109.87 1,485.00 2,381.42 2,255.00 900.00 700.00

Market value per share during the year (High) Rupees 2,298.00 2,262.35 2,940.00 2,415.00 918.00 700.00

Market value per share during the year (Low) Rupees 1,100.00 1,286.87 2,300.00 945.00 700.00 594.00

Earnings before interest, taxes, depreciation

and amortization (EBITDA) Rs. Mio 2,989.07 2,211.54 2,475.27 1,829.73 1,460.72 1,130.22

Note:TheCompanyhasnotcarriedoutanyrevaluation,hencethereisnosurplusonrevaluationoffixedassets.


| 27

Summary of Cash Flow Statement

2010 2009 2008 2007 2006 2005

(Rupees in Thousand)

Cashflowfromoperatingactivities 232,457 2,830,047 741,549 1,011,781 1,179,228 599,956

Cashflowfrominvestingactivities (577,499) (846,392) (604,368) (111,239) (119,926) (299,500)

Cashflowfromfinancingactivities (288,480) (1,324,451) (429,291) (831,423) (837,449) (318,987)

(633,522) 659,204 (292,110) 69,119 221,853 (18,531)

Opening cash and cash equivalents 673,409 13,730 305,420 236,295 14,484 33,062

Effectofexchangeratefluctuations (146) 475 420 6 (42) (47)

Closing cash and cash equivalents 39,741 673,409 13,730 305,420 236,295 14,484

28 |

Statement of Value Added and its Distribution

2010 2009

(Rupees in thousand)

VALUE ADDED

Net sales 13,912,769 11,428,104

Material and services (10,137,486) (8,536,013)

Other income 83,104 79,259

3,858,387 2,971,350

DISTRIBUTION % %

EMPLOYEES AS REMUNERATION

Salaries, wages and amenities 661,374 17.1 608,737 20.5

FINANCIAL CHARGES TO PROVIDERS OF FINANCE

Finance Cost 31,548 0.8 48,766 1.6

GOVERNMENT AS TAXES

Tax 962,052 24.9 714,784 24.0

Workersprofitparticipationfund 150,198 3.9 108,072 3.6

Workers welfare fund 56,245 1.5 47,500 1.4

1,168,495 30.3 864,356 29.0

SHAREHOLDERS AS DIVIDEND

Cash dividend 923,643 23.9 831,278 28.0

SOCIETY WELFARE

Donationtoflood/earthquakevictims 1,500 0.1 1,500 0.1

RETAINED WITHIN THE BUSINESS

Depreciation / amortization 157,533 4.1 150,911 5.1

Retainedprofit 914,294 23.7 465,802 15.7

1,071,827 27.8 616,713 20.8

3,858,387 100 2,971,350 100


| 29

Review Report to the Memberson Statement of Compliance with Best Practices of Code of Corporate Governance

We have reviewed the Statement of Compliance with the best

practices contained in the Code of Corporate Governance

prepared by the Board of Directors of Rafhan Maize Products

Company Limited (“the Company”) to comply with the Listing

Regulations of Karachi and Lahore Stock Exchanges.

The responsibility for compliance with the Code of Corporate

Governance is that of the Board of Directors of the Company. Our

responsibility is to review, to the extent where such compliance

canbeobjectivelyverified,whethertheStatementofCompliance

reflectsthestatusoftheCompany’scompliancewiththeprovisions

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

complywiththeCode.Aspartofourauditoffinancialstatements

we are required to obtain an understanding of the accounting and

internalcontrolsystemssufficient toplan theauditanddevelop

an effective audit approach. We have not carried out any special

review of the internal control system to enable us to express an

opinion as to whether the Board’s statement on internal control

covers all controls and the effectiveness of such internal controls.

Further, Sub-Regulation (xiii a) of Listing Regulation No.35

(previously Regulation No.37) notified by The Karachi Stock

Exchange (Guarantee) Limited vide circular KSE/N-269 dated 19

January 2009 requires the Company to place before the Board

of Director for their consideration and approval of related party

transactions distinguishing between transactions carried out on

terms equivalent to those that prevail in 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. We have not carried out any procedures to determine

whether the related party transactions were under taken at arm’s

length price.

Based on our review nothing has come to our attention which

causes us to believe that the Statement of Compliance does not

appropriately reflect the 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 31 December 2010.

Lahore KPMG Taseer Hadi & Co.

February 14, 2011 Chartered Accountants

(Bilal Ali)

30 |

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

This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulation No.35 of Karachi Stock Exchange (Guarantee) Limited and Chapter XI of Lahore Stock Exchange (Guarantee) Limited for the purpose of establishing a framework of good governance, whereby the company is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:

1. The Company encourages representation of independent non-executive directors and the Board has 8 independent non-executive directors including 3 directors representing minority shareholders.

2. The directors of the Company have confirmed that noneof them is serving as a director in more than ten listed companies, including this Company.

3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company. None of our directors is a member of Stock Exchange.

4. No casual vacancy occurred in the Board during the year under review.

5. The Company has prepared a ‘Statement of Ethics and Business Practices’, which has been signed by all the directors and employees of the Company.

6. The Board has developed a vision/mission statement, overall corporatestrategyandsignificantpoliciesof theCompany.Acompleterecordofparticularsofsignificantpoliciesalongwith the dates on which they were approved or amended has been maintained.

7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman, and in his absence, by the Vice Chairman, and in their absence by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated within stipulated time.

9. The Directors of the Board were apprised of their duties and responsibilities from time to time during Board meetings.

10. The Board approves appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO. However, there was no new appointment against these posts during the year.

11. The directors’ report for the year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

12. ThefinancialstatementsoftheCompanyweredulyendorsedby CEO and CFO before approval of the Board.

13. The CEO, directors, and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financialreportingrequirementsoftheCode.

15. The Board has formed an audit committee comprising of four non-executive directors as members including the chairman of the committee.

16. The meetings of the audit committee were held at least once everyquarterpriortoapprovalofinterimandfinalresultsofthe Company and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. The related party transactions were placed before the audit committee and approved by the board of directors. All transactions were made at arm’s length basisunder“ComparableUncontrolledPriceMethod”.

17. The related party transactions have been placed before the audit committee and approved by the board of directors to comply with the requirements of Listing Regulations of Karachi and Lahore Stock Exchanges.

18. The Board has set-up an effective internal audit function. The InternalAuditor issuitablyqualifiedandexperiencedforthepurpose and is conversant with the policies and procedures of the Company. The Internal Auditor is involved in internal audit function on a full time basis.

19. The statutory auditors of the Company have confirmedthat they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of thefirm,theirspousesandminorchildrendonotholdsharesoftheCompanyandthatthefirmandall itspartnersareincompliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors haveconfirmed that theyhaveobserved IFACguidelines inthis regard.

21. WeconfirmthatallothermaterialprinciplescontainedintheCode have been complied with.

On behalf of the Board

Ansar Yahya Chief Executive and Managing DirectorFaisalabad February 14, 2011


| 31

Auditors’ Report to the Members

We have audited the annexed balance sheet of Rafhan Maize

Products Co. Ltd. (“the company”) as at 31 December 2010

and the related profit and loss account, cash flow statement,

statement of comprehensive income and statement of changes

in equity, together with the notes forming part thereof, for the year

then ended and we state that we have obtained all the information

and explanations which, to the best of our knowledge and belief,

were necessary for the purposes of our audit.

It is the responsibility of the 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

significantestimatesmadebymanagement,aswellas,evaluating

the overall presentation of the above said statements. We believe

that our audit provides a reasonable basis for our opinion and,

afterdueverification,wereportthat:

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) thebalancesheetandprofitandlossaccounttogether

with the notes thereon have been drawn up in conformity

with the Companies Ordinance, 1984, and are in

agreement with the books of account and are further

in accordance with accounting policies consistently

applied;

ii) the expenditure incurred during the year was for the

purpose of the Company’s business; and

iii) the business conducted, investments made and the

expenditure incurred during the year were in accordance

with the objects of the Company;

c) in our opinion and to the best of our information and

according to the explanations given to us, the balance sheet,

profitand lossaccount,cashflowstatement, statementof

comprehensive income and statement of changes in equity

together with the notes forming part thereof conform with

approved accounting standards as applicable in Pakistan,

and, give the information required by the Companies

Ordinance, 1984, in the manner so required and respectively

give a true and fair view of the state of the Company’s affairs

asat31December2010andoftheprofit,itscomprehensive

income,itscashflowsandchangesinequityfortheyearthen

ended; and

d) in our opinion Zakat deductible at source under the Zakat

and Ushr Ordinance, 1980(XVIII of 1980), was deducted

by the Company and deposited in the Central Zakat Fund

established under section 7 of that Ordinance.

Lahore KPMG Taseer Hadi & Co.

February 14, 2011 Chartered Accountants

(Bilal Ali)

32 |

Balance SheetAs at 31 December 2010

Ansar Yahya Anis Ahmad Khan Chief Executive & Zulfikar Mannoo Director Managing Director Director

Note 2010 2009

( Rupees in thousands)

NON CURRENT ASSETS

Property, plant and equipment 5 2,174,145 1,765,365

Intangible assets 6 29,392 –

Capital work in progress 7 973,017 987,851

3,176,554 2,753,216

Employeesretirementbenefits 8 64,800 15,784

Long term loans – secured 9 2,920 3,564

Current assets

Stores and spares 10 310,521 277,972

Stock in trade 11 3,125,746 1,166,118

Trade debts 12 376,923 315,365

Loans and advances 13 124,966 11,840

Trade deposits and short term prepayments 14 25,522 22,227

Other receivables 15 12,254 6,416

Cash and bank balances 16 39,741 673,409

4,015,673 2,473,347

Current liabilities

Trade and other payables 17 1,108,503 734,202

Markupaccruedonshorttermrunningfinances 8,298 8,601

Shorttermrunningfinances–secured 18 634,460 –

Provision for taxation 203,047 235,057

1,954,308 977,860

Working capital 2,061,365 1,495,487

Total capital employed 5,305,639 4,268,051

NON CURRENT LIABILITIES

Deferred taxation 19 351,754 260,321

NET CAPITAL EMPLOYED 4,953,885 4,007,730

Theannexednotes1to39formanintegralpartofthesefinancialstatements.


| 33

Note 2010 2009


Represented by:

Share capital and reserves

Share capital 20 92,364 92,364

Reserves 21 4,861,521 3,915,366

Contingencies and commitments 22

4,953,885 4,007,730


34 |

Profit and Loss Accountfor the year ended 31 December 2010


Note 2010 2009


Sales - Net 23 13,912,769 11,428,104

Cost of sales 24 (10,615,033) (8,992,742)

Gross profit 3,297,736 2,435,362

Distribution cost 25 (131,768) (116,884)

Administrative expenses 26 (211,092) (187,535)

(342,860) (304,419)

Operating profit 2,954,876 2,130,943

Other operating income 27 83,104 79,259

3,037,980 2,210,202

Finance cost 28 (31,548) (48,766)

Other operating expenses 29 (206,443) (149,572)

(237,991) (198,338)

Profit before taxation 2,799,989 2,011,864

Taxation 30 (962,052) (714,784)

Profit after taxation 1,837,937 1,297,080

Earnings per share - Basic and diluted (Rupees) 31 198.99 140.43



| 35

Statement of Comprehensive Incomefor the year ended 31 December 2010

Note 2010 2009


Profit for the year 1,837,937 1,297,080

Other comprehensive Income:

Acturialgain/(loss)ofretirementbenefitsrecognizeddirectlyinequity 49,016 (56,173)

Deferred tax on acturial gain / (loss) recognized directly in equity (17,155) 19,660

Total comprehensive income for the year 1,869,798 1,260,567



36 |

Cash Flow Statementfor the year ended 31 December 2010

Note 2010 2009


Cash flows from operating activities Profitbeforetax 2,799,989 2,011,864Adjustment for non-cash charges and other items: Depreciation 157,026 150,911 Amortisation of intangible asset 507 – Provisionforemployeesretirementbenefits 23,438 18,089 Provision for doubtful debts 2,471 780 Provision for obsolete inventory 8,210 3,579 Profitonsaleofproperty,plantandequipment (2,561) (4,727) Interest income (6,685) (4,303) Finance cost 31,548 48,766 Gain on foreign exchange transactions 146 (475) Markup capitalized 20,751 35,458 Operating profit before working capital changes 3,034,840 2,259,942 (Increase) / decrease in current assets: Stores and spares (40,759) (1,783) Stock in trade (1,959,628) 1,239,944 Trade debts (64,029) 27,459 Loans and advances (113,293) 13,587 Trade deposits and short term prepayments (3,295) 4,029 Other receivables (5,838) (1,034) (2,186,842) 1,282,202 Increase / (decrease) in current liabilities: Trade and other payables 373,598 (32,258)Net (increase) / decrease in working capital (1,813,244) 1,249,944 Cash generated from operations 1,221,596 3,509,886 Taxes paid (919,784) (581,908) Employeesretirementbenefitspaid (23,438) (18,089) Interest received 6,685 4,303 Finance cost paid (52,602) (84,145) (989,139) (679,839)Net cash generated from operating activities 232,457 2,830,047 Cash flows from investing activities Capital expenditure incurred (581,897) (847,507) Sale proceeds from sale of property, plant and equipment 3,587 4,822 Long term loans disbursed (1,500) (4,826) Repayment from long term loans 2,311 1,119 Net cash used in investing activities (577,499) (846,392) Cash flows from financing activities Dividend paid (922,940) (830,742) Shorttermrunningfinances–secured 634,460 (493,709)Net cash used in financing activities (288,480) (1,324,451)Net (decrease)/increase in cash and cash equivalents (633,522) 659,204 Cash and cash equivalents at the beginning of the year 673,409 13,730 Effect of exchange rate fluctuations on cash and cash equivalents (146) 475 Cash and cash equivalents at the end of the year 16 39,741 673,409




| 37

Statement of Changes in Equityfor the year ended 31 December 2010


Capital Reserves Revenue Reserves

Share Share Unappropriated Total

capital premium Other General profit


Balance as at 31 December 2008 92,364 36,946 941 207 3,447,983 3,578,441

Total comprehensive income for the year – – – – 1,260,567 1,260,567

92,364 36,946 941 207 4,708,550 4,839,008

Transactions with owners of the Company,

recognised directly in equity

Final dividend 2008 @ Rs. 40 per share – – – – (369,457) (369,457)

Ist interim dividend @ Rs. 25 per share – – – – (230,911) (230,911)

2nd interim dividend @ Rs. 25 per share – – – – (230,910) (230,910)

– – – – (831,278) (831,278)


Total comprehensive income for the year – – – – 1,869,798 1,869,798

92,364 36,946 941 207 5,747,070 5,877,728

Transactions with owners of the Company,

recognised directly in equity `

Final dividend 2009 @ Rs. 40 per share – – – – (369,457) (369,457)

Ist interim dividend @ Rs. 35 per share – – – – (323,275) (323,275)

2nd interim dividend @ Rs. 25 per share – – – – (230,911) (230,911)

– – – – (923,643) (923,643)



38 |

1 The Company and its operations

RafhanMaizeProductsCompanyLimited(“theCompany”)isincorporatedinPakistanandislistedontheKarachiandLahoreStockExchanges.CornProductsInternationalInc.Chicago,U.S.A,holdsmajoritysharesoftheCompany.Theregisteredofficeofthe Company is located at Finlay House, I.I. Chundrigar Road, Karachi.

The Company uses maize as the basic raw material to manufacture and sell a number of industrial products, principal ones being industrial starches, liquid glucose, dextrose, dextrin and gluten meals.

2 Basis of preparation

2.1 Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicablein Pakistan and the requirements of Companies Ordinance, 1984. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standard Board and Islamic FinancialReportingStandards(IFAs) issuedbytheInstituteofCharteredAccountantsofPakistanasarenotifiedunderthe provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of Companies Ordinance, 1984 or the requirements of the said directives shall prevail.

2.2 Standards and amendments to published approved International Financial Reporting Standards not yet effective

The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods beginning on or after January 01, 2011. These standards are either not relevant to the Company’s operations or arenotexpectedtohaveasignificantimpactontheCompany’sfinancialstatementsotherthenincreaseindisclosuresincertain cases:

AmendmenttoIAS32-FinancialInstruments:Presentation–ClassificationofRightsIssues(effectiveforannualperiodsbeginningonorafterFebruary01,2010).TheIASBamendedIAS32toallowrights,optionsorwarrantstoacquireafixednumberoftheentity’sownequityinstrumentsforafixedamountofanycurrencytobeclassifiedasequityinstrumentsprovided the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivativeequityinstruments.ThisinterpretationhasnoimpactontheCompany’sfinancialstatements.

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 impactonCompany’sfinancialstatements.

IAS 24 - Related Party Disclosures (revised 2009) – effective for annual periods beginning on or after January 01, 2011. The revisionamendsthedefinitionofarelatedpartyandmodifiescertainrelatedpartydisclosurerequirementsforgovernment-related entities. The amendment would result in certain changes in disclosures.

Amendments to IFRIC14 IAS19 -TheLimitonaDefinedBenefitAssets,MinimumFundingRequirementsand theirInteraction (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.ThisamendmentisnotlikelytohaveanyimpactonCompany’sfinancialstatements.

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 amendmentsincludelistofeventsortransactionsthatrequiredisclosureintheinterimfinancialstatementsandfairvalueof 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 inincreaseddisclosuresinthefinancialstatements.

Amendments to IFRS 7 - Disclosures – Transfers of Financial Assets (effective for annual periods beginning on or after July 1,2011).Theamendmentsintroducenewdisclosurerequirementsabouttransfersoffinancialassetsincludingdisclosuresforfinancialassetsthatarenotderecognisedintheirentirety;andfinancialassetsthatarederecognisedintheirentiretybut

Notes to the Financial Statementsfor the year ended 31 December 2010


| 39

forwhichtheentityretainscontinuinginvolvement.ThisamendmentisnotlikelytohaveanyimpactonCompany’sfinancialstatements.

3 Basis of measurement

“Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,exceptforrecognitionofcertainemployeesretirementbenefitsatpresentvalue.

4 Summary of significant accounting policies

4.1 Trade debts

Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstandingamountsattheyearend.Baddebtsarewrittenoffwhenidentified.

4.2 Revenue recognition

Sale of goods

Revenue represents the fair value of the consideration received or receivable for goods sold, net of discounts and sales tax. Revenue is recognized when it is probable that the economic benefits associated with the transaction will flowto the Company and the amount of revenue, and the associated cost incurred, or to be incurred, can be measured reliably.

Revenuefromsalesisrecognizedupontransferofsignificantrisksandrewardsofownershipofthegoodstobuyersi.e.dispatch of goods to customers.

Interest Income from bank deposits and loans is recognized on accrual basis.

4.3 Taxation

Incometaxexpensecomprisescurrentanddeferredtax.Incometaxisrecognizedinprofitandlossexcepttotheextentthat it relates to items recognized directly in equity, in which case it is recognized in equity.

Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for

taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profitfortheyearifenactedaftertakingintoaccounttaxcredits,rebatesandexemptions,ifany.Thechargeforcurrenttax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.

Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from

differencesbetweenthecarryingamountofassetsand liabilities in thefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationofthetaxableprofit.Deferredtaxliabilitiesaregenerallyrecognisedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognisedtotheextentthat it isprobablethattaxableprofitswillbeavailableagainst which the deductible temporary differences, unused tax losses and tax credits can be utilised.

Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity.

4.4 Earning per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividingtheprofitorlossattributabletoordinaryshareholdersoftheCompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPS isdeterminedbyadjustingtheprofitor lossattributable toordinaryshareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.


40 |

4.5 Operating segments

Thefinancialstatementshavebeenpreparedonthebasisofasinglereportablesegment. 96.46%(2009:97.46%)outoftotalsalesoftheCompanyrelatestocustomersinPakistan. All non current assets of the Company as at 31 December 2010 are located in Pakistan.

4.6 Property, plant and equipment

Property,plantandequipmentexceptfreeholdlandarestatedatcostlessaccumulateddepreciationandanyidentifiedimpairmentloss.Freeholdlandisstatedatcostlessanyidentifiedimpairmentloss.Costinrelationtocertainproperty,plantandequipmentsignifieshistoricalcostandborrowingcostsasreferredtoinnote4.16.

Depreciation on property, plant and equipment is provided on a straight-line-basis. Rates of depreciation, which are disclosed in note 5, are designed to write off the cost over the estimated useful lives of the assets. Depreciation methods, residualvaluesanduseful livesoftheassetsarereviewedatleastateachfinancialyearendandadjustedif impactondepreciationissignificant.

Depreciation on additions to property, plant and equipment is charged from the month in which the asset is acquired or capitalised, while no depreciation is charged for the month in which the asset is disposed off.

The Company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset’s revised carrying amount over its estimated useful life.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only whenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothecompanyandthecostoftheitemcan be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the

carrying amount of the asset is recognised as an income or expense.

4.7 Intangible assets

The Company reviews the rate of amortization and value of intangible assets for possible impairment on an annual basis. Any change in the estimates in future years might affect the carrying amounts of intangible assets with a corresponding affect on the amortization charge and impairment.

4.8 Capital work-in-progress

Capitalwork inprogressandstoresheld forcapitalexpenditurearestatedatcost lessany identified impairment lossand represents expenditure incurred on property, plant and equipment during the construction and installation. Cost also includes applicable borrowing costs. Transfers are made to relevant property, plant and equipment category as and when assets are available for use.

4.9 Retirement and termination benefits Defined contributions scheme

TheCompanyoperatesadefinedcontributionapprovedprovidentfundforallitseligibleemployees,inwhichtheCompanyandtheemployeesmakeequalmonthlycontributionsattherateof14%ofbasicsalaryincludingdearnessallowanceofemployees.

Defined benefits schemes

TheCompanyalsomaintainsanapprovedgratuityfundforallitsemployeesandanapprovedpensionfundforofficersandabove-grade employees, having a service period of minimum 10 years.



| 41

The contributions are made to pension and gratuity funds in accordance with the actuary’s recommendations based on the actuarial valuation of these funds as at 31 December 2010.

Thefuturecontributionratesofthesefundsincludeallowancesfordeficitandsurplus.Projectedunitcreditmethodisusedforvaluationofthesefundsbasedonthefollowingsignificantassumptions:

Gratuity Fund Pension Fund

2010 2009 2010 2009

Discountrate 14.50% 12.75% 14.50% 12.75% Expectedreturnonplanassets 13.50% 13% 13.50% 13% Contributionrates(%ofbasicsalaries) 6% 6% 16% 11% Annualincreaseinpensionrate – – 5% 5% Expected rate of growth per annum in futuresalaries 14.50% 12.75% 14.50% 12.75%

The actuarial gains and losses are recognized in the period in which they occur directly in shareholders’ equity and presented in the statement of comprehensive income.

4.10 Compensated absences

The Company accounts for compensated absences on the basis of unavailed earned leave balance of each employee at the end of the year.

4.11 Stores and spares

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

4.12 Stocks in trade

Stocksintradehavebeenvaluedatthelowerofcostandnetrealizablevalue.Netrealizablevaluesignifiestheestimatedselling price in the ordinary course of the business less estimated costs to complete and to make the sale.

Cost has been determined as follows: Raw materials Moving average cost Work in process Moving average cost Finished goods Moving average cost Thevariancebetweenstandardandactualcostonworkinprocessandfinishedgoodsischargedtocostofsales.

4.13 Research and development cost

Research and development costs are charged to profit and loss account in the year in which these are incurred.

4.14 Foreign currencies

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

4.15 Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents comprise of cheques in hand, cash and bankbalances.


42 |

4.16 Borrowing costs

Borrowing costs incurred on related property, plant and equipment are capitalized till the date of commissioning. All other borrowingcostsareincludedintheprofitandlossoftheperiodonanaccrualbasis.

4.17 Provisions

Provisions are recognized when the Company has a legal or constructive obligation as a result of past events and it is probablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.However,provisionsarereviewedateachbalancesheetdateandadjustedtoreflectcurrent best estimate.

4.18 Financial assets and liabilities

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.Allfinancialassetsandliabilitiesareinitiallymeasuredatcost,whichisthefairvalueoftheconsiderationgivenandreceivedrespectively.Thesefinancialassetsandliabilitiesaresubsequentlymeasuredatfairvalue,amortisedcostorcost, as the case may be. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item.

4.19 Off-setting of financial assets and financial liabilities

AfinancialassetandafinancialliabilityisoffsetandthenetamountisreportedinthebalancesheetiftheCompanyhasalegally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

4.20 Trade and other payables

Financial liabilities are initially recognized at fair value plus directly attributable cost, if any, and subsequently at amortized cost using effective interest rate method.

Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services.

4.21 Impairment losses

Financial assets

Afinancialassetisconsideredtobeimpairedifobjectiveevidenceindicatethatoneormoreeventshadanegativeeffectontheestimatedfuturecashflowofthatasset.

An impairment loss in respectofafinancialasset measuredatamortizedcost iscalculatedasadifference between

itscarryingamountandthepresentvalueoftheestimatedfuturecashflowsdiscountedattheoriginaleffectiveinterestrate.Animpairmentlossinrespectofanavailable-for-salefinancialassetiscalculatedbyreferencetoitscurrentfairvalue.

Individuallysignificantfinancialassetsaretestedforimpairmentonaindividualbasis.Theremainingfinancialassetsareassessed collectively in groups that share similar credit risk characteristics.

Non financial assets

ThecarryingamountsoftheCompany’snon-financialassets,otherthanbiologicalassets,investmentproperty,inventoriesand deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinitelivesorthatarenotyetavailableforuse,recoverableamountisestimatedateachreportingdate.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable

amount.Acash-generatingunitisthesmallestidentifiableassetgroupthatgeneratescashflowsthatlargelyareindependentfrom other assets and groups.



| 43

Impairmentlossesarerecognizedinprofitandloss.Impairmentlossesrecognizedinrespectofcash-generatingunitsareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitsandthentoreducethecarryingamountof the other assets of the unit on a pro-rata basis.

4.22 Derivative financial instruments

These are initially recorded at fair value on the date a derivative contract is entered into and are re-measured to fair value at subsequent reporting dates. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivativesascashflowhedges.

The Company documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used inhedgingtransactionsarehighlyeffectiveinoffsettingchangesincashflowofhedgeditems.Derivativesarecarriedasassets when fair value is positive and liabilities when the fair value is negative.

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesarerecognized inequity.Thegainor lossrelatingtothe ineffectiveportion isrecognized immediately intheprofitand lossaccount.

Amountsaccumulatedinequityarerecognizedinprofitandlossaccountintheperiodswhenthehedgingitemswilleffectprofitorloss.However,whentheforecasthedgedtransactionresultsintherecognitionofanon-financialassetoraliability,the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Any gain or loss from change in fair value of derivatives that do not qualify for hedge accounting are taken directly toprofitandlossaccount.

4.23 Related party transactions

Transactions with related parties are priced at comparable uncontrolled market price except for the assets sold to employees under the employees’ car scheme as approved by the board of directors.

PartiesaresaidtoberelatediftheyareabletoinfluencetheoperatingandfinancialdecisionsoftheCompanyandviceversa.

4.24 Dividends

Dividend distribution to the shareholders is recognized as a liability in the period in which it is approved by the shareholders.


44 |

5 Property, plant and equipment Reconciliation of net carrying value Reconciliation of gross carrying value

Particulars Net book value Disposals (at Depreciation

Net book value Accumulated Net book value Depreciation as at 1 January Additions

NBV) charge as at 31

Cost as at 31 depreciation as at as at 31 rate (% per

2010 December 2010 December 2010

31 December 2010 December 2010 annum)

Rupees in thousands Rupees in thousands

Free–hold land 265,322 86,865 – – 352,187 352,187 – 352,187

Factory building on free–hold land 317,652 35,737 – (55,435) 297,954 747,294 (449,340) 297,954 10

Plant, machinery and equipment 1,105,812 424,690 – (83,172) 1,447,330 2,729,757 (1,282,427) 1,447,330 5

Other machinery and equipment 26,530 1,202 – (1,220) 26,512 53,079 (26,567) 26,512 5

Furniture,fixtureandoffice –

equipment 14,307 9,519 – (4,921) 18,905 59,459 (40,554) 18,905 20

Automobiles 35,742 8,819 (1,026) (12,278) 31,257 85,564 (54,307) 31,257 20

2010 1,765,365 566,832 (1,026) (157,026) 2,174,145 4,027,340 (1,853,195) 2,174,145

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

Note 2010 2009


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

157,026 150,911

5.3 Disposal of property, plant and equipment Book Sale Description Sold to Cost value Proceeds Profit Mode of disposal


Automobile New Jubilee Insurance Company

3rd Floor, Jubilee Insurance House 1,239 1,002 1,239 237 Claim

I.I. Chundrigar Road, Karachi.

1,239 1,002 1,239 237

Above represents sale of assets with book value of more than Rs. (thousand) 50. Note 2010 2009


6 Intagible assets

SAP computer software and implementation Gross carrying value basis Cost 29,899 – Amortisation 6.1 (507) – 29,392 – Rate of amortisation 20% – 6.1 The software represents financial accounting software which has been acquired during the current year. The

amortisation of the software represents the total amortisation charged during the current year which is equal to accumulated amortisation.

Reconciliation of net carrying value Reconciliation of gross carrying value

Particulars Net book value Disposals (at Depreciation

Net book value Accumulated Net book value Depreciation as at 1 January Additions

NBV) charge as at 31

Cost as at 31 depreciation as at as at 31 rate (% per

2009 December 2009 December 2009

31 December 2009 December 2009 annum)

Rupees in thousands Rupees in thousands

Free–hold land 265,322 – – – 265,322 265,322 – 265,322

Factory building on free–hold land 260,595 108,218 – (51,161) 317,652 711,557 (393,905) 317,652 10

Plant, machinery and equipment 960,842 227,585 – (82,615) 1,105,812 2,313,782 (1,207,970) 1,105,812 5

Other machinery and equipment 23,599 4,643 (1) (1,711) 26,530 51,877 (25,347) 26,530 5

Furniture,fixtureandoffice

equipment 10,170 8,099 (3) (3,959) 14,307 49,941 (35,634) 14,307 20

Automobiles 32,628 14,670 (91) (11,465) 35,742 82,973 (47,231) 35,742 20

2009 1,553,156 363,215 (95) (150,911) 1,765,365 3,475,452 (1,710,087) 1,765,365



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7. Capital work in progress

Cornwala/ Plant Mehran expansion projects projects Others 2010 2009


Civil works and buildings 306,015 327 – 306,342 235,702

Plant and machinery 653,375 6,486 – 659,861 472,929

Project stores – – – – 272,406

Advance for land - note 7.2 – – 6,814 6,814 6,814

2010 959,390 6,813 6,814 973,017 987,851

2009 978,769 2,268 6,814

7.1 Cornwala/Mehran projects include markup amounting to Rs. (thousands) 20,751 (2009: Rs. (thousands) 35,458)

capitalizedduringtheyearattheraterangingfrom12.63%to14.84%perannum(2009:11.64%to16.75%).

7.2 This represents full payment of Rs. (thousands) 1,814 (2009: Rs. (thousands) 1,814) and legal cost incurred

Rs. (thousands) 5,000 (2009: Rs. (thousands) 5,000) for the Company’s factory land in Faisalabad which was acquired

from the government in 1953 but registration of title is still pending in the name of Company.

2010 2009

Note ( Rupees in thousands)

8. Employees retirement benefits

Gratuity 8.1 92,030 83,988

Pension 8.1 (27,230) (68,204)

64,800 15,784

8.1 Movements in the net assets/(liabilities) recognized in the balance sheet are as follows:

Gratuity Pension 2010 2009 2010 2009


Net assets/(liabilities) at the

beginning of the year 83,988 89,746 (68,204) (17,789)

Expenses recognized (8,043) (8,090) (15,395) (9,999)

Contribution paid 8,043 8,090 15,395 9,999

Actuarial loss recognized 8,042 (5,758) 40,974 (50,415)

Net assets/(liabilities)

at the end of the year 92,030 83,988 (27,230) (68,204)

8.2 The amounts recognized in the profit and

loss account are as follows:

Current service cost 19,185 20,613 7,852 7,517

Interest cost 48,341 60,633 42,482 38,679

Expected return on plan assets (59,483) (73,156) (34,939) (36,197)

8,043 8,090 15,395 9,999


46 |

Gratuity Pension 2010 2009 2010 2009


8.3 The amounts recognized in the balance sheet are as follows:

Present value of the obligation (415,553) (380,565) (325,703) (339,240) Fair value of plan assets 507,583 464,553 298,473 271,036 Net asset/(liability) 92,030 83,988 (27,230) (68,204) 8.4 Movement in present value of defined benefit obligation

Presentvalueofdefinedbenefitobligation as at the beginning of the year 380,565 492,403 339,240 260,636 Current service cost 19,185 20,613 7,852 7,517 Interest cost 48,341 60,633 42,482 38,679 Actualbenefitspaidduringtheperiod (23,257) (195,573) (19,986) (11,471) Actuarial (gain)/loss on obligation. (9,281) 2,489 (43,885) 43,879 Presentvalueofdefinedbenefit obligation as at the end of the year 415,553 380,565 325,703 339,240 8.5 Movement in fair value of plan assets

Fair value of plan asset as at the beginning of the year 464,553 582,149 271,036 242,847 Expected return on assets 59,483 73,156 34,939 36,197 Actual contribution by the employer 8,043 8,090 15,395 9,999 Actual paid during the year (23,257) (195,573) (19,986) (11,471) Actuarial gain on plan asset (1,239) (3,269) (2,911) (6,536) Fair value of plan asset as at the end of the year 507,583 464,553 298,473 271,036 8.6 Actual return on plan assets

Expected return on plan assets 59,483 73,156 34,939 36,197 Actuarial loss on plan assets (1,239) (3,269) (2,911) (6,536) 58,244 69,887 32,028 29,661

(Percentage) (Percentage) 2010 2009 2010 2009 8.7 Plan assets consist of the following

Debtinstruments 79% 86% 77% 84% Cashandotherdeposits 21% 14% 23% 16% 2010 2009 2008 2007 2006 (Rupees in thousands) 8.8 Historical information-gratuity

Presentvalueofdefined benefitobligation (415,553) (380,565) (492,403) (416,871) (393,382) Fair value of plan assets 507,583 464,553 582,149 507,134 445,285 Surplus in the plan 92,030 83,988 89,746 90,263 51,903 Experience adjustment arising on plan liabilities (9,281) 2,489 37,155 (408) 60,504 Experience adjustment arising on plan assets (1,239) (3,269) 36,638 37,952 41,150



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Note 2010 2009 ( Rupees in thousands)

9 Long term loans - secured considered good

Staff loans outstanding for periods less than three years to:

Executives 9.4 3,000 3,073

Other employees 1,470 2,208

4,470 5,281

Less: Current maturity 13 1,550 1,717

2,920 3,564

9.1 Loans to other employees represent house building loans provided to employees in accordance with Company’s policyandarerepayableoveraperiodoffiveyears.Theseloansaresecuredagainsttheemployeesprovidentfund.Loanstoemployeescarryinterestattherateofapproximately8%perannum(2009:8%perannum).

9.2 Maximum aggregate balance during the year, at the end of any month, of loans to executives was Rs. (thousands) 3,682 (2009: Rs. (thousands) 3,073).

9.3 No loans were granted to the directors and chief executive of the Company.


9.4 Loans to executives Opening balance 3,073 885 Disbursement during the year 1,500 2,830 Recoveries during the year (1,573) (642) Closing balance 3,000 3,073

10 Stores and spares Stores 223,568 186,744 Spares 116,765 109,406 340,333 296,150 Less: Provision for slow moving and obsolete items 10.1 (42,808) (34,598) 297,525 261,552 Stores in transit 12,996 16,420 310,521 277,972 10.1 Provision for slow moving and obsolete items Opening balance 34,598 31,019 Provision for the year 8,210 3,579

Closing balance 42,808 34,598

2010 2009 2008 2007 2006 (Rupees in thousands) 8.9 Historical information–pension

Presentvalueofdefinedbenefitobligation (325,703) (339,240) (260,636) (205,827) (201,449) Fair value of plan assets 298,473 271,036 242,847 212,101 182,781 Surplus/(deficit)intheplan (27,230) (68,204) (17,789) 6,274 (18,668) Experience adjustment arising on plan liabilities (43,885) 43,879 33,073 (13,183) (5,572)

Experience adjustment arising

on plan assets (2,911) (6,536) 9,010 11,759 11,183


48 |


11 Stock in trade

Raw materials - corn & cobs 2,333,955 656,527

Work in process 51,816 34,715

Finished goods 739,975 474,876

3,125,746 1,166,118

12 Trade debts

Secured - against security deposits and bank guarantees 280,414 216,381

Unsecured-consideredgood

Related parties 19,926 34,874

Others 76,583 64,110

96,509 98,984

Considered doubtful 13,899 11,428

110,408 110,412

Less: Provision for doubtful balances 12.1 (13,899) (11,428)

96,509 98,984

376,923 315,365

12.1 Provision for doubtful balances

Opening balance 11,428 10,651

Provision for the year 2,471 780

Bad debts written off – (3)


13 Loans and advances

Loans and advances - considered good

Suppliers of goods and services 118,585 6,477

Employees 13.1 4,831 3,646

Current maturity of long term loans 9 1,550 1,717

124,966 11,840

13.1 No advances were given to executives, directors and chief executive of the Company during the year.


14 Trade deposits and short term prepayments

Security Deposits 12,727 8,870

L/C margin 1,001 546

Prepayments 11,794 12,811

25,522 22,227



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15 Other receivables

Other receivables - Farmers balances Considered good 9,485 1,566 Considered doubtful 1,675 1,675 11,160 3,241 Less: Provision for doubtful balances 15.1 (1,675) (1,675) 9,485 1,566 Due from related parties 1,574 1,119 Workers’profitparticipationfund 15.2 – 428 Others 1,195 3,303 12,254 6,416

15.1 Provision for doubtful balances Opening balance 1,675 1,675 Provision for the year – – Closing balance 1,675 1,675

15.2 Workers’ profit participation fund Opening balance 428 1,177 Provision for the year 28 (150,198) (108,072) Payment to the fund 149,572 107,323

Closing balance (198) 428

16 Cash and bank balances

Cash at banks on current accounts 1,516 45,547 on PLS accounts 16.1 17,134 606,870 18,650 652,417 Cash in hand 1,134 2,358 Cheques in hand 19,957 18,634 21,091 20,992

39,741 673,409

16.1 Thesecarryprofitatratesrangingfrom5%to11.5%perannum(2009:5%to12%perannum).


17 Trade and other payables

Creditors 328,796 138,187 Advances from customers 140,386 78,320 Security deposits from dealers and contractors 17.1 299,713 174,219 Other deposits 17.2 855 857 Accrued liabilities 244,536 277,131 Workers’ welfare fund 28 57,075 41,067 Workers’profitparticipationfund 15.2 198 – Employees provident fund 6,588 1,071 Sales tax payable 22,441 16,777 Special excise duty payable 3,554 2,915 Unclaimeddividend 4,361 3,658

1,108,503 734,202


50 |

17.1 As per the terms of agreement between dealers and contractors, the Company can utilize these deposits in the normal course of business.

17.2 These represent deposits held against tenders for the sale of scrap.

18 Short term running finance - secured

18.1 TheaggregatefinancingfacilityavailablefromcommercialbanksisRs.(thousands)3,000,000(2009:Rs.(thousands)3,000,000).

18.2 Therateofmarkuprangesfrom12.63%to14.84%perannum(2009:11.64%to16.75%perannum).Thesefacilitiesare secured by joint pari passu hypothecation charge on current assets of the Company and are subject to repricing on monthly/quarterly basis.

18.3 The unutilized facility for letters of credit as on 31 December 2010 amounts to Rs. (thousands) 648,622 (2009:

Rs. (thousands) 592,901). Note 2010 2009 ( Rupees in thousands)

19 Deferred taxation

The details of the tax effect of taxable and deductible temporary differences are as follows:

Taxable temporary difference on:

Accelerated tax depreciation 350,795 271,959

Employeesretirementbenefits 22,680 5,525

373,475 277,484

Deductible temporary difference on:

Others (21,721) (17,163)

351,754 260,321

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


19.1 Taxable temporary difference

Accelerated tax depreciation 271,959 78,836 – 350,795

Employeesretirementbenefits 5,525 – 17,155 22,680

Deductible temporary difference

Others (17,163) (4,558) – (21,721)

260,321 74,278 17,155 351,754

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


Taxable temporary difference

Accelerated tax depreciation 225,971 45,988 – 271,959

Employeesretirementbenefits 25,185 – (19,660) 5,525

Deductible temporary difference

Others (15,883) (1,280) – (17,163)

235,273 44,708 (19,660) 260,321



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2010 2009 2010 2009 (Number of shares) (Rupees in thousands)

20 Authorized, issued, subscribed and paid up capital

Authorized share capital Ordinary shares of Rs.10 each 20,000,000 20,000,000 200,000 200,000 20.1 Issued, subscribed and paid up capital

Ordinary shares of Rs. 10 each

fully paid up for cash 1,858,991 1,858,991 18,590 18,590

Issued other than cash - plant

and machinery 36,294 36,294 363 363

Issued as fully paid bonus shares 7,341,143 7,341,143 73,411 73,411

9,236,428 9,236,428 92,364 92,364

20.2 CornProducts International Inc.,USA holds6,494,243 (2009:6,494,243)ordinary sharesofRs.10eachasat

31 December 2010. Note 2010 2009 ( Rupees in thousands)

21 Reserves

Capital

Share premium 21.1 36,946 36,946

Other 21.2 941 941

37,887 37,887

Revenue

General reserve 207 207

UnappropriatedProfit 4,823,427 3,877,272

4,823,634 3,877,479

4,861,521 3,915,366 21.1 This reserve can be utilized in accordance with the provision of section 83(2) of the Companies Ordinance, 1984. 21.2 This reserve was created under section 15BB of the Income Tax Act, 1922 to avail the tax exemption in prior

years. 22 Contingencies and commitments

a) Certainlabourcasesarependingbeforethelabourcourtsandtheirfinancialeffectcannotbereasonablydeterminedduetotheirnatureanduncertaintysurroundingthem.Thepossibilityofanyoutflowforsettlementoftheseclaimsisconsidered remote.

b) Land registration fee as per Note 7.2. c) Commitments in respect of capital expenditure contracted but not provided amounts to Rs. (thousands) 476,247

(2009: Rs. (thousands) 474,254).

d) Commitments in respect of purchase of corn amounts to Rs. (thousands) 3,488,519 (2009: Rs. (thousands) 4,028,200).

e) Commitments in respect of counter guarantees given to banks in consideration of their guarantees in the normal

course of business amount to Rs. (thousands) 120,370 (2009: Rs. (thousands) 105,972).


52 |

2010 2009 Note ( Rupees in thousands)

23 Sales - net

Domestic 14,120,519 11,684,655

Export 518,656 304,567

14,639,175 11,989,222

Less: Sales tax 674,803 516,762

Special excise duty 42,022 33,182

Trade discount and commission 9,581 11,174

726,406 561,118

13,912,769 11,428,104

24 Cost of sales

Raw material consumed:

Corn 7,744,004 6,490,974

Stores 263,587 254,649

Packing material 270,444 224,387

8,278,035 6,970,010

Factory expenses:

Salaries, wages and amenities 24.1 469,325 420,824

Spares consumed 118,629 102,523

Fuel and power 1,667,190 1,163,108

Rent, rates and taxes 3,819 25,525

Repairs and maintenance 9,527 13,519

Depreciation 5.2 145,768 140,628

Insurance 10,942 10,231

Factory general expenses 193,998 142,116

2,619,198 2,018,474

10,897,233 8,988,484

Add: Opening work in process stock 34,715 28,785

10,931,948 9,017,269

Less: Closing work in process stock (51,816) (34,715)

Cost of production 10,880,132 8,982,554

Add: Openingfinishedgoodsstock 474,876 485,064

11,355,008 9,467,618

Less: Closingfinishedgoodsstock (739,975) (474,876)

10,615,033 8,992,742

24.1 Salaries, wages and amenities include Rs. (thousands) 11,355 (2009: Rs. (thousands) 8,248) in respect of contribution

to pension and gratuity fund and Rs. (thousands) 11,660 (2009: Rs. (thousands) 10,264) in respect of contributions

to provident fund.



| 53


25 Distribution cost

Salaries and amenities 25.1 44,803 47,306

Traveling and automobile expenses 6,950 8,559

Freight and distribution 66,019 48,044

Insurance 1,991 2,485

Rent, rates and taxes 1,113 1,007

Repair and maintenance 438 345

Electricity charges 113 93

Printing and stationery 379 486

Telephone and postage 1,713 1,475

Advertising and sales promotion 332 625

Depreciation 5.2 4,859 4,503

Market research and development 46 58

Provision for doubtful debts 12.1 2,471 780

Miscellaneous expenses 541 1,118

131,768 116,884

25.1 Salaries and amenities include Rs. (thousands) 2,780 (2009: Rs. (thousands) 2,380) in respect of contribution to

pension and gratuity fund and Rs. (thousands) 1,951 (2009: Rs. (thousands) 1,951) in respect of contributions to

provident fund.


26 Administrative expenses

Salaries and amenities 26.1 147,246 140,608 Traveling and automobile expenses 11,460 10,852 Insurance 811 881 Rent, rates and taxes 1,421 1,361 IT, networking and data communication 22,186 8,378 Repair and maintenance 1,061 2,140 Electricity charges 1,975 1,489 Printing and stationery 1,595 936 Telephone and postage 3,439 3,132 Legal and professional charges 7,397 5,524 Depreciation 5.2 6,399 5,780 Amortisation on intangible assets 6.1 507 – Auditors’ remuneration 26.2 1,874 1,704 Miscellaneous expenses 2,221 3,250 Donation and charity 26.3 1,500 1,500 211,092 187,535

26.1 Salaries and amenities include Rs. (thousands) 9,303 (2009: Rs. (thousands) 7,461) in respect of contribution to

pension and gratuity fund and Rs. (thousands) 5,891 (2009: Rs. (thousands) 6,637) in respect of contributions to

provident fund.


54 |

2010 2009 ( Rupees in thousands)

26.2 Auditors’ remuneration

Statutory audit fee 730 670

Review of half yearly accounts 250 230

Services in connection with review and reporting of

accounts to CPI Inc. 690 635

Audit of gratuity and pension funds 84 84

Miscellaneouscertification 30 –

Out of pocket expenses reimbursed 90 85

1,874 1,704

26.3 This represents donation to Government for rehabilitation of flood victims and none of the Directors has any

interest in the donee. Note 2010 2009


27 Other operating income

Markuponstaffloansandprofitonbankdeposits 6,685 4,303

Profitonsaleofscrap 56,647 54,835

Profitonsaleofproperty,plantandequipment 2,561 4,727

Profitonsaleofpesticidesandseeds 7,127 2,992

Commission received 1,108 1,210

Foreign exchange (loss) / gain (146) 1,200

Miscellaneous income 9,122 9,992

83,104 79,259

28 Finance cost

Markuponshorttermrunningfinances 24,166 42,401

Bank charges and commission 7,382 6,365

31,548 48,766

29 Other operating expenses

Workers’profitparticipationfund 15.2 150,198 108,072

Workers’ welfare fund 56,245 41,500

206,443 149,572

30 Taxation

Current 887,774 670,076

Deferred 74,278 44,708

962,052 714,784

30.1 The Income Tax Department has charged tax of Rs. (thousands) 81,078 for the assessment year 2001-2002 (financialyearended30September2000)undersection12(9A)oftheIncomeTaxOrdinance,1979(Repealed)ontheallegationthatthedividenddistributionbytheCompanywaslessthan40%ofitsaftertaxprofits.Againstthislevy,theCompanyfiledanappealwiththeCommissionerof IncomeTax(Appeals),whichwasrejected.TheCompanypreferred an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT (Appeals). The ITAT vide orderdated21April2006decidedthecaseinfavouroftheCompanyandconfirmedthatlevyoftaxundersection12(9A)wasagainsttheprovisionsofthelawanddirectedtheassessingofficerfordecisioninaccordancewiththeprovisions of amended clause 59 of Part IV, Second Schedule to the repealed Income Tax Ordinance, 1979. The Income Tax Department has moved to Lahore High Court on 17 October 2006, against the orders of ITAT. The case hasnotbeenfixedforhearingsofar.

NoprovisionhasbeenmadeinthesefinancialstatementsasaccordingtothemanagementoftheCompany, it isprobable that this case will be decided in favour of the Company. The legal advisors of the Company have concurred with the management’s view.



| 55


2010 2009

% %

30.2 Numerical reconciliation between average effective

tax rate and applicable tax rate:

Applicable tax rate 35.00 35.00

Tax effect of inadmissible expenses 0.54 0.32

Tax effect of admissible expenses (0.14) (0.33)

Effect of presumptive tax regime and others (1.04) 0.54

Average effective tax rate (tax expense

dividedbyprofitbeforetax) 34.36 35.53

2010 2009

31 Earnings per share - basic and diluted

31.1 Earning per share - Basic

Profitattributabletoordinaryshareholders (Rupees in thousands) 1,837,937 1,297,080

Weighted average number of ordinary shares (Numbers) 9,236,428 9,236,428

Earnings per share - basic (Rupees) 198.99 140.43

31.2 Earning per share - Diluted

There is no dilution effect on basic earnings per share as the Company has no such commitments.

32 Financial instruments

TheCompany’sfinancialliabilitiesmainlycomprisetradeandotherpayablesandshorttermrunningfinances.ThemainpurposeoffinancialliabilitiesistoraisefinancefortheCompany’sfinancialassetswhichcompriselongtermloan,tradedebts,Loansand advances, trade deposits and short term prepayments, other receivables and Cash and bank balances.

Thecompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments: - Credit risk - Liquidity risk - Market risk The Board of Directors has overall responsibility for the establishment and oversight of Company’s risk management framework.

The Board is also responsible for developing and monitoring the Company’s risk management policies. 32.1 Credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties fail completely to perform as contracted and arise principally from long term loans, trade debts, loans and advances, trade deposits andshorttermprepaymentandotherreceivablesandcashandbankbalances.OutofthetotalfinancialassetsofRs.462,740thousand(2009:Rs.1,085,249thousand)financialassetswhicharesubjecttocreditriskamountto Rs. 442,783 thousand (2009: Rs. 1,011,175 thousand).

To manage exposure to credit risk in respect of trade receivables, management performs credit reviews taking into accountthecustomer’sfinancialposition,pastexperienceandotherfactors.Whereconsiderednecessary,advancepayments are obtained from certain parties. Sales made to major customers are secured through security deposits, bank guarantees and letters of credit. To manage exposure to credit risk, the company applies credit limits to its customer and obtains advances from certain customers.

Allinvestingtransactionsaresettled/paidforupondelivery.TheCompany’spolicyistoenterintofinancialinstrumentcontract by following internal guidelines such as approving counterparties and approving credits.

Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly effected by the changes in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk.

Thecarryingamountoffinancialassetsrepresentsthemaximumcreditexposurebeforeanycreditenhancements.The maximum exposure to credit risk at the reporting date is:

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Long term loans 4,470 5,281

Trade debts 376,923 315,365

Loans and advances 4,831 3,646

Trade deposits and short term prepayments 24,521 9,416

Other receivables 12,254 6,416

Cash and bank balances 19,784 671,051

442,783 1,011,175

Secured 284,884 221,662

Unsecured 157,899 789,513

442,783 1,011,175

The company has placed its funds with banks which are rated Al+ by PACRA/JCR VIS

The maximum exposure to credit risk for trade debts as at 31 December 2010

by geographic regions was:

Domestic 380,134 287,809

Foreign 10,688 38,984

390,822 326,793

The aging of trade receivables at the reporting date is:

Past due 0 - 30 days 385,478 319,300

Past due 31 - 60 days 2,411 5,214

Past due 61 - 90 days 255 1,383

Past due 366 & above 2,678 896

390,822 326,793

The aging of impairment loss against trade receivable:

Past due 0 - 30 days 8,555 3,935

Past due 31 - 60 days 2,411 5,214

Past due 61 - 90 days 255 1,383

Past due 366 & above 2,678 896

13,899 11,428

The movement in provision for impairment of receivables is as follows:

Opening balance 11,428 10,651

Provision for the year 2,471 780

Bad debts written off – (3)


32.2 Liquidity risk

LiquidityriskistheriskthattheCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheCompany’sapproachtomanagingliquidityistoensureasfaraspossibletoalwayshavesufficientliquiditytomeetitsliabilitieswhen due. The Company is not materially exposed to liquidity risk as substantially all obligations / commitments of the Company are short term in nature and are restricted to the extent of available liquidity. In addition, the Company hasobtainedoverdraftfacilitiesfromvariouscommercialbankstomeetanydeficit,ifrequiredtomeettheshorttermliquidity commitments.



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ThetablebelowsummarizesthematurityprofileoftheCompany’sfinancialliabilitiesasatreportingdate: 31 December 2010

Carrying Contractual Less than More than

amount cash flows 12 month 1 year


Financial Liabilities

Trade and other payables 968,117 968,117 968,117 –

Markupaccruedonshorttermrunningfinances 8,298 9,377 9,377 –

Shorttermrunningfinances–secured 634,460 634,460 634,460 –

1,610,875 1,611,954 1,611,954 –

31 December 2009

Carrying Contractual Less than More than

amount cash flows 12 month 1 year


Financial Liabilities

Trade and other payables 655,882 655,882 655,882 –

Markupaccruedonshorttermrunningfinances 8,601 9,891 9,891 –

Shorttermrunningfinances–secured – – – –

664,483 665,773 665,773 –

32.3 Market risk

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices willeffecttheCompany’sincomeorthevalueofitsholdingsoffinancialinstruments.

32.3.1 Currency risk

The Company is exposed to currency risk on import of project related and stores and spares items and export ofgoodsmainlydenominatedinUSdollarsandonforeigncurrencybankaccounts.TheCompany’sexposureto

foreign currencyriskforUSDollarsareas follows:

USD USD

2010 2009

Foreign debtors 124,795 462,520

Foreign currency bank accounts 100 100

Grossfinancialassetsexposure 124,895 462,620

Trade and other payables (3,508) (228,226)

Net exposure 121,387 234,394

Thefollowingsignificantexchangerateshavebeenapplied:

2010 2009 2010 2009

Average rate for the year Reporting date rate

USDtoPKR 85.78 81.66 85.64 84.25


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Sensitivity analysis:

At reportingdate, if thePKRhad strengthenedby10%against the foreign currencieswith all other variables heldconstant,beforetaxprofitfortheyearwouldhavebeenlowerbytheamountshownbelow,mainlyasaresultofnetforeignexchange gain on translation of foreign debtors, foreign currency bank account and trade and other payables.


Effect on profit and loss

USDollar 1,040 1,975

1,040 1,975 The weakening of the PKR against foreign currencies would have had an equal but opposite impact on the post tax loss. Thesensitivityanalysispreparedisnotnecessarilyindicativeoftheeffectsonprofitfortheyearandassets/liabilitiesoftheCompany. 32.3.2 Interest rate risk

AtthereportingdatetheinterestrateprofileoftheCompany’ssignificantinterestbearingfinancialinstrumentswasasfollows:

2010 2009 2010 2009

Effective rate Carrying amount (in Percentage) (Rupees in thousands)

Financial Assets

Fixed rate instruments:

Long term loans 8 8 4,470 5,281 Variable rate instruments:

Cash and bank balances - saving 5 to 11.5 5 to 12 17,134 606,870

Financial liabilities

Variable rate instruments: Short term borrowings 12.63 to 14.84 11.64 to 16.75 634.460 – Fairvaluesensitivityanalysisforfixedrateinstruments

TheCompanydoesnotaccountforanyfixedratefinancialassetsandliabilitiesatfairvaluethroughprofitandloss.Thereforeachangeininterestratesatthereportingdatewouldnotaffectprofitandlossaccount.

Cashflowsensitivityanalysisforvariablerateinstruments

Achangeof100basispointsininterestratesatthereportingdatewouldhavedecreased/(increased)pofitfortheyear by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2009.

Profit and loss 100 bps Increase Decrease (Rupees in thousand)

As at 31 December 2010 242 (242)

As at 31 December 2009 424 (424) Thesensitivityanalysispreparedisnotnecessarilyindicativeoftheeffectsonprofitfortheyearandassets/liabilities

of the Company.

32.3.3 Other price risk

Otherpriceriskistheriskthatthefairvalueorfuturecashflowsofafinancial instrumentwillfluctuatebecauseofchanges in market prices (other than those arising from interest rate risk or currency risk). The company is not exposed toanypriceriskastherearenofinancialinstrumentsatthereportingdatethataresensitivetopricefluctuations.

32.3.4 Fair value of financial instruments

Thecarryingvaluesof thefinancialassetsandfinancial liabilitiesapproximate their fair values.Fair value is theamountfor which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.


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32.3.5 Capital risk management

TheBoard’spolicyistomaintainanefficientcapitalbasesoastomaintaininvestor,creditorandmarketconfidenceand to sustain the future development of its business. The Board of Directors monitors the return on capital employed, whichtheCompanydefinesasoperatingincomedividedbycapitalemployed.TheBoardofDirectorsalsomonitorsthe level of dividends to ordinary shareholders.

The Company’s objectives when managing capital are:

(i) to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholdersandbenefitsforotherstakeholders,and

(ii) to provide an adequate return to shareholders.

The Company manages the capital structure in the context of economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the amount of dividends paid to shareholders and issue new shares.

For working capital requirement and capital expenditure, the Company primarily relies substantially on short term borrowings.

33 Remuneration of Chief Executive, paid Directors and Executives Chief Executive & MD Directors Executives

2010 2009 2010 2009 2010 2009

(Rupees in thousands)

Managerial remuneration 8,005 15,729 3,872 6,408 37,319 32,026

Rent, bonus and other allowances 2,950 13,300 4,466 9,300 49,053 39,701

10,955 29,029 8,338 15,708 86,372 71,727

Retirementbenefits 1,805 2,625 873 587 8,413 5,345

Club subscription 27 85 26 27 40 36

Leave encashment 1,128 10,294 903 804 5,252 5,197

13,915 42,033 10,140 17,126 100,077 82,305

Number 1 2 1 2 43 37

Meeting fees aggregating to Rs. (thousands) 9 (2009: Rs (thousands) 3) were paid to 4 (2009: 4) non-executive directors for attending board meetings. In addition Chief Executive & Managing Director, full time working director and some executives are also provided with Company maintained car.

34 Transactions with related parties and associates

The realted parties comprise parent company, related group companies, local associated company, directors of the company, key management personnel and staff retirement funds. Details of transactions with related parties, other than those disclosed elsewhereinthesefinancialstatementsareasfollows:

2010 2009

Name of parties Nature of relationship Nature and description of Total Total

related party transaction value of Closing value of Closing

transaction balance transaction balance

(Rupees in thousands) (Rupees in thousands)

UnileverPakistanFoodLimited Associate Sales 798,858 15,455 703,067 242,222

Services rendered – – 63 –

Corn Products International Holding company Services received – – – 1,455

Corn Products Kenya Ltd. Associate Export sales 12,528 4,471 32,850 18,758

Corn Products Malaysia Associate Export sales 97,334 – 7,504 3,478

Employeesbenefits Otherrelatedparties Contributiontofunds 42,940 – 36,940 14,713

The transactions were carried out at an arm’s length basis, in accordance with the accounting policy as stated in Note 4.23.

No buying and selling commission has been paid to any associated undertaking.

60 |


2010 2009 ( Metric Tons)

35 Plant capacity and production

Average grind capacity per day 1,408 1,303

Grind capacity for 350 working days 492,683 456,050

Actual days worked 303 309

Actual grind 425,528 399,723

The reduction in grind days/ grind was attributable to lower sales demand and acute energy crisis in the country.

36 Dividends

TheBoardofDirectorshaveproposedafinaldividendfortheyearended31December2010ofRs.55pershare,amountingto

Rs. (thousands) 508,004 at their meeting held on 14 February 2011, for approval of the members at the Annual General Meeting

to be held on 29 March 2011 (2009: Rs. 40 per share amounting to Rs. (thousands) 369,457).

37 Date of authorization of issue

Thesefinancialstatementswereauthorizedforissueon14February,2011bytheBoardofDirectorsoftheCompany.

38 Use of estimates and judgments

The preparation of financial statements in conformitywith approved accounting standards requiresmanagement tomake

judgments, estimates and assumptions that effect the application of policies and reported amounts of assets and liabilities,

income and expenses. The estimates and associated assumptions and judgments are based on historical experience and

various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making

the judgment about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may

differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized

in the period in which the estimate is revised if the revision effects only that period, or in the period of revision and future

periodsifrevisionaffectsbothcurrentandfutureperiods.Theareaswherevariousassumptionsandestimatesaresignificantto

Company’sfinancialstatementsorwherejudgmentswereexercisedinapplicationofaccountingpoliciesareasfollows:

- Taxation- (note 4.3 & 30)

- Usefullifeofdepreciableassets-(note4.6&5)

- Employeesretirementbenefits-(note4.9&8)

- Provision and contingencies- (note 4.17 & 22)

39 General

- Figuresinthesefinancialstatementshavebeenroundedofftothenearestthousandsofrupees.

- Comparativefigureshavebeenreclassifiedandrearrangedwherenecessaryinordertofacilitatecomparison.



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Pattern of ShareholdingAs at 31 December 2010

Number of Total

Shareholders Shareholding Shares Held

715 1 – 100 37,054

152 101 – 500 36,027

47 501 - 1000 36,159

48 1001 - 5000 116,823

2 5001 - 10000 15,995

1 15001 - 20000 20,000

1 25001 - 30000 28,827

1 40001 - 45000 43,140

2 50001 - 55000 108,217

2 55001 - 60000 114,050

1 60001 - 65000 63,822

3 65001 - 70000 200,262

1 85001 - 90000 89,989

1 100001 - 105000 100,131

2 110001 - 115000 226,265

2 140001 - 145000 283,066

1 150001 - 155000 152,139

2 165001 - 170000 332,964

1 200001 - 205000 200,085

1 235001 - 240000 236,578

1 300001 - 305000 300,595

1 6490001 - 6495000 6,494,240

988 9,236,428

Sr. Categories of Number of Shares

No. Shareholders Shareholders Held Percentage

1 Individuals 955 2,532,945 27.42

2 Investment Companies 1 60 0.00

3 Insurance Companies 3 113,322 1.23

4 Joint Stock Companies 10 1,603 0.02

5 Modaraba Companies 2 3,378 0.04

6 Foreign Investors 5 6,494,288 70.31

7 Mutual Fund 6 88,451 0.96

8 Others 6 2,381 0.02

Total: 988 9,236,428 100.00

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

62 |

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

No. of

Shares

Associated Companies, undertakings and related parties

Corn Products International Inc. - Sponsor and Related Party 6,494,240

NIT 0

ICP 60

Directors

Mr. John F. Saucier 1

Mr. Rashid Ali 865

Ms. Cheryl K. Bebee 1

Ms. Mary A. Hynes 1

Mr.ZulfikarMannoo 238,263

Mian M. Adil Mannoo 155,911

Mr. Wisal A. Mannoo 177,198

Mr. Anis Ahmad Khan 1,264

Sh. Gulzar Hussain 5,574

Directors’ Spouses

Mrs.SarwatZulfikarW/oMr.ZulfikarMannoo 9,370

CEO

Mr. Ansar Yahya 82

Executives 1,712

Public sector companies and corporations 0

Banks, DFIs, Non-Banking FI, Insurance, Modaraba, Mutual Fund 204,601

Shareholders holding ten percent or more voting interest

Corn Products International Inc. 6,494,240


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Proxy Form118th General Meeting (Annual Ordinary)

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

I / We

of

being shareholder (s ) of Rafhan Maize Products Company L imited hereby appoint

of

or failing him

as my / our proxy to vote for me / us and on my / our behalf at the 118th General Meeting

(Annual Ordinary) of the Company to be held at Karachi on Tuesday, March 29, 2011

at 10:00 a.m. and / or at any adjournment thereof.

Dated this day of 2011.

AffixRevenue (Signature of Proxy) Stamp of Rs. 5/-

Witness Signature of Shareholder

Place Folio No. / CDC No.

No. of Shares held

Notes:

a) This Form of Proxy, duly completed and signed across a revenue stamp, must be deposited at the Company’sRegisteredOfficenotlessthan48hoursbeforethetimeofholdingthemeeting.

b) A proxy need not be a member of the Company.

AFFIX CORRECT POSTAGE

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

Rafhan-AR-2010

Documents

managing director

lost workday

deductible

casual vacancy

ansar yahya

zulfikar mannoo

adil mannoo

lahore stock