Annual Report 2011 3r1k1r

Abbott Pakistan Annual Report 2011

Theme The Concept behind our Annual Report 2011 focuses on our ’Individuality’ which is driven by our diversity. We manufacture and market leading pharmaceuticals, nutritional, diagnostics, diabetes care and general health care products to meet the needs of our patient population. Our Individuality is one of our strengths and inspires new efforts across our Company. This requires us to be more thoughtful and creative in the way we conduct our business. And that's a challenge we welcome, as it will make us a better company in multiple ways. Our goal of turning science into caring is a testimony to our enduring contributions to providing health care solutions. A commitment that extends to every aspect of our business and our conduct.

We are a diverse, global health care Company with scientific expertise and products that address the full range of health care needs - from disease prevention and diagnosis to treatment and cure.

About Abbott Pakistan We are part of global, broad-based health care company devoted to providing efficacious, safe and cost effective medicines, new technologies and innovative ways to manage health. Our work across broad lines of business gives us a wealth of knowledge, understanding and capabilities in a number of health areas, including:

Pharmaceuticals Nutritional Diagnostics Diabetes Care General Health Care


For more than a century, Abbott has been globally driven by a constant goal: to advance medical science to help people live healthier lives. A continuous process of innovation, research and development at Abbott's worldwide facilities enables Abbott Pakistan to offer effective solutions for various health care challenges, with products and services that are well focused, within the customer's reach and contribute to improved health care of the people of Pakistan. Our products extend across many areas of health, addressing not only treatment, but also prevention and diagnosis.

Our Promise We are here for the people we serve in their pursuit of healthy lives. This has been the way of Abbott for more than a century – ionately and thoughtfully translating science into lasting contributions to health. Our products encircle life, from newborns to aging adults, from nutrition and diagnostics through medical care and pharmaceutical therapy. Caring is central to the work we do and defines our responsibility to those we serve: • We advance leading-edge science and technologies that hold the potential for significant improvements to health and to the practice of health care. • We value our diversity – that of our products, technologies, markets and people – and believe that diverse perspectives combined with shared goals inspire new ideas and better ways of addressing changing health needs.


• We focus on exceptional performance – a hallmark of Abbott people worldwide – demanding of ourselves and each other because our work impacts people’s lives. • We strive to earn the trust of those we serve by committing to the highest standards of quality, excellence in personal relationships, and behaviour characterized by honesty, fairness and integrity. • We sustain success – for our business and the people we serve - by staying true to key tenets upon which our company was founded over a century ago: innovative care and a desire to make a meaningful difference in all that we do. The promise of our company is in the promise that our work holds for health and life.

“A Promise for Life” is a statement that describes - for our customers, our communities, our shareholders and all of our stakeholders - what we believe in, what we value, and what we strive to deliver in our day-to-day work. For Abbott employees, Our Promise is our com - guiding us in our actions and decision making, to ensure we live up to the high expectations we have set for ourselves in order to serve our stakeholders better. Our Promise challenges us to continually improve and inspires us to always aim higher.



Contents 09 11 12 14 16 18 24 26 30 34 38 40 42 44 48 49 50 52 54 56 57 58 60

Corporate Information Corporate Structure of Abbott Pakistan Vision & Mission History of Abbott at a glance Our Core Values Our Global Citizenship Priorities Ethics and Compliance Corporate Social Responsibility at Abbott Pakistan Human Resource Development Environment, Health & Safety Simplification Initiatives at Abbott Pakistan Highlights of the year Awards and Recognitions Pharmaceutical Products General Health Care Products Diagnostic Products Nutritional Products Diabetes Care Products Brief of Reference of Board Committees Board Committees Attendance Corporate Governance Directors’ Profile Directors’ Report

70 74 75 77 78 80 81 82 84 85 86 87 88 132 133 136 138 139

Key Operating and Financial Data Vertical Analysis Horizontal Analysis Statement of Value Addition and its Distribution Statement of Compliance with the Code of Corporate Governance Review Report to the on Statement of Compliance with Best Practices of Code of Corporate Governance Auditors’ Report to the Balance Sheet Profit and Loss Statement of Comprehensive Income Cash Flow Statement Statement of Changes In Equity Notes to the Financial Statements Pattern of Shareholding Categories of Shareholders Notice of Annual General Meeting Calendar of Financial Events Details Proxy Form

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Corporate Information Board of Directors

Legal Advisors

Munir A. Shaikh (Chairman) Asif Jooma (Chief Executive Officer) Kamran Y. Mirza Thomas C. Freyman (Alternate Director Anis A. Shah) Syed Anis Ahmed Roland Wolfgang Kaut Shamim Ahmad Khan

Orr,Dignam & Co. Surridge & Beecheno

Audit Committee

Bankers

Shamim Ahmad Khan (Chairman) Munir A. Shaikh Kamran Y. Mirza Maria Memon (Chief Internal Auditor by invitation) Syed Anis Ahmed (CFO by invitation)

Faysal Bank Limited Citibank N.A. Deutsche Bank AG MCB Bank Limited National Bank of Pakistan Standard Chartered Bank (Pakistan) Limited HSBC Bank Middle East Limited The Bank of Tokyo-Mitsubishi UFJ Limited Barclays Bank PLC

Human Resource Committee Munir A. Shaikh (Chairman) Asif Jooma Shamim Ahmad Khan

Share Transfer Committee Asif Jooma (Chairman) Syed Anis Ahmed Anis A. Shah (Alternate Director to Thomas C. Freyman)

Banking Committee Munir A. Shaikh (Chairman) Asif Jooma Anis A. Shah (Alternate Director to Thomas C. Freyman) Syed Anis Ahmed

Chief Financial Officer Syed Anis Ahmed

Company Secretary Malik Saadatullah

Auditors M. Yousuf Adil Saleem & Co. Chartered ants

Share Registrar FAMCO Associates (Pvt) Ltd. State Life Building 1-A,1st Floor, I.I. Chundrigar Road, Karachi, 74000

City Office 8th Floor, Faysal House, ST-02, Shahrah-e-Faisal, Karachi

ed Office Opp. Radio Pakistan Transmission Centre, Hyderabad Road, Landhi, P.O. Box 7229, Karachi

Website www.abbott.com.pk

Senior Management Team Asif Jooma (Chief Executive Officer) Syed Anis Ahmed (Chief Financial Officer) Anis A. Shah (Operations Director) Dr. Sarmad Maqbool (Marketing & Strategy Director) Dr. Farrukh Hafeez (Quality Assurance Director) Ayub A. Siddiqui (Head of Nutrition Division) Habib Ahmed (Head of Diagnostic Division) Syed Imtiazuddin (Head of Diabetes Care Division) Dr. Raeef Ahmed (Medical Director) Seema Khan (Regulatory Director) Saira C. Halai (Human Resource Director)

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The promise of our Company is in the promise that our work holds for health and life.


Corporate Structure of Abbott Pakistan

Shareholders

Audit Committee

Board of Directors

Human Resource Committee

Share Transfer Committee CEO

Internal Audit

Pharmaceuticals

General Health Care

Banking Committee

Management

Nutritional

Diagnostics

Others

Diabetes Care

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Abbott Pakistan

Vision To be a premier healthcare company in Pakistan.

Mission

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To deliver consistently superior products and services which contribute significantly to improve the quality of life of consumers.


We advance leading-edge science and technologies that hold the potential for significant improvements to health and to the practice of health care.

History of Abbott at a Glance

1888 Dr. Abbott begins producing dosimetric granules in his apartment on Chicago's North Side.

1900 The business is officially incorporated in Illinois as the Abbott Alkaloidal Company

1915 The company changes its name to Abbott Laboratories.

A tradition of innovation.

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For more than 120 years, Abbott has been a pioneer in developing innovative solutions that improve health and the practice of healthcare. In 1888, 30-year-old Wallace C. Abbott, M.D., began making a new form of medicine. Using the active - or alkaloid - part of a medicinal plant, he formed tiny pills, called “dosimetric granules,” which provided a measured amount of the drug. The demand for these accurate granules soon far exceeded the needs of his own practice. From a small operation based above Dr. Abbott's pharmacy, Abbott has evolved into one of the world's leading health care companies.


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1920

1973

Dr. Abbott breaks ground for a new manufacturing facility in North Chicago, III.

Abbott forms its diagnostics division to bring together all diagnostic products and services. The company also introduces Ensure, its first adult medical nutritional product.

1929

1997

Abbott stock is listed on the Chicago Stock Exchange.

Abbott acquires the parenteral products business of Sanofi Pharmaceuticals, Inc., and also launches several new products, including an improved version of Similac infant formula in the United States.

1964

2001

The company acquires M&R Dietetic Laboratories of Columbus, Ohio.

Abbott completes the acquisition of the pharmaceutical business of BASF, including the global operations of Knoll Pharmaceuticals. In addition, Abbott acquires Vysis, Inc., a leading genomic disease management company.

2010 Abbott acquires Solvay Pharmaceuticals and STARLIMS.

Our Core Values

Pioneering

Caring

Leading-edge science and commercialization.

Making a difference in people’s lives.

We lead with solutions that address human needs by pioneering innovative treatments and products, lifesaving medical devices, and new approaches to managing health. At Abbott, pioneering means leading-edge science and innovative execution.

Caring is central to the work that we do to help people live healthier lives. We have tremendous respect for the lives of everyone touched by our company. Our respect for people is demonstrated in what we do and how we act.

Achieving

Enduring

Customer-focused outcomes and world-class execution.

Commitment and purpose.

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We drive for meaningful results –demanding of ourselves and each other because our work impacts people’s lives. We are committed to working together to deliver solutions that are effective and profitable. Our focus on execution and collaboration ensures that we keep our promises to each other and to those we serve.


Enduring means both honoring our history and maintaining our commitment to the future. We will always be here to help keep people healthy. We keep our promises, acting in accordance with all of our values. We grow through our intellectual curiosity and a desire to continuously learn and improve.

Our strength in Abbott is derived from the culmination of experiences any one person has with our Company. It is through living our Promise and Values that these experiences are shaped. Our behaviors are a testimony to the guiding principles of our core values reflected in our day to day existence.

Our Global Citizenship Priorities Innovating for the Future Scientific discovery and innovation are the hallmarks of Abbott's business - and the core of our commitment to advancing health and well-being.

Our broad scientific expertise enables us to create new health care products, carry them through the critical stages of development and then deliver them to patients and health care providers around the world. Our diverse portfolio of pharmaceuticals, nutritionals, medical and diagnostic devices share a common framework of excellence in science, research, development and engineering. During the year, we completed an outcome study on Acute Exacerbation of Chronic Bronchitis (AECB) patients with Klaricid treatment. This study involved more than 200 subjects at 31 sites across Pakistan. With increasing awareness and demands, we will continue to run ICH-G (International Conference on Harmonization Good Clinical Practices) complaint clinical trials with the highest ethical standards to demonstrate clinical effectiveness and establish safety of Abbott products. This in turn will ensure availability of health care solutions to doctors and the community having the highest quality standards.

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Our ongoing investment in R & D enables us to address the ever-changing global disease burden and to foster new, improved solutions for emerging health care challenges. Abbott Pakistan Annual Report 2011

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Enhancing Access Our expertise and resources help to bridge gaps in healthcare access. We tailor our approach to specific patient needs in specific regions of the world. Expanding access to care requires addressing a complex array of challenges. Lack of awareness about health care issues and treatments, inadequate healthcare infrastructure and social stigmas also can make it difficult for patients to get the medicines they need. We work to address these and other obstacles as part of our core business strategy and as part of our commitment to enhancing global health and well-being.

Expanding access to health care for patients around the world is a key component of Abbott's commitment to citizenship and is integral to our core business strategy. One of the most critical challenges facing our society is a broad lack of awareness about health care issues and treatments.

Factors That Play a Role in Increasing Access

awareness infrastructure

affordability

overcoming education stigma

Against this challenging backdrop, Abbott works to help increase access to a wide range of health care services, as well as Abbott products. We partner with government agencies, health care professional societies, non-governmental organizations and other key stakeholders on interventions to help build health care infrastructure and capacity; increase the quality and frequency of health care practitioner training; and educate patients about disease awareness, symptom management and treatment options. Abbott works with stakeholders in the markets where we do business to help local health care providers understand how best to use our products.

Protecting Patients & Consumers Our ability to create life-enhancing and life-preserving products is constantly bolstered by scientific advances, but delivering on our commitment to patients and consumers goes well beyond the laboratory. To deliver safe and effective products - at the right time and in the right dosage or formulation - we work to educate patients and health care professionals about potential risks and side effects. All medicines, health care interventions, procedures and products carry some degree of risk - which must be balanced against the often greater risks associated with the illnesses or injuries these interventions are designed to treat. Fully educating and informing our stakeholders about these risks and benefits is paramount.

Along with educating patients and health care professionals about the safe use of our products, we work hard to ensure safety and consumer protection throughout the manufacturing and distribution process. The safety of many product ingredients is generating significant debate throughout the health care industry. At the same time, the broad geographic dispersion of our supply chain requires increased oversight and auditing.

Our obligation to protect patients and consumers goes beyond simply complying with regulatory requirements. It means earning and keeping the trust of all those who depend on our products by: • Ensuring quality, safety and product integrity across the full spectrum of research, development and manufacturing of our products and packaging. • Ensuring the quality, safety and authenticity of each product that bears the Abbott name through our distribution channels. • Effectively identifying and targeting the most appropriate patient profiles for each Abbott product and ensuring that health care professionals are fully informed of the benefits and risks of our products. • Directly and indirectly educating patients about proper storage, use and disposal of their medicines and health care products under appropriate medical supervision.

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As a leader in global health care, Abbott's goal is to create and develop products that preserve and enhance the lives of patients and consumers.


A fundamental focus of this goal is ensuring that our products are safe and effective, and that they deliver the intended benefits. We work diligently to protect the safety of ingredients and processes with which we manufacture products. We also offer a wide range of training and educational initiatives to help patients, consumers and health care providers, use and prescribe our products appropriately.

Abbott health care products are designed to meet important societal needs - needs that are best met when we work collaboratively with suppliers, health care professionals and patients. Recognizing that all health care products and procedures entail some degree of risk, we are committed to working with a broad range of stakeholders to minimize these potential risks while optimizing opportunities for improved health and well-being.

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Our commitment to patient and consumer protection is shared by all Abbott Pakistan employees and by an even greater number of people working on behalf of our partners and suppliers. We hold all of them to high ethical and performance standards and maintain effective management systems to review and audit them.


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Our quality management system is ed by policies, processes, procedures and resources that ensure our products are designed and manufactured to be safe and effective. All our processes are regularly monitored, and our products are assessed against approved specifications before distribution.

Safeguarding the Environment Abbott has long been committed to minimizing global environmental impacts - from the sourcing of raw materials, the manufacture and distribution of our products, and the use and disposal of our products by consumers and healthcare practitioners.

Ethics and Compliance Abbott integrity is based on decisions - large and small - that Abbott employees make each day at every level of the company. Abbott decisions are guided by Abbott values, a sense of ethics and respect for the law. To Abbott commitment to ethical conduct and compliance with the law, Abbott has a longstanding ethics and compliance program. The Abbott Code of Conduct sets forth the principles and behaviours to which all Abbott employees must commit. All employees are required to read, understand and certify their adherence to this Code annually.

Our Code makes it clear that we do not tolerate illegal or unethical behaviour in any of Abbott business dealings. It stresses the importance of ethical and honest conduct, appropriate treatment of confidential information, avoiding conflicts of interest, and the accuracy and integrity of Abbott's books and records. In addition, it requires timely and accurate public disclosures and compliance with relevant laws, including food and drug laws, laws relating to government healthcare programs and antitrust laws.

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The policies and procedures ing the principles outlined in the Code are updated to reflect changes in Abbott industry's codes.


A key to Abbott's ethics and compliance program is the policies and procedures that the Abbott's Office of Ethics & Compliance (OEC) has created to guide employees as they conduct their day-to-day activities within the global healthcare community. Ethical conduct and compliance with the law are central to fulfilling Abbott responsibility to Abbott stakeholders. Honesty, fairness and integrity represent the necessary conditions of an ethical workplace and are non-negotiable.

Abbott's employees understand that earning trust is a result of their actions, the decisions they make and the manner in which they conduct business every day - in matters large and small. As they perform every aspect of their business activities, our employees are guided by a clear understanding of legal and regulatory requirements, company policies and procedures.

Corporate Social Responsibility at Abbott Pakistan

We are redefining the concept of responsibility. Beyond philanthropy, we apply our science, expertise and technology to address critical health care needs through innovative collaborations and partnerships.

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We are working to build sustainable solutions to the society's most pressing health care challenges, while reducing our impact on the environment by creating lasting solutions for both current and future stakeholders.


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Working to facilitate access to health care by expanding our core businesses in pharmaceuticals, nutritionals, medical devices and diagnostics by developing new products and services to address unmet healthcare needs.

Abbott Pakistan seeks to make a significant and long-lasting difference in the quality of people's lives. We , encourage and partner with a wide array of credible and effective community-based organizations. We ask all our employees and s to in the effort. We effectively promote health care access by assisting governments, universities, research centers, health care companies, hospitals, clinics and related institutions. We have ed 'SOS Children's Villages of Sindh' which is also running a medical centre where free consultancy services are being offered to women and children and is also actively involved in immunization and polio eradication programmes. We have also ed HOPE (Health Oriented Preventive Education) which is working for the benefit of the poor and needy in the urban slum areas of Karachi and rural Sindh, AJK and NWFP in health and education sectors. We have partnered with the Kidney Centre for the treatment of the poor and needy patients suffering from kidney related diseases and also with LRBT to them to achieve their vision of providing free eye treatment and running health clinics for the poor & underprivileged citizens across the length & breadth of Pakistan.

Now more than ever, the sustainability of business and society are interconnected. At Abbott, we believe innovative, responsible and sustainable business plays an important role in building a healthy, thriving society.

Corporate Social Responsibility at Abbott Pakistan

Abbott Pakistan has also ed 'The Citizen Archive of Pakistan' which is working with a goal to educate the Pakistani youth by way of building critical thinking in the young minds especially those belonging to underprivileged communities. Abbott Pakistan is always at front when it comes to community work and services and helped flood affectees with money and in form of various goods and medicines. Free books and school bags were also distributed by Abbott Pakistan. Our employees also stepped forward to this cause. We have also ed “OICCI Flood Relief Fund”, for the assistance of people in flood affected areas in rural Sindh. Facilitating access through our corporate social responsibility initiatives by donating health care products and services. Enhancing patient assistance and by ing a wide array of civil society organizations engaged in the direct delivery of health care services.

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We regard our strategies for business growth and profitability as inseparable from our strategies for citizenship and sustainability. We strive to simultaneously create both public and private value - advancing science and helping to reduce the global disease burden.


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We constantly explore new ways of ensuring that patients have access to our products and benefit from our knowledge. By partnering with others who share our commitment, we are finding better ways to help people in need overcome barriers to health care and live longer, more productive lives.

We strive to foster economic, environmental and social wellbeing - with our products, in the way we operate our company, and through our involvement with the communities where we live and work. Abbott Pakistan seeks to enhance the health, prosperity and quality of life in the communities we serve.

Our commitment to improving life extends to humanitarian causes. We recognize that as a leading provider of innovative health care products, we have a unique responsibility and opportunity to ensure people have access to them - whether they are among the poor and underprivileged or victims of natural disasters. We are determined to do our part through creative and varied social programs.

Human Resource Development Human Resource Management and Development at Abbott Pakistan has always been a dynamic process, which focuses on a holistic approach to attracting, developing, nurturing and retaining talent.

We continually strive to create a diverse mix of talent for the different business segments which we operate in. At the same time, ing our existing employees in realizing their potential and enjoying rewarding careers. Our values require us to invest in our people so that they can come up with solutions to address the emerging healthcare needs of the people. By focusing on the following key objectives, we are able to provide meaningful career paths to potential and existing employees: •

Finding a diverse mix of talent for the right roles across global cultures and areas of expertise.

•

Aligning the growth of our workforce with our global strategies.

•

ing our people with strong organizational values, an inclusive culture and ongoing career development opportunities.

•

Retaining our people with rewards and opportunities for personal growth.

Learning and Development Learning and Development opportunities throughout 2011 centered around not only on-the-job training but also in- house and external trainings and workshops. These Learning and Development programs and initiatives reflect our efforts to develop current and future leadership potential. In addition, we also organize detailed orientation programs which help newly hired employees get a feel of the organization and transition smoothly into their roles.

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Our human resource strategy reflects the dynamic opportunities inherent in the breadth and diversity of our different lines of businesses, which cross cultures, countries, functions, technologies and customers. Abbott Pakistan exposes its people to a wide array of exciting challenges and experiences, affording them remarkable opportunities to solve problems and address emerging health care needs.


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Talent Management We employ a talent management process, which creates a pipeline of leaders to achieve sustainable growth in the years to come. Leadership teams identify talent for current and future leadership opportunities and the development needed to prepare these employees for more senior positions not only at Abbott Pakistan but also in Abbott's other s worldwide.

Every year, through a performance management process, called Performance Excellence, employees are given an opportunity to assess their performance, in coordination with their managers, and identify opportunities for growth and career development. With the organizational leaders' , the employees evolve development plans and in the process create an environment for the organization where it can achieve and exceed targets. The process also encourages employees to prioritize their work in a way that aligns it with the overall psyche of the organization and its values.

Reward Management To keep our employees motivated, we have put in place various Reward & Recognition programs that are not only local in nature but also go all the way up to the Abbott global platform. These initiatives have clearly demonstrated that they help a great deal in making employees feel appreciated and help them achieve their personal and professional goals.

Employee Engagement Our goal of enhancing Employee Engagement within the organizational setup motivates us to come up with programs that encourage cross divisional integration and also make Abbott a fun and healthy place to work. During 2011, a number of such activities were organized including townhall meetings, health awareness sessions, sports events and Eid Breakfast among others. Gauging Employee Engagement is one more aspect of this endeavor, which is given due importance. We conduct internal surveys on a regular basis to understand how our employees perceive the opportunities provided to them and where they feel there is room for improvement.

Employer Branding Abbott Pakistan also focuses on employer branding activities so that it continues to stay in the ranks of one of the most sought after employers in Pakistan, in general and the pharmaceutical sector, in particular.

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In 2011, talent drives were carried out at the leading institutions of higher learning in Pakistan to offer internship opportunities to students. This helped us convey to these students our values and also provided a chance to the selected group to experience the corporate environment first hand.


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Environment, Health and Safety Abbott Pakistan works diligently to reduce our global environmental impacts - from the sourcing of raw materials, to the manufacture and distribution of our products, to the use and disposal of our products by consumers and health care providers. Our environmental stewardship initiatives help protects the planet while improving efficiency, reducing costs and preserving our ability to do business in the future.

We have three environmental priorities: ●

Climate change

●

Water usage

●

Product stewardship

We recognize the interrelated nature of these three priorities. Our work in one area inevitably affects the others. We have developed comprehensive management and governance systems to ensure that environmental considerations are fully integrated into our day-to-day planning and business processes. During the Year, a Tree Plantation Project was undertaken with the help of Divisional Forest Department of Sindh. In this project 800 Neem trees were planted. Abbott Pakistan was also awarded a letter of appreciation from “Divisional Forest Office, Sindh” for the efforts towards a greener and healthier environment and largest plantation by any pharmaceutical company in Sindh province.

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To encourage a culture of fitness and exercise Abbott Pakistan conducted “Get Active!” exercise project for plant employees


Our global standards include technical program requirements, metrics and audit and reporting mechanisms that serve as a baseline expectation for health and safety performance worldwide. Every Abbott manufacturing plant implements a plan based on these standards and is evaluated regularly.

Our environmental stewardship initiatives help protect the planet while improving efficiency, reducing costs and preserving our ability to do business in the future.

Our environmental policy achieves these objectives: • Improve the efficiency and sustainability of our business activities and products, reducing greenhouse gas emissions, water use and waste. • Require contractors working on behalf of Abbott to conform to regulatory requirements and meet applicable internal Environment, Health and Safety (EHS) standards. • Establish goals and strategies for the enterprise and report publicly on our progress.

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• Integrate sound EHS practices consistent with our management system into all aspects of the business, maintaining legal compliance.


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Clear policies, standards and management systems ensure we operate in a manner that protects both human health and the environment. Our environmental management metrics, auditing and reporting mechanisms are evaluated regularly, and we hold our employees responsible for improving their performance against these targets as part of our annual performance appraisal process.

Climate change is a serious global issue and Abbott Pakistan has been continuously working to reduce greenhouse gas emissions. Abbott Pakistan has been working well within its limits of C02 emissions and hence, maintaining its position as a “Green plant”. The plant is also fully compliant with the defined parameters of National Environmental Quality Standards.

Simplification Initiatives at Abbott Pakistan “Simplification” is at the core of our business and operational excellence. At Abbott Pakistan, we are committed to do pioneering work with simplicity. Achieving being one of our core values is all about success with simplicity which involves integration of efforts from all areas of business i.e sales, marketing, HR, finance and all other functions to focus on evaluation of current business processes and commitment to eliminate redundant activities.

A number of simplification and continuous improvement projects with the aim to optimize efficiency and bring out further improvement in our processes were implemented in 2011. Some of these include: • Implementation of “Promotional Material Tracking System” and “Marketing Spend Authorization and Tracking System” to give more insight to the management. • Implementation of “Field Force Expense Management System”. • Implementation of “Activity Monitoring System for Field Force”. • Long term vendor partnership for selective Class A items in order to ensure consistency in supply at a targeted price in a highly inflationary economy.

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• Streamlined “Waste Management System”. Abbott Pakistan Annual Report 2011

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We are committed to do pioneering work with

simplicity.

We recognize that achieving business and operational excellence is an ongoing process. A cross functional Simplification Team reporting to top management has been set up to integrate simplification and business process improvements into all aspects of how we conduct business from ethics and compliance and social investing to product quality and safety and relationships with stakeholders.

Highlights of the Year

During this Year we produced:

1,862 million Tablets

93.78 million bottles of Liquid Products

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12.22 million Tubes


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Our work targets diseases that pose the greatest burdens on society, including cardiovascular disease, cancer, diabetes, infectious disease and pain. Our diversity enables us to make a unique and powerful contribution to global health by combating diseases on many fronts.

9.7 million fills of Injectables

196.22 million units

Awards and Recognitions

Abbott Pakistan received awards for ≈Best HR Practices in PakistanΔ and for having in place ≈A balanced and effective Talent TriangleΔ. This was as per a survey conducted by Sidat Hyder Morshed Associates (Pvt) Limited for 26 renowned Companies from 6 different sectors.

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Our flagship product Mospel was awarded Superbrands status by the Pakistan Superbrands Council.


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We drive for meaningful results – demanding of ourselves and each other because our work impacts people’s lives. We’re committed to working together to deliver solutions that are effective and profitable.

Abbott Pakistan was ranked among the top ten organizations for large industrial units and was awarded the Environment, Health & Safety Excellence Award by the National Forum for Environment and Health, a non-governmental organization d with the United Nations Environmental Program.

Abbott Pakistan was amongst the companies who were given Best Corporate Report 2010 award in the ≈Chemicals & Fertilizers sectorΔ by the Institute of Chartered ants of Pakistan and the Institute of Cost and Management ants of Pakistan. The award seeks to promote corporate ability, transparency and governance through the publication of timely, informative, factual and reader friendly annual reports.

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Pharmaceutical Products


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Abbott medicines are used to treat some of the world’s most serious and prevalent diseases. We also continue to pursue new therapeutic indications for existing medications that offer patients and physicians important treatment options.

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Abbott Pakistan manufactures over 150 different pharmaceutical and general health care products for the local and export markets.


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General Health Care Products


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Diagnostic Products Abbott Pakistan drives innovation in the fast-paced medical technology market. Our products are addressing disease diagnosis, management and treatment monitoring.

Being a leader in the In-Vitro Diagnostic Market, we continue to transform the practice of medical diagnostics through innovative products and automated laboratory systems that lower costs and improve patient care. Our broad line of diagnostic instruments and tests are used worldwide in hospitals, large reference labs, small labs and clinics to diagnose a range of serious health concerns, including infectious disease, cancer, diabetes and cardiac issues.

We are the market leader in Immunoassays and an established reference supplier of Infectious Disease screening markers. We also have presence in Hematology & Clinical Chemistry, and with the Scientific Leadership we have in our products and solutions.

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Nutritional Products


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Abbott Pakistan has pioneered the nutritional care with its pediatric and medical nutrition ranges. We are delivering the promise for life by providing nutritional , with our wide range of products for infants, children, mothers and adults. We are committed to be the trusted leader in providing innovative and superior nutrition that advances the quality of life for people of all ages.

Diabetes Care Products

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Committed to improve the lives of people with diabetes through our research and innovation.


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Abbott Diabetes Care is committed to develop products to reduce the discomfort and inconvenience of blood glucose monitoring; introducing systems that are easier to use, require less blood and provide faster results.

Stylish, easy-to-use FreeStyle Optium Meter. FreeStyle Optium meter, with 5-second testing, No Calibration (NO CODING)

FreeStyle Optium Strips:

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Fast, discreet testing

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Easier testing with NO CODING.

•

Test starts automatically, just insert strips.

•

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3 buttons makes it easy to review your previous results or averages.

For use with existing meters-(no need to change Optium Xceed meters)

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Recalls up to 450 results with time & date.

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Small sample size (0.6É l)

•

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7, 14 and 30 day test averages.

Top-fill or end-fill test strips, for easy sample application and visual confirmation ( friendly )

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Optional confirmation beep

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Individual foil-wrapped package protects test strips from contamination until opened ( no strip wastage )

We design, develop and manufacture several leading-edge glucose monitoring systems and test strips for use in both home and hospital settings.

Brief of Reference of Board Committees Audit Committee

Banking Committee

The Committee comprises of three , all of whom are Non-Executive Directors. The Audit Committee meets at least four times a year. Company Secretary acts as secretary to the Audit Committee.

The Committee comprises of a Non-Executive Director, two Executive Directors (one of the Executive Directors is an alternate Director) and Chief Executive Officer. Company Secretary acts as secretary to the Committee.

The brief of reference of audit committee are as follows: Review quarterly, half yearly and annual financial statements of the company prior to their approval by the Board of Directors.

•

Review of preliminary announcements of results prior to publication.

Human Resource Committee

•

At least once a year, the Audit Committee shall meet external auditors without Chief Financial Officer and Chief Internal Auditor.

The Committee consists of Chief Executive Officer and two Non– Executive Directors. HR Director acts as Secretary to the Committee.

•

At least once a year, the Audit Committee shall meet Chief Internal Auditor without Chief Financial Officer and External auditors.

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Recommendation about the appointment of external auditors to the board of directors and consider any questions of resignation or removal of external auditors, if any, audit fees, and provision by external auditors of any service in addition to audit of financial statements.

This Sub-Committee of the Board is responsible for reviewing the remuneration and benefits of the Chief Executive Officer, Executive Directors, Company Secretary and Chief Internal Auditor. The meeting of the committee is held at least once in a year.

•

Review management letter issued by the external auditors and management response thereto.

•

Determination of appropriate measures to safeguard the Company’s assets.

•

Consideration of any other issue or matter as may be assigned to the Committee by the Board of Directors.

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•

Banking Committee approves matters relating to opening, closing and day to day operations of bank s, issuing such instructions to the company’s bankers with regards to the company’s banking transaction and business as it may consider appropriate.


Share Transfer Committee The Committee comprises of Chief Executive Officer and two Executive Directors (one of the executive directors is an alternate director). Company Secretary acts as secretary to the Committee. Committee approves registration, transfer and transmission of shares. Moreover, it also issues and cancels share certificates including duplicate share certificates.

55

Annual Report 2011

Board Committees Attendance

AUDIT COMMITTEE Name Shamim Ahmad Khan Munir A. Shaikh Kamran Y. Mirza Syed Anis Ahmed Maria Memon Malik Saadatullah

Category Chairman - Non Executive director Member - Non Executive director Member - Non Executive director By invitation - Chief Financial Officer By invitation - Chief Internal Auditor Secretary

Meetings Held Attended 4 4 4 4 4 3 4 4 4 4 4 4

HUMAN RESOURCE COMMITTEE Name

Category

Munir A. Shaikh Asif Jooma Shamim Ahmad Khan Saira C. Halai

Chairman - Non Executive director Member- Chief Executive Officer Member - Non Executive director Secretary

Meetings Held Attended 1 1 1 1 1 1 1 1

SHARE TRANSFER COMMITTEE Name

Category

Asif Jooma Anis A. Shah Syed Anis Ahmed Malik Saadatullah

Chairman - Chief Executive Officer Member - Alternate Director to Thomas C. Freyman Member - Chief Financial Officer Secretary

Meetings Held Attended 12 12 12 12 12 12 12 12

56

BANKING COMMITTEE Name

Category

Munir A. Shaikh Asif Jooma Anis A. Shah Syed Anis Ahmed Malik Saadatullah

Chairman - Non Executive director Member - Chief Executive Officer Member - Alternate Director to Thomas C. Freyman Member - Chief Financial Officer Secretary


Meetings Held Attended 4 0 4 3 4 1 4 4 4 4

Corporate Governance Performance Evaluation of the Board The Board of Directors act as governing trustees of the Company on behalf of the shareholders while carrying out the Company's mission and goals. The Board of Directors set following evaluation criteria to judge its performance.

a. Compliance with the legislative system in which Abbott Pakistan operates, particularly Companies Ordinance, 1984, listing regulation of Stock Exchanges, and the Memorandum and Articles of Association of the Company. b. Review of the strategic plans, business risks and monitoring Company's performance against the planned objectives and advice the management on strategic initiatives. c. Establishing adequate internal control system in the Company and its regular assessment through self assessment mechanism and internal audit activities. d. Ensuring required quorum of Board meeting is available, in order to have detailed deliberation and quality decision on matters of significance. e. Ensuring training of Board of Directors including new appointments such that each member is fully aware of his roles and responsibilities.

Performance evaluation of the Chief Executive The Chief Executive Officer, being part of the Board, is present in every meeting of the Board. The CEO provides overview of the performance of Company to the Board and addresses any specific questions by the Board . The performance of CEO is assessed through the evaluation system set by the Abbott Pakistan. The principle factors of evaluation includes financial performance, business process, compliance, business excellence and people management.

57


Directors’ Profile

1

Mr. Munir A. Shaikh Chairman (Non Executive)

4

ed Board: 20 August 2004

5

Other Engagements:

Mr. Asif Jooma Chief Executive Officer

Director/ Chief Executive Officer • Pakistan Business Council.

ed Board: 01 June 2007

Director/Chairman • Pakistan Mercantile Exchange Limited (PMEL).

Other Engagements:

Director • Safari & Outdoor Club of Pakistan.

Director • NIB Bank

• International Steel Limited.

• Engro Fertiliser Limited.

• Competitiveness Fund.

Member • Board of Investment, (BOI) Government of Pakistan.

• Board of Investment. Member / Chairman • Task Force Pharmaceutical Sector _ Planning Commission Government of Pakistan.

• Executive Committee (BOI) Government of Pakistan. • OICCI Managing Committee.

Member • Task Force Private Sector Development _ Planning Commission Government of Pakistan.

• Board of Trustees of Abbott Laboratories Pakistan Limited Staff Provident Fund. • Board of Trustees of Abbott Laboratories Pakistan Limited Staff Pension Fund.

3

Syed Anis Ahmed Chief Financial Officer ed Board: 01 March 2009 Other Engagements: Member • Board of Trustees of Abbott Laboratories Pakistan Limited Staff Provident Fund. • Board of Trustees of Abbott Laboratories Pakistan Limited Staff Pension Fund. • Board of Trustees of Abbott Laboratories Pakistan Limited Workers Profit Participation Fund.

58

Mr. Kamran Y. Mirza Director (Non Executive) ed Board: 15 January 1978

Director • Sunshine Holdings - Srilanka.

2


7

ed Board: 03 October 2011

Other Engagements: Chairman / Director • Abbott India.

Mr. Ronald Wolfgang Kaut Director (Non Executive)

• Quality Control Board – ICAP.

6

Mr. Shamim Ahmad Khan Director (Non Executive) ed Board: 01 August 2002 Other Engagements: Director • Packages Limited. • IGI Insurance Limited. Chairman • Certification of Pakistan Centre for Philanthropy. Member • Advisory Committee of Centre for International Private Entreprises.

Mr. Anis A. Shah (Alternate Director to Thomas C. Freyman) ed Board: 22 February 2011 Other Engagements: Member • Board of Trustees of Abbott Laboratories Pakistan Limited Staff Provident Fund. • Board of Trustees of Abbott Laboratories Pakistan Limited Staff Pension Fund. • Board of Trustees of Abbott Laboratories Pakistan Limited Workers Profit Participation Fund.

1

2

3

4

5

6

59


7

Directors’ Report The Directors take pleasure in presenting their Report together with the audited financial statements of the Company for the year ended December 31, 2011.

Financial Performance Net sales for the year increased 18% over last thirteen months period (26% increase on a 12 months comparable basis). Gross Profit ratio at 36% was 2% better compared to the previous period when it was 34% primarily due to better product-mix, relatively stable exchange rate vis a vis the US Dollar and effective cost control.

Operating results

Rs in 000

Profit for the year before taxation Taxation Profit after taxation

2,374,826 (730,240) 1,644,586

Other comprehensive income net of tax

92,480

Un-appropriated profit brought forward

947,947

Transfer from Un-appropriated profit Profit available for appropriation

(650,000) 2,035,013

Appropriations: -Final dividend 2010 Rs 3 per share

(293,701)

-Interim dividend 2011 Rs 2 per share

(195,801)

Un-appropriated profit carried forward

Profit after tax for the year under review of Rs 1,645 million (Thirteen months period 2010: Rs 1,177 million) and Earnings Per Share for the year were Rs 16.80 were higher than the comparable 13 and 12 months period last year.

60

Your Directors are pleased to announce a final Cash dividend of Rs 4.00 per share (2010 : Rs 3.00 per share), which is in addition to an interim cash dividend of Rs 2.00 per share (2010: Rs 2.00 per share) paid to the shareholders during 2011.


1,545,511

Segment-wise Sales and Marketing Performance During the year, your Company successfully transferred the marketing and selling rights of Legacy Solvay Brands in Pakistan from Highnoon Laboratories Limited, following a global acquisition of Solvay Pharmaceuticals by Abbott International, the ultimate holding company. Pharmaceutical sales for the year under review increased by 16% over prior thirteen months period (25% increase on 12 months comparable basis) mainly attributable to volume, improved product-mix and impact of

acquisition of Legacy Solvay brands. Vitamins and hematinics, pain management, anti-infectives, cough and cold, anti-epileptics and gastro preparations recorded strong double digit growth. Nutritional sales for the year posted 23% growth over thirteen months period last year (32% increase on 12 months comparable basis) mainly on of volume and selective price increases on certain products.

61


Manufacturing Abbott Pakistan manufactures over 150 different pharmaceutical and general health care products for the local and export markets.

General Health Care (GHC), Diagnostic and Diabetes Care sales for the year grew by 28% over thirteen months period (34% increase on 12 months comparable basis) owing primarily to focused marketing of consumer products and increased sales of Mospel.

PBT

PAT

PBT as % of sales

26% 2,375

24%

1,177 609

876

864

1,645

1,741

16%

10%

1,238

1,058

1,043

1,555

17% 1,517

Rs. in million

18%

2006

2007

2008

2009

2010

2011

Industry overview The Pakistan pharmaceutical industry is currently estimated at US $ 1.88 billion as per IMS Quarter III 2011, MAT. The share of MNCs in the Pakistan pharmaceutical market is 43% with national companies ing for 57% of the market. The Pakistan pharmaceutical / nutrition market grew by approximately 19.2% in 2011. (IMS Dec. 2011, MAT). Your Company grew in line with the market and retained its position as the second largest research based pharmaceutical company in Pakistan.

Market Share Abbott Pakistan achieved a market share of 6.7% as per IMS (Dec 2011, MAT) in the pharmaceutical and nutrition market (2010 market share: 6.1%).

Capital Expenditure Your Company is continuously striving to improve productivity and efficiency of plant operations. During the year under review a total of Rs 715 million was spent on various capital projects such as GMP upgrade and procurement of manufacturing and service equipments aimed at productivity improvements.

Liquidity Management and Cash Flow Strategy During the year an amount of Rs. 1,773 million was generated from operating activities of the Company. At year end, the Company had a liquid fund position comprising of cash/bank balances and short term investments amounting to Rs. 1,453 million after investments in capital projects and dividend payments. To ensure sufficient availability of funds at all times whilst generating optimum returns through placement of surplus liquidity in various available investment avenues, the Company has developed and implemented a formal cash flow monitoring mechanism whereby cash inflows and outflows are projected and monitored on regular basis.

The Company follows a conservative investment strategy for placement of surplus funds and ensures that the investment portfolio of the Company is secure. Surplus funds are generally placed in short-term Bank deposits.

62

A monitoring system is in place whereby the Company's existing investment portfolio and new proposals for funds placement are reviewed by the investment Committee comprising of senior management staff and professional consultants.


Evaluation of Company's performance For the purpose of evaluating the performance of the Company, the management uses various indicators that mainly include industry growth, growth of peer companies in therapeutic areas in which the company operates, prior year performance, macro economic conditions and other business factors impacting the Company.

63


On the basis of these, budgets are developed and actual performance measured against budget at regular intervals during the year so that remedial action, if required, is taken on timely basis. This exercise is carried out for all the business segments of the Company. The management believes that these indicators will be relevant for future as well, albeit with minor changes.

financial, commercial and operational risks of the Company.

Risk Management

Contribution to National Exchequer

The Company's activities expose it to a variety of risks. The Company's overall risk management programme focuses on minimizing potential adverse effects on the Company's performance. The overall risk management of the Company is carried out by the Company's Senior Management Team and is also presented to the Board of Directors. This entails identifying, evaluating and addressing strategic,

Your Company has contributed Rs 1,798 million (2010: Rs 1,507 million) to the government and its agencies on of various government levies including income tax, custom duties and sales tax etc.

The Senior Management Team also carries out a SWOT analysis of Company, its products and the market in which it operates. On the basis of SWOT analysis, key challenges are addressed and opportunities identified, action plans developed and executed to achieve the long term strategic objectives of the Company.

Environment, Health and Safety Abbott was ranked among the top ten organizations in Pakistan for large industrial units and was awarded the Environment, Health & Safety Excellence Award by the National Forum for Environment and Health, a non-governmental organization d with the United Nations Environmental Program. Your Company was recognized for efforts, initiatives for employees, community development projects and strong commitment to a better environment.

initiative, 25 employees from Manufacturing, Supply Chain, QA and Engineering were trained in the first session and they initiated various productivity improvement projects within their respective areas. ●

●

During the year, OEE (Overall Equipment Effectiveness) measurement was started for key areas to reduce cycle time and improve productivity. As a part of Quality Management System improvement, initiatives were taken to further improve and automate the stability program and document handling.

The collective contribution of the various Business Process Improvement initiatives greatly contributed towards improving your Company's financial performance.

Human Resources The focus of Human Resources has aimed at developing a 'Best in Class' organization. During the year, your Company received 2 awards for “Best HR Practices in Pakistan” and HR Benchmarking Survey's balanced and effective talent triangle”. This was as per a survey conducted by Sidat Hyder Morshed Associates (Pvt) Limited for 26 renowned Companies from 6 different sectors. Emphasis on learning and development continued in 2011 with a large number of in-house and external training sessions and workshops. Training programs were mainly aimed at imparting knowledge to upgrade technical and soft skills as identified in employee growth plans. The strong commitment to Training and Development has been a critical factor in the growth of the company. We are pleased to report that as a result of effective HR policies and a conducive and open environment, your Company's employee turnover rate remained well below the industry average. Your Company was also recognized for “Largest Plantation done by any Pharmaceutical Organization” in Sindh in collaboration with Forest Department. Several other initiates in the areas of waste management and Industrial Hygiene have also been implemented.

Business Process Improvement

64

●

Your Company launched the Lean Sigma Green Belt initiative at the Plant for productivity improvement and waste elimination. Through this


We continue to focus on attracting, developing and retaining top tier talent for the Company. The company conducted a Pulse survey for the Pharma Division employees to track employee perceptions with regards to their level of engagement, HR health and core activities. A participation rate of more than 95% was achieved, demonstrating a strong sense of commitment by the employees. The company has drawn up plans to address areas of improvement to further strengthen corporate culture and effectiveness.

020

Annual Report 2011

Your Company was also recognized for “Largest Plantation done by any Pharmaceutical Organization” in Sindh in collaboration with Forest Department.

Corporate Social Responsibility Global citizenship is an integral part of Abbott's mission to improve people's lives. The company's policies focus on enhancing access to health care, protecting patients and consumers and safeguarding the environment. Working in partnership with others, Abbott leverages its core business expertise and resources to create sustainable solutions in countries around the world. In addition, your Company kept itself involved in the day to day lives of the communities it operates within. In 2011, The Abbott Fund contributed towards the flood relief efforts. Moreover, employee contributions also benefited affectees as employees personally involved themselves in relief efforts. Your company continued to organization like AKU, LRBT and SOS Children's Village in 2011.

Subsequent Events No material changes or commitments affecting the financial position of the Company have taken place between the end of the year and the date of this report.

Board Changes

66

Mr. Angelo Kondes resigned from the Board with effect from October 1, 2011, and in his place Mr. Roland W. Kaut was appointed as Director of the


Company with effect from October 3, 2011, for the remainder term ending on March 24, 2014. The Board wishes to place on record the valuable contributions made by the outgoing Director Mr. Angelo Kondes and welcomes the new Director Mr. Roland Kaut.

67


Business challenges and future outlook

Pattern of Shareholding

The company remains vulnerable in view of continued pressure on the Pak rupee and domestic inflation. Following years of minimal price adjustments on selected products, there is an urgent need for an across the board price increase. Your Company along with other of the pharmaceutical industry continues to urge the Government for a mutually acceptable pricing mechanism for pharmaceutical products. In addition, the devolution of health to the provinces following the age of the 18th Amendment has serious implications for the industry. Both the industry associations i.e. PPMA and Pharma Bureau agree on the need for the establishment of a Drug Regulatory Authority at the Federal level to manage Pharmaceutical Registration and Pricing. This is no different to existing structures globally where Drug registration and Pricing are coordinated by one body at a Federal level. Escalation in the cost of energy and other inputs has put great pressure on the pharmaceutical companies. Your company is meeting the challenge by introducing cost improvement initiatives and product portfolio optimization.

A statement showing the pattern of shareholding in the Company and additional information as at December 31, 2011 is given on page 132. The Directors, CEO, CFO, Company Secretary and their spouses and minor children did not carry out any transaction in the shares of the Company during the year.

Intellectual Property Rights continues to be a concern for the industry. Concrete efforts need to be undertaken to discourage both piracy and counterfeiting. Effective implementation will protect consumers, as well as the industry.

Auditors The present Auditors M/s M. Yousuf Adil Saleem & Co., Chartered ants, retire and being eligible, offer themselves for re-appointment. The Board of Directors endorses the recommendation of the Audit Committee for their re- appointment as auditors of the Company for the financial year ending December 31, 2012.

Holding Company As at December 31, 2011 Abbott Asia Investments Limited, UK held 76,259,454 shares. The ultimate holding Company is Abbott International LLC, USA.

Compliance with the Code of Corporate Governance As required by the Code of Corporate Governance dated March 28th, 2002 the Directors are pleased to state as follows: ●

The financial statements, prepared by the management of the Company, present fairly its state of affairs, the results of its operations, cash flows and changes in equity.

●

Proper books of of the Company have been maintained.

●

Appropriate ing policies have been consistently applied in preparation of financial statements. ing estimates are based on reasonable and prudent judgement.

●

International ing Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed.

●

The Company maintains a sound internal control system which gives reasonable assurance against material misstatement or loss. The internal control system is regularly reviewed.

●

There are no doubts upon the Company's ability to continue as a going concern.

●

There has been no material departure from the best practices of corporate governance, as detailed in the Listing Regulations.

●

Key operating and financial data for the last six years is summarized on page 70.

●

Outstanding taxes, statutory charges and duties, if any, have been duly disclosed in the Financial Statements.

●

Significant deviations, from last period in the operating results of the Company have been highlighted and explained.

●

The value of investments made by the staff retirements funds as per their financial statements are as follows:-

●

●

●

Value (Rs millions) ALPL Pension Fund (Based on year ended December 31, 2010) - audited 1599 ALPL Provident Fund (Based on year ended December 31, 2010) - audited

During the year, four meetings of the Board of Directors were held. Attendance by each Director/CFO/Company Secretary was as follows:

Name of Directors/CFO/Co. Secretary 1 2 3 4 5 6 7

Mr. Munir A. Shaikh Mr. Asif Jooma Mr. Angelo Kondes* Mr. Roland W. Kaut** Syed Anis Ahmed Mr.Thomas C. Freyman Mr. Sadi Syed*** - Alternate Director to Thomas C Freyman 8 Mr. Anis A. Shah****Alternate Director to Thomas C. Freyman 9 Mr. Kamran Y. Mirza 10 Mr. Shamim Ahmad Khan 11 Syed Anis Ahmed (CFO) 12 Mr. Malik Saadatullah (Company Secretary)

4 4 2 0 4 0 1 3 4 4 4 4

Acknowledgements The Board of Directors would like to take this opportunity to express their deep appreciation of the commitment, loyalty and dedication of the employees. We would also like to acknowledge the and cooperation received from our esteemed customers, suppliers, bankers and stakeholders.

February 14th, 2012

68

Number of Board Meetings Attended

* Resigned from the Board w.e.f. October 1st, 2011 ** Appointed to the Board w.e.f. October 3rd, 2011 *** Retired from the Company w.e.f. February 22nd, 2011 **** Appointed Alternate Director w.e.f. February 22nd, 2011

Munir A. Shaikh Chairman


542

Net sales for the year increased 18% over last thirteen months period (26% increase on a 12 month comparable basis). Gross Profit ratio at 36% was 2% better compared to the previous period when it was 34% primarily due to better product-mix, relatively stable exchange rate vis a vis the US Dollar and effective cost control.

Key Operating and Financial Data Financial Position December 31, 2011

December 31, 2010

November 30, 2009

November 30, 2008

November 30, 2007

November 30, 2006

Restated (Rupees in '000)

Balance Sheet Fixed Assets - Property, plant and equipment - Intangible asset Other Non-Current Assets Current Assets

2,298,062 76,055 55,449 4,975,763

1,877,596 56,152 3,856,673

1,662,785 42,606 3,259,185

1,560,835 33,746 3,455,129

1,516,821 35,418 3,129,129

1,437,023 34,233 3,564,169

Total Assets

7,405,329

5,790,421

4,964,576

5,049,710

4,681,368

5,035,425

Issued, subscribed and paid-up capital Capital Reserves Revenue Reserves

979,003 223,247 3,983,933

979,003 197,167 2,736,369

979,003 173,853 2,085,604

979,003 154,777 2,434,732

979,003 130,016 2,580,254

979,003 46,097 3,216,786

Total Equity

5,186,183

3,912,539

3,238,460

3,568,512

3,689,273

4,241,886

Non-Current Liabilities Current Liabilities

165,219 2,053,927

115,182 1,762,700

119,627 1,606,489

100,606 1,380,592

110,414 881,681

44,100 749,439

Total Liabilities

2,219,146

1,877,882

1,726,116

1,481,198

992,095

793,539

Total Equity and Liabilities

7,405,329

5,790,421

4,964,576

5,049,710

4,681,368

5,035,425

Twelve months ended December 31, 2011

Thirteen months ended December 31, 2010

Twelve months ended November 30, 2009

12,946,968 4,666,478 2,378,042 2,374,826 730,240 1,644,586 587,402 2,657,942

10,995,701 3,687,038 1,744,787 1,741,257 564,313 1,176,944 489,502 2,000,889

8,450,118 2,321,131 878,503 875,978 266,906 609,072 1,174,804 1,084,803

7,123,412 2,469,005 1,240,583 1,237,879 373,652 864,227 489,502 1,443,585

6,584,454 2,635,109 1,558,401 1,555,199 512,309 1,042,890 1,762,206 1,744,231

5,914,181 2,516,484 1,520,887 1,517,227 459,226 1,058,001 293,701 1,680,605

1,772,876 (643,800) (494,836)

917,503 (374,785) (494,415)

1,074,757 (181,200) (1,174,262)

607,282 442,515 (494,426)

1,342,118 (93,836) (1,761,005)

934,717 (913,524) (173,127)

1,453,327

819,087

770,784

1,051,489

496,118

1,008,841

Operating and Financial Trends

Profit and Loss Net sales including toll manufacturing service fee Gross profit Operating profit Profit before taxation Taxation Profit after taxation Ordinary cash dividends * EBITDA**

Twelve months Twelve months ended November ended November 30, 2007 30, 2008 Restated (Rupees in '000)


Cash Flows Operating activities Investing activities Financing activities Cash and cash equivalents at the end of the year / period

70

* Includes final dividend amounting to Rs. 391.601 million proposed by the Board of Directors subsequent to the year end. ** EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation)





Twelve months Twelve months ended November ended November 30, 2007 30, 2008 Restated

71



Ratios Profitability Ratios

Unit

Gross profit ratio Net profit to sales EBITDA* margin to sales Operating leverage ratio Return on equity / Return on capital employed Return on assets

% % % Times

36.0% 12.7% 20.5% 0.18

33.5% 10.7% 18.2% 0.16

27.5% 7.2% 12.8% 0.10

34.7% 12.1% 20.3% 0.17

40.0% 15.8% 26.5% 0.24

42.5% 17.9% 28.4% 0.26

% %

31.7% 22.2%

30.1% 20.3%

18.8% 12.3%

24.2% 17.1%

28.3% 22.3%

24.9% 21.0%

Times Times

2.42 1.26 0.71

2.19 0.97 0.46

2.03 0.94 0.48

2.50 1.24 0.76

3.55 1.95 0.56

4.76 3.01 1.35

Times

0.14

0.08

0.13

0.09

0.20

0.16

Days Days Days Days Times Times

96.67 9.52 45.76 60.43 1.96 6.09

101.19 8.94 51.00 59.12 2.04 6.21

100.38 8.79 46.76 62.41 1.69 5.24

119.97 7.73 51.49 76.21 1.46 4.63

121.05 9.36 53.00 77.41 1.36 4.46

132.89 10.99 53.14 90.73 1.29 4.51

12.02 9.13 4.6% 0.42 2.40 5.00

6.22 15.51 12.4% 1.93 0.52 12.00

8.83 12.46 4.5% 0.57 1.77 5.00

10.65 19.38 8.7% 1.69 0.59 18.00

10.81 13.32 2.1% 0.28 3.60 3.00

39.96 -

33.08 -

36.45 -

37.68 -

43.33 29,914,000

97,900,300

97,900,300

97,900,300

97,900,300

97,900,300

109.74 126.50 77.00

96.49 126.42 65.00

110.00 233.15 109.36

206.50 210.00 141.00

144.00 244.00 136.00

494.27

347.92

458.80

486.70

415.54

Liquidity Ratios Current ratio Quick / Acid test ratio Cash to Current Liabilities Cash flow from operations to Sales

Activity / Turnover ratios No. of days in inventory No. of days in receivables No. of days in payables Operating Cycle Total assets turnover ratio Fixed assets turnover ratio

Investment / Market Ratios Basic / Diluted Earnings per share Rs. 16.80 Price earnings ratio Times 5.94 Dividend yield ratio % 6.0% Dividend pay out ratio Times 0.36 Dividend cover ratio Times 2.80 Cash dividend per share Rs. 6.00 Break-up value per share with / without surplus on revaluation of fixed assets Rs. 52.97 Bonus shares issued Number No. of shares at end of year / period Number 97,900,300 Market value per share at the end of the year / period Rs. 99.79 Market value per share (High) Rs. 103.00 Market value per share (Low) Rs. 79.25

Capital Structure Ratios Interest cover ratio

Times

739.44

Note : Sales include toll manufacturing service fee. * EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation)

Graphical Presentation - Key Operating and Financial Data PBT

Net Sales

PAT

PBT as % of sales

(Including Toll Manufacturing Service Fees) 26% 12,947

10,996

1,177 609

876

864

1,645

1,741

16%

10%

1,238

1,058

1,043

1,555

17% 1,517

Rs. in million

18%

8,450

7,123

6,584

5,914

Rs. in million

2,375

24%

2006

2007

2008

2009

Dividend

2010

2011

2006

2007

2008

2009

2010

2011

Earnings Per Share - Restated (Rupees)

Dividend Payout %

Price Earnings Ratio (Times)

16.80

15.51

2009

5.94

2008

9.13

6.22

12.02

12.46

10.65

36%

8.83

490

42%

587

10.81

1,175 490

57%

294

28%

13.32

19.38

169%

Rs. in million

1,762

193%

2006

2007

2008

2009

2010

2011

2006

2010

2011

Current Ratio

4.76

Profit and Loss Analysis-Expenses

2007

Profit after Taxation 3.55

Taxation-Net Financial Cost

2.03

Selling and Distribution expenses Cost of Goods Sold and Services

72

2011


2006

2007

2008

2009

2010

2.42

2.50

istrative Expenses

2.19

Other Operating Charges

2011

No. of Days in Inventory

Return on Equity / Return on Capital Employed

No. of Days in Payables

2007

2008

2009

2010

2006

2011

Capital Expenditure

2007

2008

45.76 8.94

2011

Vertical Analysis

Market Price Per Share

52.97

99.79

109.74 39.96

2011

33.08

2010

36.45

2009

96.49

110.00

144.00

Rupees

318

2008

37.68

2007

43.33

2006

255

274

417

Rs. in million

493

206.50

715

Book Value Per Share

2010

9.52

96.67

101.19

2009

51.00

8.79

46.76

7.73

9.36

51.49

53.00

10.99

53.14

18.8

Days

24.2

100.38

119.97

121.05

30.1

31.7

132.89

No. of Days in Receivables

28.3 24.9 %

2006

73


2006

2007

2008

2009

2010

2011

Vertical Analysis

December 31,

December 31,

November 30,

November 30,

November 30,

November 30,

2011

2010

2009

2008

2007

2006

Restated

Balance Sheet

Rupees ' 000

Total Equity

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

5,186,183

70.0

3,912,539

67.6

3,238,460

65.2

3,568,512

70.7

3,689,273

78.8

4,241,886

84.2

165,219

2.2

115,182

2.0

119,627

2.4

100,606

2.0

110,414

2.4

44,100

0.9

Current Liabilities

2,053,927

27.8

1,762,700

30.4

1,606,489

32.4

1,380,592

27.3

881,681

18.8

749,439

14.9


7,405,329

100.0

5,790,421

100.0

4,964,576

100.0

5,049,710

100.0

4,681,368

100.0

5,035,425

100.0

Non-Current Assets

2,429,566

32.8

1,933,748

33.4

1,705,391

34.4

1,594,581

31.6

1,552,239

33.2

1,471,256

29.2

Current Assets

4,975,763

67.2

3,856,673

66.6

3,259,185

65.6

3,455,129

68.4

3,129,129

66.8

3,564,169

70.8

Total Assets

7,405,329

100.0

5,790,421

100.0

4,964,576

100.0

5,049,710

100.0

4,681,368

100.0

5,035,425

100.0

Non-Current Liablitites







Restated

Profit and Loss Net sales including toll manufacturing service fee

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

Rupees ' 000

%

12,946,968

100.0

10,995,701

100.0

8,450,118

100.0

7,123,412

100.0

6,584,454

100.0

5,914,181

100.0

Cost of goods sold and services

8,280,490

64.0

7,308,663

66.5

6,128,987

72.5

4,654,407

65.3

3,949,345

60.0

3,397,697

57.5

Gross Profit

4,666,478

36.0

3,687,038

33.5

2,321,131

27.5

2,469,005

34.7

2,635,109

40.0

2,516,484

42.5

Selling and distribution expenses

1,894,390

14.6

1,601,101

14.6

1,252,810

14.8

1,094,405

15.4

908,965

13.8

853,187

14.4

295,823

2.3

267,915

2.4

201,943

2.4

174,511

2.4

161,278

2.4

121,112

2.0

2,476,265

19.1

1,818,022

16.5

866,378

10.3

1,200,089

16.8

1,564,866

23.8

1,542,185

26.1

Other operating income

142,466

1.1

109,079

1.0

141,890

1.7

105,545

1.5

173,394

2.6

108,722

1.8

Other operating charges

240,689

1.9

182,314

1.7

129,765

1.5

65,051

0.9

179,859

2.7

130,020

2.2

2,378,042

18.3

1,744,787

15.8

878,503

10.4

1,240,583

17.4

1,558,401

23.7

1,520,887

25.7

3,216

0.0

3,530

0.0

2,525

0.0

2,704

0.0

3,202

0.1

3,660

0.0

2,374,826

18.3

1,741,257

15.8

875,978

10.4

1,237,879

17.4

1,555,199

23.6

1,517,227

25.7

730,240

5.6

564,313

5.1

266,906

3.2

373,652

5.2

512,309

7.8

459,226

7.8

1,644,586

12.7

1,176,944

10.7

609,072

7.2

864,227

12.1

1,042,890

15.8

1,058,001

17.9

istrative expenses

Finance cost Profit before taxation Taxation - net

74

Profit for the year / period


75


Horizontal Analysis December 31, 2011

December 31, 2010

November 30, 2009

2008

2007

2006

December 31,

December 31,

2011

2010

November 30, 2009

2008

2007

2006

Restated Rupees in ' 000

% increase / (decrease) over preceeding year*

Balance Sheet Total Equity

5,186,183

3,912,539

3,238,460

3,568,512

3,689,273

4,241,886

32.6

20.8

(9.2)

(3.3)

(13.0)

24.3

165,219

115,182

119,627

100,606

110,414

44,100

43.4

(3.7)

18.9

(8.9)

150.4

109.2

Current Liabilities

2,053,927

1,762,700

1,606,489

1,380,592

881,681

749,439

16.5

9.7

16.4

56.6

17.6

7.7


7,405,329

5,790,421

4,964,576

5,049,710

4,681,368

5,035,425

27.9

16.7

(1.7)

7.9

(7.0)

22.0

Non-Current Assets

2,429,566

1,933,748

1,705,391

1,594,581

1,552,239

1,471,256

25.6

13.4

6.9

2.7

5.5

20.5

Current Assets

4,975,763

3,856,673

3,259,185

3,455,129

3,129,129

3,564,169

29.0

18.3

(5.7)

10.4

(12.2)

22.6

Total Assets

7,405,329

5,790,421

4,964,576

5,049,710

4,681,368

5,035,425

27.9

16.6

(1.7)

7.9

(7.0)

22.0




Twelve months Twelve months ended November ended November 30, 2007 30, 2008 Restated


Non-Current Liability

Rupees '000

Profit and Loss Net sales including toll manufacturing service fee







% increase / (decrease) over preceeding year*

12,946,968

10,995,701

8,450,118

7,123,412

6,584,454

5,914,181

17.7

30.1

18.6

8.2

11.3

13.1

Cost of goods sold and services

8,280,490

7,308,663

6,128,987

4,654,407

3,949,345

3,397,697

13.3

19.2

31.7

17.9

16.2

14.0

Gross Profit

4,666,478

3,687,038

2,321,131

2,469,005

2,635,109

2,516,484

26.6

58.8

(6.0)

(6.3)

4.7

12.0

Selling and distribution expenses

1,894,390

1,601,101

1,252,810

1,094,405

908,965

853,187

18.3

27.8

14.5

20.4

6.5

9.7

295,823

267,915

201,943

174,511

161,278

121,112

10.4

32.7

15.7

8.2

33.2

5.7

2,476,265

1,818,022

866,378

1,200,089

1,564,866

1,542,185

36.2

109.8

(27.8)

(23.3)

1.5

13.9

Other operating income

142,466

109,079

141,890

105,545

173,394

108,722

30.6

(23.1)

34.4

(39.1)

59.5

121.6


240,689

182,314

129,765

65,051

179,859

130,020

32.0

40.5

99.5

(63.8)

38.3

(4.1)

2,378,042

1,744,787

878,503

1,240,583

1,558,401

1,520,887

36.3

98.6

(29.2)

(20.4)

2.5

20.0

3,216

3,530

2,525

2,704

3,202

3,660

(8.9)

39.8

(6.6)

(15.6)

(12.5)

26.1

2,374,826

1,741,257

875,978

1,237,879

1,555,199

1,517,227

36.4

98.8

(29.2)

(20.4)

2.5

20.0

730,240

564,313

266,906

373,652

512,309

459,226

29.4

111.4

(28.6)

(27.1)

11.6

21.3

1,644,586

1,176,944

609,072

864,227

1,042,890

1,058,001

39.7

93.2

(29.5)

(17.1)

(1.4)

19.4

istrative expenses

Finance cost Profit before taxation Taxation - net Profit for the year / period

* Compared with restated figures except for 2011.

Horizontal Analysis

Statement of Value Addition and its Distribution Thirteen months ended December 31, 2010

Twelve months ended December 31, 2011 (Rupees ‘000)

(Rupees ‘000)

%

%

Wealth Generated Total Revenue inclusive of sales tax and other operating income Bought-in-materials and services

100

11,337,856 7,392,183 3,945,673

100

1,550,589

32.02

1,611,520

40.84

763,984 199,996 306,145 1,270,125

15.78 4.13 6.32 26.23

550,564 146,862 233,076 930,502

13.95 3.72 5.91 23.58

1,409

0.03

3,752

0.10

587,402

12.13

489,502

12.41

3,216

0.07

3,530

0.09

279,900 1,149,664 1,429,564 4,842,305

5.78 23.74 29.52 100.00

256,102 650,765 906,867 3,945,673

6.49 16.49 22.98 100.00

13,395,579 8,553,274 4,842,305

Wealth Distribution To Employees Salaries, wages, allowances and staff welfare To Government Income Tax Workers' Funds and Central Research Fund Sales tax and excise duty To Society Donations To Providers of Capital Dividends* To Providers of Finance Finance cost Retained in the Business Depreciation Added to Unappropriated profit

To Employees

To To Society Providers of Capital

To Providers of Finance

To Employees

To Government

To To Society Providers of Capital

0.09

0.10 Retained in the Business

12.41

23.58

% To Government

0.07

0.03

12.13

22.98

2010

40.84

29.52

2011

%

26.23

32.02

* Dividends Include final dividend amounting to Rs.391.601 million proposed by the Board of Directors subsequent to the year / period end.

To Retained in the Providers of Finance Business

77


Statement of Compliance With the Code of Corporate Governance This statement is being presented to comply with the requirements of the Code of Corporate Governance (the Code) contained in the listing regulations of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. 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 Directors representing minority interests on its Board of Directors. At present, the Board includes four non-executive Directors including one independent Director representing minority shareholders.

2.

The Directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company.

3.

All the resident Directors of the Company are ed as taxpayers and none of them has defaulted in payment of any loan to a banking company, a Development Financial Institution or a Non-banking Financial Institution. None of the resident Director is a member of the stock exchange on which the Company's shares are listed.

4.

A casual vacancy occurred in the Board during the year and it was filled within 30 days of its occurrence.

5.

The Company has adopted a Code of Business Conduct, which has been circulated and signed by all the Directors and employees of the Company. In addition, the Company has prepared and fully implemented an Ethics Compliance Program under which a number of core policies have been prepared to cover various facets of business practices.

6.

The Company has developed a vision / mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

7.

All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and and conditions of appointment of the Chief Executive have been taken by the Board.

8.

The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose. 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 in time.

9.

The Board approves the appointment, remuneration and and conditions of Chief Financial Officer, Company Secretary and Chief Internal Auditor, as determined by the Chief Executive.

10. All the directors on the Board are fully conversant with their duties and responsibilities as directors of corporate bodies. The Board had arranged an orientation course of the Code of Corporate Governance for its directors in the previous years to apprise them of their role and responsibilities.

78

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


12. The financial statements of the Company were duly endorsed by the Chief Executive and Chief Financial Officer, before approval by the Board. 13. The Directors, Chief Executive and Executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The Company maintains an updated list of related parties and all transactions with related parties are placed before the Audit Committee on a quarterly basis. All related party transactions have been reviewed and approved by the Board and are carried out on normal / agreed and conditions in accordance with the agreements. 16. The Board has formed an Audit Committee. It comprises three all of whom are non-executive Directors. The Board has also formed a Human Resource Committee, comprising two non-executive Directors and one executive Director. In addition, the Board has formed a Shares Transfer Committee and a Banking Committee. 17. The meetings of the Audit Committee were held at least once every quarter prior for approval of the quarterly, half yearly and final results of the Company and as required by the Code. The of reference of the Committee have been formed and advised to the Committee for compliance. 18. The Board has set-up an effective in-house Internal Audit function. In addition, the Board has made arrangements for periodic internal audits by an independent firm of Chartered ants. Both the firm and the in-house internal audit staff are conversant with the policies and procedures of the Company. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered ants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of ants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered ants of Pakistan. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Listing Regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. We confirm that all other material principles contained in the Code have been complied with.

By Order of the Board

Munir A. Shaikh Chairman February 14, 2012

79


M. Yousuf Adil Saleem & Co Chartered ants Cavish Court, A-35, Block 7 & 8 KCHSU, Sharea Faisal, Karachi-75350, Pakistan.

Review Report to the

UAN: +92 (0) 21 111-55-2626 Fax: +92 (0) 21 3454 1314 Web: www.deloitte.com

on Statement of Compliance with Best Practices of Code of Corporate Governance We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Abbott Laboratories (Pakistan) Limited (the Company) to comply with the Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges, where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of the financial statements we are required to obtain an understanding of the ing and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. Further, Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges require the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on 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 undertaken at arm's length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended December 31, 2011.

Chartered ants Engagement Partner: Nadeem Yousuf Adil Karachi Date: 14 February 2012

M. Yousuf Adil Saleem & Co Chartered ants Cavish Court, A-35, Block 7 & 8 KCHSU, Sharea Faisal, Karachi-75350, Pakistan.

Auditors» Report to the

UAN: +92 (0) 21 111-55-2626 Fax: +92 (0) 21 3454 1314 Web: www.deloitte.com

We have audited the annexed balance sheet of Abbott Laboratories (Pakistan) Limited (the Company) as at December 31, 2011 and the related profit and loss , statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved ing 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 the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence ing the amounts and disclosures in the above said statements. An audit also includes assessing the ing policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of have been kept by the Company as required by the Companies Ordinance, 1984; (b) in our opinion: (i)

the balance sheet and profit and loss together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of and are further in accordance with ing policies consistently applied;

(ii)

the expenditure incurred during the year was for the purpose of 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, profit and loss , statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved ing standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at December 31, 2011 and of the profit, total comprehensive income, its cash flows and changes in equity for the year then ended; and (d) in our opinion, Zakat deductible at source under 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.

Chartered ants Engagement Partner: Nadeem Yousuf Adil Karachi Date: 14 February 2012

Balance Sheet As at December 31, 2011

Note

December 31, December 31, 2011 2010 (Rupees ‘000)

EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorised capital

3

2,000,000

2,000,000

Issued, subscribed and paid-up capital

4

979,003

979,003

Reserves - capital - revenue

223,247 3,983,933

197,167 2,736,369

Total Equity

5,186,183

3,912,539

5

165,219

115,182

6

2,053,927

1,762,700

2,219,146

1,877,882

7,405,329

5,790,421

NON-CURRENT LIABILITY Deferred taxation CURRENT LIABILITIES Trade and other payables Total Liabilities CONTINGENCIES AND COMMITMENTS

82

TOTAL EQUITY AND LIABILITIES


7

Note

83



ASSETS NON-CURRENT ASSETS Fixed assets - Property, plant and equipment - Intangible asset Long-term loans and advances Long-term deposits Long-term prepayments

8 9 10 11

2,298,062 76,055 42,676 4,096 8,677

1,877,596 39,203 2,801 14,148

2,429,566

1,933,748

76,887 2,316,562 411,813 173,908 151,238 1,425 53,138 337,465 1,453,327

72,430 2,069,633 263,267 130,868 134,170 705 79,715 286,798 819,087

Total Current Assets

4,975,763

3,856,673

TOTAL ASSETS

7,405,329

5,790,421

Total Non-current Assets CURRENT ASSETS Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and short-term prepayments Accrued profit Other receivables Taxation recoverable Cash and bank balances

12 13 14 15 16 17 18

The annexed notes 1 to 38 form an integral part of these financial statements.

Chief Executive

Director

Profit and Loss For the year ended December 31, 2011

Note Sales - net Cost of goods sold and services Gross profit Selling and distribution expenses istrative expenses

19 20

Other operating income Other operating charges

24 25

Finance cost Profit before taxation Taxation - net

26

Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 (Rupees ‘000)

22 23

27


12,946,968 8,280,490 4,666,478 1,894,390 295,823 2,476,265 142,466 240,689 2,378,042 3,216 2,374,826 730,240

10,995,701 7,308,663 3,687,038 1,601,101 267,915 1,818,022 109,079 182,314 1,744,787 3,530 1,741,257 564,313

1,644,586

1,176,944

(Rupees) Earnings per share - basic / diluted

28

16.80


84

Chief Executive


Director

12.02

85


Statement of Comprehensive Income For the year ended December 31, 2011

Note



1,644,586

1,176,944

126,224

(50,426)

(33,744)

13,749

92,480

(36,677)

1,737,066

1,140,267

Other comprehensive income for the year / period - Actuarial gains / (losses) on defined benefit pension plan

21.1.7

- Tax on actuarial (gains) / losses Other comprehensive income - net of tax Total comprehensive income for the year / period


Chief Executive

Director

Cash Flow Statement For the year ended December 31, 2011

Note


CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Income taxes paid Long-term loans and advances - net Long-term deposits - net Long-term prepayments - net

29

2,563,135 (790,962) (3,473) (1,295) 5,471

1,512,023 (580,974) (7,424) 1,592 (7,714)

1,772,876

917,503

Fixed capital expenditure Acquisition of intangible asset Sale proceeds from disposal of fixed assets Interest income

(714,775) (86,100) 24,247 132,828

(492,839) 38,823 79,231

Net cash outflow from investing activities

(643,800)

(374,785)

(3,216) (491,620) (494,836)

(3,530) (490,885) (494,415)

634,240 819,087 1,453,327

48,303 770,784 819,087

Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES Finance cost paid Dividends paid Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year / period Cash and cash equivalents at the end of the year / period The annexed notes 1 to 38 form an integral part of these financial statements.

86

Chief Executive


Director

87


Statement of Changes in Equity For the year ended December 31, 2011

Reserves Share Capital

Balance as at December 1, 2009

Capital Reserves Reserve Other arising on - (Note merger 2.23)

Revenue Reserves UnGeneral appropriated Reserves Prof it (Rupees ‘000)

Total Equity

2,259,457

3,238,460

-

-

1,176,944

1,176,944

979,003

46,097

127,756

1,538,422

-

-

-

250,000

-

-

-

-

-

-

-

-

(36,677)

(36,677)

(36,677)

-

-

-

-

1,140,267

1,140,267

1,140,267

Final dividend for the year ended November 30, 2009 @ Rs. 3 per share

-

-

-

-

(293,701)

(293,701)

(293,701)

Interim dividend for the thirteen months ended December 31, 2010 @ Rs. 2 per share

-

-

-

-

(195,801)

(195,801)

(195,801)

Capital contribution from Abbott International LLC., USA

-

-

23,314

-

-

23,314

23,314


979,003

46,097

151,070

1,788,422

947,947

2,933,536

3,912,539

Balance as at January 1, 2011

979,003

46,097

151,070

1,788,422

947,947

2,933,536

3,912,539

-

-

-

650,000

-

-

-

-

-

-

1,644,586

1,644,586

-

-

-

-

92,480

92,480

92,480

-

-

-

-

1,737,066

1,737,066

1,737,066

Final dividend for the thirteen months ended December 31, 2010 @ Rs. 3 per share

-

-

-

-

(293,701)

(293,701)

(293,701)

Interim dividend for the year ended December 31, 2011 @ Rs. 2 per share

-

-

-

-

(195,801)

(195,801)

(195,801)

Capital contribution from Abbott International LLC., USA

-

-

26,080

-

-

26,080

26,080

979,003

46,097

177,150

2,438,422

1,545,511

4,207,180

5,186,183

Transfer from unappropriated profit to general reserve made subsequent to the year ended November 30, 2009

547,182

Total

(250,000)

Total comprehensive income for the thirteen months ended December 31, 2010 Profit for the thirteen months ended December 31, 2010 Other comprehensive income for the thirteen months ended December 31, 2010, net of tax Total comprehensive income for the thirteen months ended December 31, 2010

1,176,944

Transactions with owners, recorded directly in equity

Transfer from unappropriated profit to general reserve made subsequent to the thirteen months ended December 31, 2010

(650,000)

Total comprehensive income for the year ended December 31, 2011 Profit for the year ended December 31, 2011 Other comprehensive income for the year ended December 31, 2011, net of tax Total comprehensive income for the year ended December 31, 2011

1,644,586

Transactions with owners, recorded directly in equity



Chief Executive

Director

Notes to the Financial Statements For the year ended December 31, 2011

1.

THE COMPANY AND ITS OPERATIONS Abbott Laboratories (Pakistan) Limited (the Company) is a public limited company incorporated in Pakistan on July 02, 1948, and its shares are quoted on Karachi, Lahore and Islamabad stock exchanges. The address of its ed office is opposite Radio Pakistan Transmission Centre, Hyderabad Road, Landhi, Karachi. The Company is principally engaged in the manufacture, import and marketing of research based pharmaceutical, nutritional, diagnostic, diabetic care, molecular devices, hospital and consumer products and in providing toll manufacturing services. During the period ended December 31, 2010, the Company changed its financial year end from November 30 to December 31 to bring it in line with the financial year followed by Abbott International LLC., USA, the ultimate holding company. The current year figures pertain to twelve months (year) ended December 31, 2011 and the corresponding figures pertain to thirteen months (period) ended December 31, 2010, and therefore are not comparable.

2.

SUMMARY OF SIGNIFICANT ING POLICIES

2.1

Basis of preparation

2.1.1

Statement of compliance These financial statements have been prepared in accordance with approved ing standards as applicable in Pakistan. Approved ing standards comprise of such International Financial Reporting Standards (IFRS) issued by the International ing Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions, of or directives issued under Companies Ordinance, 1984, shall prevail.

2.1.2

ing convention These financial statements have been prepared under the historical cost convention except certain financial instruments which are measured at fair value.

2.1.3

Adoption of new and amended standards and interpretations During the year, following standards and interpretations including amendments to standards and interpretations became effective, however, their application did not have material impact on the financial statements of the Company:

88

-

IFRS 3 - Business Combinations (Amendments) IFRS 7 - Financial Instruments: Disclosures (Amendments) IAS 1 - Presentation of Financial Statements (Amendments) IAS 24 - Related Party Disclosures (Revised) IAS 27 - Consolidated and Separate Financial Statements (Amendments) IAS 32 - Financial Instruments: Presentation (Amendments) IAS 34 - Interim Financial Reporting (Amendment) IFRIC 13 - Customer Loyalty Programmes (Amendment) IFRIC 14 - Prepayments of a Minimum Funding Requirement (Amendment) IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments


89


2.1.4 Amendments to published standards and new interpretation to existing standard that are not yet effective and have not been early adopted by the Company The following amendments to published standards and new interpretation to existing standard are effective for ing periods, beginning on or after the date mentioned against them: -

IFRS 7 - ‘Financial Instruments: Disclosures’ (effective for annual periods beginning on or after July 1, 2011) - The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.

-

IAS 1 - ‘Presentation of Financial Statements’ (effective for annual periods beginning on or after July 1, 2012) - retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

-

IAS 12 - ‘Income taxes’ - (effective for annual periods beginning on or after January 1, 2012) IAS 12 currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, ‘Investment property’. This amendment therefore introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, ‘Income taxes - recovery of revalued non-depreciable assets’, will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn.

-

IAS 19 - ‘Employee Benefits’ (effective for annual periods beginning on or after January 1, 2013) These amendments eliminate the corridor approach and calculate finance costs on a net funding basis.

-

IFRIC 20 - ‘Stripping Costs in the Production Phase of a Surface Mine’ applies to all types of natural resources that are extracted using a surface mine activity process, and addresses the issues pertaining to the recognition of production stripping cost as an asset, initial measurement of stripping activity at cost and subsequent measurement of stripping activity asset at depreciated or amortised cost based on a systematic basis over the expected useful life of the identified component of ore body.

The above mentioned amendments to published standards and new interpretation to existing standard are either not relevant to the Company’s operations or are not expected to have significant impact on the Company’s financial statements other than increase in disclosure in certain cases.


2.1.5

Critical ing estimates and judgments The preparation of financial statements in conformity with approved ing standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affects the application of policies and the reported amount of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates underlying the assumptions are reviewed on an ongoing basis. Revisions to ing estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments and estimates made by the management that may have a significant risk of material adjustments to the financial statements in the subsequent years are as follows: i) ii) iii) iv)

Property, plant and equipment (note 2.3 and note 8.1); Intangible asset (note 2.4 and note 9) Provision for slow moving and obsolete stock-in-trade (note 2.6 and note 13); Estimates of receivables and payables in respect of staff retirement benefit schemes (note 2.14 and note 21); v) Provision for taxation (note 2.9, note 5 and note 27); and vi) Share based compensation (note 2.23 and 30). 2.2

Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (the “functional currency”). The financial statements are presented in Pakistani Rupees, which is also the Company’s functional currency.

2.3

Fixed assets Property, plant and equipment (a) Owned These assets are stated at cost less accumulated depreciation and impairment loss (if any) except freehold land, which is stated at cost. (b) Leased Leased asset comprises of leasehold land which is stated at cost less accumulated amortisation less accumulated impairment, if any. (c) Depreciation / amortisation

90

Depreciation is charged to income applying the straight line method whereby the cost less residual value of an asset is allocated over its estimated useful life at the rates given in note 8.1. Depreciation on assets is charged from the month of addition to the month of disposal. The Abbott Pakistan Annual Report 2011

91


assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end. Amortisation on leasehold land is charged to profit and loss equally over the period of the lease. (d) Gains or losses on disposal of fixed assets Gains or losses on disposal of fixed assets are taken to the profit and loss in the period in which they arise. (e) Subsequent costs Subsequent costs are included in the assets’ carrying amount and recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss as and when incurred. (f) Capital work-in-progress This is stated at cost less impairment loss, if any, and consists of expenditure incurred and advances made in the course of construction and installation. These are transferred to specific assets as and when the assets are available for use. 2.4

Intangible asset An intangible asset is recognised as an asset if it is probable that future economic benefits attributable to the asset will flow to the entity and the cost of such asset can be measured reliably. Intangible asset with finite life is measured initially at cost and subsequently stated at cost less accumulated amortisation and impairment losses, if any. This is amortised on a straight line basis over its estimated useful life of five years. The amortisation period for intangible assets with finite useful lives is reviewed at each year end and is changed to reflect the useful life expected at respective year end.

2.5

Stores and spares These are valued at cost determined on the weighted average basis. Cost in relation to items in transit comprises of invoice value and other charges incurred thereon up to the balance sheet date. Provision is made in the financial statements for obsolete and slow moving items based on estimates regarding their usability.

2.6

Stock-in-trade Stock of raw and packing materials, work-in-process and finished goods are valued at the lower of cost, calculated on first-in-first-out basis, and net realisable value. Cost in relation to work-in-process and finished goods represents direct cost of materials, direct wages and an appropriate portion of production overheads. Cost in relation to items in transit represents invoice value and other charges incurred thereon up to the balance sheet date.


Net realisable value signifies the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale. 2.7

Trade debts and other receivables Trade debts and other receivables are recognized initially at fair value and subsequently measured at amortised cost less provision for impairment. A provision for impairment of trade debts is estimated when there is objective evidence that the Company will not be able to collect all amount due according to the original of the receivables. The carrying amount of the asset is reduced through the use of an allowance , and the amount of the loss is recognized in the profit and loss within ‘other operating charges’. When a trade debt is uncollectible, it is written off against the allowance for trade debts. Subsequent recoveries of amounts previously written off are credited to ‘other operating income’ in the profit and loss .

2.8

Sample inventory Sample inventory is classified as prepayment in the balance sheet and is carried at cost. The cost of sample inventory is charged to income on issuance of samples to medical practitioners. Provision is made in the financial statements for obsolete and slow moving items based on estimates regarding their usability.

2.9

Taxation Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into tax credits and rebates available, if any, and taxes paid under the Final Tax Regime (FTR). The charge for current tax also includes adjustments for prior years or otherwise considered necessary for such years. Income tax paid at import stage under FTR is recognised as tax expense in the period in which related goods are sold as required by the ing Technical Release - 30 of the Institute of Chartered ants of Pakistan. Deferred Deferred tax is recognised using the balance sheet liability method, on all temporary differences between the carrying amount of assets and liabilities and their tax bases after adjusting for the impact of FTR. Deferred tax assets are recognised for all deductible temporary differences and carry forward of unused tax credits and losses, to the extent that it is probable the taxable profit will be available against which the deductible temporary differences and / or carry-forward of unused tax credits and losses can be utilised.

92

The carrying amount of deferred tax asset is reviewed at each balance sheet date and is recognised only to the extent that it is probable that future taxable profits will be available against which the asset may be utilised.


93


Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. 2.10

Cash and cash equivalents Cash and cash equivalents comprise of cash in hand, cheques and drafts in hand and in transit and balances with banks in savings, deposit, current s and short-term running finance, if any.

2.11

Trade and other payables Short-term liabilities for trade and other amounts payable are recognised initially at fair value plus directly attributable cost, if any, and subsequently carried at amortised cost.

2.12

Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the shareholders.

2.13

Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and the amount can be reliably estimated. Provisions are reviewed at each balance sheet date to reflect the current best estimate.

2.14

Staff retirement benefits The Company operates: -

A recognised provident fund (defined contribution plan) for all permanent employees who have completed six months’ service; and An approved funded pension scheme (defined benefit plan) for all its permanent employees who have completed one year’s service.

Contributions and annual provisions to cover the obligation under the funded pension scheme are made based on annual actuarial valuation. The actuarial valuation is carried out using the Projected Unit Credit Method. The actuarial gains and losses arising at each valuation date are recognised in other comprehensive income and presented in the statement of comprehensive income. Staff retirement benefits are payable to employees on completion of the prescribed qualifying period of service under the scheme. 2.15

Liability for employees’ compensated absences The Company s for the liability in respect of employees’ compensated absences in the year in which these are earned. Provisions to cover the obligations are made using the current salary levels of employees.


2.16

Foreign currency transactions Transactions denominated in foreign currencies are recorded in Pakistani Rupees at the foreign currency rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pakistani Rupees at the rates of exchange approximating those at the balance sheet date. Exchange differences are taken to the profit and loss currently.

2.17

Derivative financial instruments Derivative financial instruments held by the Company generally comprise of forward foreign exchange contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivative instruments are recognised immediately in the profit and loss .

2.18

Revenue recognition -

2.19

Sales are recorded on dispatch of goods to customers. Service income is recognised when the related services are rendered. Income on investments / deposits is accrued on a time proportionate basis, taking into the effective interest rates.

Impairment Non-financial assets The carrying amount of non-financial assets other than inventories are assessed at each reporting date to ascertain whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised, as an expense in the profit and loss , for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. Value in use is ascertained through discounting of the estimated future cash flows using a discount rate that reflects the current market assessments of the time value of money and the risk specific to the assets. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised.

2.20

Financial instruments

94

All financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised at the time when the Company loses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognised at the time when they are extinguished that is, when the obligation specified in the contract is discharged, cancelled or expires. Any gains or losses on derecognition of financial assets and financial liabilities are taken to the profit and loss currently.


2.21

95


Offsetting Financial assets and liabilities are offset and the net amount is reported in the financial statements only when the Company has a legally enforceable right to offset the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

2.22

Segment reporting Segment reporting is based on the operating (business) segments of the Company. An operating segment is an identifiable component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. An operating segment’s operating results are reviewed regularly by the Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax assets, liabilities and related income and expenditure. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment. The business segments are engaged in providing products or services which are subject to risks and rewards which differ from the risk and rewards of other segments. Segments reported are as follows: Pharmaceutical The Pharmaceutical segment is engaged in the manufacture, import and marketing of research based pharmaceutical products ed with the Ministry of Health and in providing toll manufacturing services. Nutritional The Nutritional segment is engaged in the manufacture, import and marketing of pediatric nutritional products and medical nutritional products. Others The Others segment represents the manufacture, import and marketing of diagnostic equipment, diabetes care, molecular devices, their testing kits and general healthcare products.

2.23

Share based compensation The cost of awarding shares to employees is reflected by recording a charge in the profit and loss equivalent to the fair value of shares on the grant date over the vesting period. Since awarded shares relate to Group Companies, a corresponding reserve is created to reflect the equity component.


December 31, December 31, 2011 2010 Number of shares 3.

AUTHORISED CAPITAL 200,000,000

4.


200,000,000

Ordinary shares of Rs. 10 each

2,000,000

2,000,000

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 5,832,196

5,832,196 Ordinary shares of Rs. 10 each issued as fully paid for cash

58,322

58,322

18,479,640

18,479,640 Ordinary shares of Rs. 10 each issued as fully paid for consideration other than cash

184,796

184,796

73,588,466

73,588,466 Ordinary shares of Rs. 10 each issued as fully paid bonus shares

735,885

735,885

97,900,302

97,900,302

979,003

979,003

As at December 31, 2011, Abbott Asia Investments Limited, UK held 76,259,454 shares. The ultimate holding company is Abbott International LLC., USA.

5.

DEFERRED TAXATION

96

Deferred tax liability arising due to accelerated tax depreciation allowance Deferred tax asset arising in respect of provisions


212,076

155,295

(46,857)

(40,113)

165,219

115,182

Note 6.


TRADE AND OTHER PAYABLES Creditors Accrued liabilities Advances from customers Material on loan Unclaimed dividends Bills payable Payable to related parties Sales tax payable Workers’ Profit Participation Fund Central Research Fund Workers’ Welfare Fund Staff pension fund Others

6.1

97


6.1 6.2 6.3

21.1.1

120,402 662,690 147,827 1,586 6,522 280,652 37,970 28,082 127,542 27,069 70,420 531,817 11,348

112,490 576,516 120,438 8,640 250,494 34,938 23,328 3,526 20,672 48,302 552,580 10,776

2,053,927

1,762,700

57,837 21,040 166,639 15,858 6,531

52,747 26,474 111,318 22,924 22,992

267,905

236,455

Bills payable include the following amounts payable to related parties: Other related parties Abbott Pharmaceuticals, Inc. Puerto Rico Abbott Gmbh Diagnostic Abbott Logistics B.V. Abbott Labs PTE Ltd., Singapore Abbott International LLC., USA


December 31, 2011 Note 6.2

December 31, 2010

(Rupees ‘000)

Payable to related parties represents the following amounts payable to: Other related parties Abbott Australasia Pty Limited Abbott Mexico Abbott International LLC., USA Abbott Mearo Abbott Labs PTE Ltd., Singapore Abbott China Abbott Pharmaceuticals, Inc. Puerto Rico Abbott Laboratories S.A. Abbott Laboratories Philippines Abbott

6.3

210 26,946 270 388 8,895 1,064 196 1 37,970

661 1,873 30,419 1,618 367 34,938

3,526 127,542 131,068 3,526

62,615 93,526 156,141 152,615

127,542

3,526

Workers’ Profit Participation Fund Balance at the beginning of the year / period Allocation for the year / period Less: Amount paid to the fund

7.

CONTINGENCIES AND COMMITMENTS

7.1

Contingencies

25

The Company has given bank guarantees of Rs. 96.064 million (2010: Rs. 71.647 million) to the Customs Department, a utility company and other institutions against tenders. 7.2

The returns of total income for four tax years were selected for audit by the tax authority. The Taxation Officer disallowed certain expenses claimed by the Company against which the Company filed appeals before the Commissioner Inland Revenue (Appeals) [CIR(A)]. The CIR(A) allowed certain expenses, however, maintained majority of the disallowances resulting in tax demand Rs. 239.695 million. The Company has now filed the appeals before the Appellate Tribunal Inland Revenue (ATIR) which are pending adjudication.

98

The Company has filed a reference application before the High Court of Sindh for assessment years 1997-98, 1999-00 to 2002-03 in respect of certain disallowances which is pending for adjudication.


99


Management is of the view that the disallowances are unjustified and, therefore confident that, the eventual outcome of the matter will be in favour of the Company. 7.3

Commitments

7.3.1

Commitments for capital expenditure aggregated approximately Rs. 23.501 million (2010: Rs. 130.028 million).

7.3.2

The Company has obtained short-term financing facilities from various commercial banks amounting to Rs. 1,349 million (2010: Rs. 980 million). These facilities can be utilized for letters of credit, guarantees and running finance / short-term loans. However, the running finance / short-term loan utilization cannot exceed Rs. 310 million (2010: Rs. 335 million). The running finance / short-term loan carries markup at rates ranging from KIBOR plus 1% to KIBOR plus 2% (2010: KIBOR plus 1% to KIBOR plus 2%) and are secured against first t pari u hypothecation charge over stocks and book debts of the Company, ranking hypothecation charge over stocks and book debts of the Company, promissory notes, and counter guarantees. The Company has not borrowed any amount against running finance / short-term loan facilities at the balance sheet date. Commitments in respect of letters of credit as at balance sheet date aggregated to Rs. 234.371 million (2010: Rs. 317.535 million). December 31, 2011 Note

8.

December 31, 2010

(Rupees ‘000)

FIXED ASSETS Property, plant and equipment Operating fixed assets Capital work-in-progress

8.1 8.5

1,877,749 420,313

1,484,642 392,954

2,298,062

1,877,596


8.1 Operating fixed assets The following is a statement of operating fixed assets: Freehold Leasehold land land

DemonstraBuildings on Buildings on Plant and Off ice tion Vehicles Computers freehold leasehold machinery equipment equipmentsland land note 8.2

Total

(Rupees ‘000) At November 30, 2009 Cost Accumulated depreciation / amortisation

20,679

2,718

324,617

66,683 2,011,294

221,411

52,495

175,008

455,347

3,330,252

-

716

163,294

59,563 1,074,386

75,966

39,702

150,437

263,289

1,827,353

Net book value

20,679

2,002

161,323

7,120

936,908

145,445

12,793

24,571

192,058

1,502,899

20,679 -

2,002 -

161,323 -

7,120 -

936,908 68,769

145,445 85,893

12,793 14,029

24,571 6,295

192,058 84,785

1,502,899 259,771

-

-

-

-

19,743 19,071 672

57,734 39,095 18,639

133 133 -

-

43,229 40,614 2,615

120,839 98,913 21,926

-

31

9,495

1,946

125,683

38,471

4,411

10,230

65,835

256,102

20,679

1,971

151,828

5,174

879,322

174,228

22,411

20,636

208,393

1,484,642

Cost Accumulated depreciation / amortisation

20,679

2,718

324,617

66,683 2,060,320

249,570

66,391

181,303

496,903

3,469,184

-

747

172,789

61,509 1,180,998

75,342

43,980

160,667

288,510

1,984,542

Net book value

20,679

1,971

151,828

5,174

879,322

174,228

22,411

20,636

208,393

1,484,642

20,679 -

1,971 -

151,828 -

5,174 -

879,322 372,518

174,228 83,590

22,411 32,368

20,636 18,401

208,393 180,539

1,484,642 687,416

-

-

-

-

87,682 82,888 4,794

46,869 27,336 19,533

1,934 1,934 -

12,601 12,474 127

19,766 19,766 -

168,852 144,398 24,454

-

29

7,392

1,279

120,709

38,394

10,153

11,458

80,441

269,855

20,679

1,942

144,436

3,895 1,126,337

199,891

44,626

27,452

308,491

1,877,749

Cost Accumulated depreciation / amortisation

20,679

2,718

324,617

66,683 2,345,156

286,291

96,825

187,103

657,676

3,987,748

-

776

180,181

62,788 1,218,819

86,400

52,199

159,651

349,185

2,109,999

Net book value

20,679

1,942

144,436

3,895 1,126,337

199,891

44,626

27,452

308,491

1,877,749

1.06 1.06

2-10 2-10

20-25 20-25

10-33 10-33

20-33 20-33

12.5-33 12.5-33

Thirteen months ended December 31, 2010 Opening net book value Additions / transfers Disposals / write offs Cost Depreciation Depreciation / amortisation charge for the period Closing net book value At December 31, 2010

Year ended December 31, 2011 Opening net book value Additions / transfers Disposals / write offs Cost Depreciation Depreciation / amortisation charge for the year Closing net book value At December 31, 2011

Annual rate of depreciation / amortisation 2010 2011

-

5-10 5-10

5-20 5-20

100

8.2 Demonstration equipments of the Company are in the possession of various hospitals and clinics.


101



Note 8.3

The depreciation charge for the year / period has been allocated as follows: Cost of goods sold and services Selling and distribution expenses istrative expenses

8.4

20 22 23

131,970 118,497 19,388 269,855

138,900 102,126 15,076 256,102

Details of disposals of operating fixed assets having book value exceeding Rs. 50,000: Description

Vehicles

Plant and machinery

Computers

Cost

Accumulated Book value depreciation (Rupees ‘000)

Sale proceeds

Mode of disposal

Negotiation Negotiation Negotiation Negotiation Negotiation Insurance Claim Negotiation Negotiation Negotiation Negotiation Negotiation Open Market Auction Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Insurance Claim Negotiation Negotiation Insurance Claim Negotiation Negotiation Negotiation

Particulars of purchaser

896 1,279 1,279 1,775 1,012 1,329 1,506 969 4,679 967 966 1,039 1,849 969 969 901 879 879 969 879 969 879 922 969 966 969 936 969 879 980 986 879 1,456 879 1,002 1,482 969 936 2,852

716 830 796 621 684 316 1,038 629 1,770 743 725 831 347 654 646 589 586 563 646 586 633 598 635 707 751 707 674 672 621 640 644 621 164 633 771 204 719 724 1,902

180 449 483 1,154 328 1,013 468 340 2,909 224 241 208 1,502 315 323 312 293 316 323 293 336 281 287 262 215 262 262 297 258 340 342 258 1,292 246 231 1,278 250 212 950

358 512 512 1,243 405 1,200 602 388 3,275 387 386 716 1,572 388 388 360 352 352 388 352 388 352 369 388 386 388 374 388 352 392 394 352 1,456 352 401 1,482 388 374 1,141

Habib Ahmed Malik Saadatullah Amir Baig Ather Noman Khan Siraj Lawai EFU Seema Khan Tariq Khalidi Sadi Syed Sheikh Adnan Latif Asmatullah Islam Sarwar Dr. Arshad Ejaz Ahmed Shah M Saleem Tahir Rasheed Iftikhar Dhariwal Abdul Rehman Atif Siddiqui Tariq M Khan Dr. Waheed Jummani Kifayatullah Maria Memon Sirbiland khan Zafarullah khan Najeebuddin Khan Muhammad Sehran Mian Tahir Mehmood Rizwan Hafeez Dr. Raeef Ahmed Muhammad Raza Jaffri Ashsan Nadeem EFU Naeemuddin Dr. Pir M Shah EFU Masood Akhter Usman Qureshi Asif Jooma

3,733 30,481 30,186

3,362 28,322 27,947

371 2,159 2,239

-

-

Write-off Write-off Write-off

118

15

103

-

-

Write-off

Employee Employee Employee Ex-Employee Employee EFU house, M.A. Jinnah Road, Karachi Employee Employee Ex-Employee Employee Employee House No. 78, Block 6, PECHS, Karachi Ex-Employee Employee Employee Employee Employee Employee Employee Employee Ex-Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Ex-Employee Employee EFU house, M.A. Jinnah Road, Karachi Employee Employee EFU house, M.A. Jinnah Road, Karachi Employee Employee Chief Executive


8.5

Capital work-in-progress

At December 1, 2009 Additions Transferred to operating fixed assets At December 31, 2010 Additions Transferred to operating fixed assets At December 31, 2011 9.

Plant and machinery

Vehicles

134,796 247,025 (68,769) 313,052 431,103 (372,518) 371,637

Others

Total

(Rupees ‘000) 18,444 6,646 78,357 83,113 (85,893) (20,765) 10,908 68,994 93,824 189,848 (83,590) (231,308) 21,142 27,534

159,886 408,495 (175,427) 392,954 714,775 (687,416) 420,313

INTANGIBLE ASSET Intangible assets include rights acquired from Highnoon Laboratories Limited against transfer of technical, marketing and sales know-how and assignment of other necessary rights and requisites for marketing and selling ex-Solvay products in Pakistan, following a global acquisition of Solvay Pharmaceuticals by Abbott International, the ultimate holding company. December 31, 2011 Note

(Rupees ‘000)

Cost Opening balance Additions Balance as at December 31,

86,100 86,100

-

Accumulated amortisation Opening balance Amortisation charge Balance as at December 31,

10,045 10,045

-

86,100 (10,045) 76,055 Years 5

-

Net book value Cost Accumulated amortisation Balance as at December 31, Useful life

102

December 31, 2010


22

-

December 31, 2011 10.

Note LONG-TERM LOANS AND ADVANCES - considered good

103


December 31, 2010

(Rupees ‘000)

Long-term loans Due from: - Executives - Employees

10.1

Less: recoverable within one year - Executives - Employees 15 Long-term advances - Employees

10.1

Reconciliation of carrying amount of long-term loans to executives: Opening balance Disbursements Transfer of balances of employee cadre to executive cadre Less: Repayments Closing balance

4,837 61,561 66,398

1,944 56,648 58,592

1,948 24,448 26,396 40,002

840 21,262 22,102 36,490

2,674 42,676

2,713 39,203

1,944 2,370 3,122 2,599 4,837

1,122 854 1,712 1,744 1,944

10.2

Loans given to executives and employees are in accordance with the Company policy. These loans are interest free and are repayable in equal monthly installments within a maximum period of four years. These loans are for the purpose of purchase of refrigerators, scooters, vehicles and television sets. The loans for purchase of vehicles are secured by way of registration of vehicles purchased in the name of the Company.

10.3

The maximum aggregate amount of loans and advances due from the chief executive and executives at the end of any month during the year were Rs. NIL (2010: Rs. 0.450 million) and Rs. 5.728 million (2010: Rs. 3.057 million) respectively.

11.

LONG-TERM DEPOSITS Deposits Provision for doubtful deposits

11.1

5,214 (1,118)

3,919 (1,118)

4,096

2,801



1,118 1,118

1,118 1,118

48,850

48,048

59,787 108,637 31,750 76,887

53,958 102,006 29,576 72,430

29,576 2,174 31,750

27,266 2,310 29,576

1,362,504

1,218,864

20

191,222

95,785

20

893,671

862,932

13.3

2,447,397 130,835 2,316,562

2,177,581 107,948 2,069,633

25

STORES AND SPARES Stores Spares [including spares-in-transit Rs. 2.691 million (2010: Rs. 2.264 million)] Less: Provision for slow moving and obsolete items

12.1

12.1

Reconciliation of provision for slow moving and obsolete items Opening provision Charge for the year / period Closing provision

13.

(Rupees ‘000)

Reconciliation of provision for doubtful deposits Opening provision Charge for the year / period Closing provision

12.

December 31, 2010

STOCK-IN-TRADE Raw and packing materials [including stock-in-transit Rs. 130.673 million (2010: Rs. 91.513 million)] Work-in-process Finished goods [including stock-in-transit Rs. 122.281 million (2010: Rs. 82.343 million)] Less: Provision for slow moving and obsolete items

Write down of inventories recognised as an expense in the current year amounts to Rs. 10.000 million (2010: Rs. 14.886 million).

13.2

Stock-in-trade includes finished goods costing Rs. 56.507 million (2010: Rs. 27.664 million) valued at net realisable value amounting to Rs. 52.627 million (2010: Rs. 22.016 million).

104

13.1



14.

96,923 101,702 (90,677)

Closing provision

130,835

107,948

3,840 36,430 40,270 371,543 411,813

7,746 30,070 37,816 225,451 263,267

13,525 425,338 13,525 411,813

14,393 277,660 14,393 263,267

3,840

7,746

14,393 59 (927) 13,525

15,742 (1,349) 14,393

26,396

22,102

1,708 374 2,082 145,430 147,512 173,908

2,697 454 3,151 105,615 108,766 130,868

TRADE DEBTS

14.1

Considered doubtful: Unsecured Less: Provision for doubtful debts

15.

(Rupees ‘000) 107,948 39,874 (16,987)

Unsecured

14.2

December 31, 2010

Reconciliation of provision for slow moving and obsolete items Opening provision Charge for the year / period Write offs during the year / period

Considered good: Secured - Due from other related party - Others

14.1

105


14.2

Due from other related party Abbott Logistics B.V. Reconciliation of provision for doubtful debts Opening provision Charge / (reversal) for the year / period Write offs during the year / period Closing provision LOANS AND ADVANCES - considered good Current portion of long-term loans Advances to: - Executives - Employees - Suppliers

10


15.1

The maximum aggregate amount of advances due from the chief executive, directors and executives at the end of any month during the year were Rs. 2.192 million, Rs. 0.191 million and Rs. 8.740 million (2010: Rs. 1.103 million, Rs. 0.179 million and Rs. 2.697 million) respectively. December 31, 2011 Note

16.

December 31, 2010

(Rupees ‘000)

TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS Considered good Trade deposits Prepayments [including sample inventory Rs. 46.343 million (2010: Rs. 34.972 million)]

36,787

38,211

114,451

95,959

151,238

134,170

2,161 153,399 2,161 151,238

2,161 136,331 2,161 134,170

2,161 2,161

2,161 2,161

20,149 14,479 3,955 163 14,392 53,138 2,057 55,195 2,057 53,138

41,687 12,402 3,720 163 21,743 79,715 1,876 81,591 1,876 79,715

Considered doubtful Trade deposits Less: Provision for doubtful trade deposits 16.1

16.1

Reconciliation of provision for doubtful trade deposits Opening provision Charge for the year / period Closing provision

17.

OTHER RECEIVABLES Considered good Due from related parties Material on loan Insurance claim receivable Service fee for toll manufacturing Others

17.1

Considered doubtful

106

Less: Provision for doubtful other receivables


17.2


(Rupees ‘000)

3,158 10,719 4,134 852 992 113 181 20,149

30,327 1,550 259 4,686 1,071 742 273 2,779 41,687

1,876 181 2,057

1,716 160 1,876

18.1

195,839 116,935 312,774

123,890 75,428 199,318

18.2

1,100,000

600,000

11,140 1,423,914

2,089 801,407

1,712 1,466 26,235 1,453,327

1,502 2,415 13,763 819,087

Reconciliation of provision for doubtful other receivables Opening provision Charge for the year / period Closing provision

18.

December 31, 2010

Due from related parties Abbott International, USA Abbott Labs PTE Ltd., Singapore Abbott International LLC., USA Abbott Laboratories Japan Abbott Laboratories Maero Abbott Laboratories Philippines Abbott Laboratories Indonesia Abbott Laboratories Egypt Abbott ALSA Abbott Laboratories Mexico Abbott Laboratories Malaysia

17.2

107


25

CASH AND BANK BALANCES With banks Savings s: - Local currency - Foreign currency Deposit s - Local currency Current s: - Local currency In hand - Foreign currency - Local currency Cheques and drafts in hand and in transit


18.1

These savings s carry markup rate at the rate of 5% (2010: 5%).

18.2

These deposit s carry markup rates ranging from 10.80% to 11.50% (2010: 10.45% to 11.95%). Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 Note

19.

(Rupees ‘000)

SALES – NET Local Export - to related parties Export - to others

32

12,674,777

10,728,882

56,959 598,650 655,609 13,330,386

54,130 571,384 625,514 11,354,396

77,273 306,145 383,418 12,946,968

125,619 233,076 358,695 10,995,701

Less:

108

Sales returns and discounts Sales tax and excise duty


109


Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 Note 20.

(Rupees ‘000)

COST OF GOODS SOLD AND SERVICES Opening work-in-process Raw and packing materials consumed

95,785 5,021,580 5,117,365

192,913 4,136,863 4,329,776

872,303 94,562 186,725 131,970 105,261 99,686 7,392 4,408 6,501 2,105 21,117 24,015 10,496 100,008 1,666,549 6,783,914 (191,222)

818,391 61,147 184,272 138,900 66,393 89,237 6,389 3,449 5,399 2,572 24,264 17,901 10,368 85,950 1,514,632 5,844,408 (95,785)

6,592,692

5,748,623

862,932 1,718,537 9,174,161 (893,671) 8,280,490

701,419 1,721,553 8,171,595 (862,932) 7,308,663

Manufacturing expenses: Salaries, wages, allowances and staff welfare Stores and spares consumed Fuel and power Depreciation Repairs and maintenance Technical service fee Insurance Printing and stationery Travelling and entertainment Rent, rates and taxes Laboratory testing supplies Computer expenses Postage, telephone and telegram Others

Closing work-in-process

20.1

8.3 32

20.2

13

Cost of goods manufactured and services Finished goods Opening stock Purchases Closing stock

13


20.1

Salaries, wages, allowances and staff welfare include a net charge of Rs. 119.889 million - note 21.3 (2010: net charge of Rs. 101.051 million) in respect of staff retirement benefits. Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 Note

20.2

(Rupees ‘000)

Details of other expenses Other fees and purchased services Recruitment and training expenses hip and subscription Conference expenses Miscellaneous expenses

21.

STAFF RETIREMENT BENEFITS

21.1

Defined benefit scheme

41,341 1,554 320 23 56,770

33,138 1,707 410 51 50,644

100,008

85,950

As mentioned in note 2.14, the Company operates a funded pension scheme for all its permanent employees. Contributions are made to the scheme based on actuarial recommendations. The actuarial valuation was carried out as at December 31, 2011 using the Projected Unit Credit Method. December 31, 2011 Note 21.1.1

2,297,069 1,765,252

2,088,619 1,536,039

531,817

552,580

Obligation at beginning of the year / period Current service cost Interest cost Benefits paid Actuarial (gain) / loss

2,088,619 106,604 289,584 (116,791) (70,947)

1,741,442 101,932 236,715 (65,509) 74,039

Obligation at end of the year / period

2,297,069

2,088,619

Deficit

110

(Rupees ‘000)

Amounts recognised in the balance sheet: Present value of the defined benefit obligation Less: Fair value of the plan assets

21.1.2

December 31, 2010

21.1.2 21.1.3 6

Movement in the present value of the defined benefit obligation:


Note 21.1.3

32

Fair value at end of the year / period

1,536,039 193,131 97,596 (116,791) 55,277

1,316,127 175,902 85,906 (65,509) 23,613

1,765,252

1,536,039

552,580 203,057 (126,224) (97,596) 531,817

425,315 162,745 50,426 (85,906) 552,580

637,750 362,468 188,153 576,881 1,765,252

492,128 371,591 241,068 431,252 1,536,039

Movement in liability: Staff Pension Fund at beginning of the year / period Charge for the year / period 21.1.6 Actuarial (gain) / loss recognised in other comprehensive income 21.1.7 Company contributions Staff Pension Fund at end of the year / period

21.1.5


Movement in the fair value of plan assets: Fair value at beginning of the year / period Expected return on plan assets Company contributions Benefits paid Actuarial gain

21.1.4

111


Plan assets are comprised as follows: Debt Equity Mixed funds Bank balances

Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 Note 21.1.6

(Rupees ‘000)

Amount recognised in profit and loss: Current service cost Interest cost Expected return on plan assets 21.3

106,604 289,584 (193,131) 203,057

101,932 236,715 (175,902) 162,745


Note 21.1.7

21.1.8


Amount recognised in other comprehensive income: Actuarial (gains) / losses

(126,224)

50,426

Actual return on plan assets

248,408

199,515

(Percent per annum) 21.1.9

Principal actuarial assumptions used were as follows: Discount rate Expected return on plan assets Future salary increases Future pension increases

13.00 13.00 10.75 4.75

14.00 14.00 11.83 5.56

21.1.10 Pension plan assets include the Company’s ordinary shares with a fair value of Rs. 43.700 million (2010: Rs. 48.100 million). 21.1.11 The expected return on plan assets was taken as 13%, which is representative of yields on long-term Government Bonds and term deposits with banks. 21.1.12 Expected contributions to the plan for the year ending December 31, 2012 is Rs. 195 million. December 31, December 31,November 30, November 30, 2011 2010 2009 2008 (Rupees ‘000) 21.1.13 Five year data on the deficit / (surplus) of the plan is as follows: Present value of defined benefit obligation

2,297,069

2,088,619

1,741,442

1,505,257

1,259,971

Fair value of plan assets

1,765,252

1,536,039

1,316,127

931,597

1,427,285

531,817

552,580

425,315

573,660

(167,314)

Deficit / (surplus)

112

November 30, 2007


December 31, December 31, November 30, November 30, 2011 2010 2009 2008 (Percentage) 21.1.14 Five year data on experience adjustments is as follows:

113


November 30, 2007

Experience adjustments on Plan liabilities-(gain)/loss

(3)

4

(1)

6

(2)

Experience adjustments on plan assets-gain/(loss)

3

2

20

(65)

12

The adjustments have been expressed as a percentage of the plan liabilities and plan assets at the balance sheet date. 21.2

Defined contribution scheme An amount of Rs. 46.172 million (2010: Rs. 42.852 million) has been charged during the period in respect of the contributory provident fund maintained by the Company.

Note 21.3


Staff retirement benefit cost recognised in the profit and loss Pension cost Less: Reimbursement from related party Provident fund contribution E.O.B.I.

Allocated as: Cost of goods sold and services Selling and distribution expenses istrative expenses

21.1.6 32 32

20.1 22.1 23.1

203,057 (3,931) 46,172 6,049

162,745 (1,335) 42,852 4,825

251,347

209,087

119,889 98,913 32,545

101,051 82,971 25,065

251,347

209,087



(Rupees ‘000)

SELLING AND DISTRIBUTION EXPENSES Salaries, wages, allowances and staff welfare Rent, rates and taxes Repairs and maintenance Royalty Insurance Depreciation Amortisation of intangible asset Legal, professional and other services Postage, telephone and telegram Printing and stationery Travelling, conveyance and entertainment Advertising, samples and sales promotion Forwarding expenses Electricity Computer expenses Training and development expenses Packing and miscellaneous supplies Distributors commission Others Less: Reimbursement from related party

22.1

8.3 9

22.2 32

614,163 30,591 16,440 19,510 7,614 118,497 10,045 20,094 15,903 8,930 219,056 486,474 187,877 11,436 20,533 15,920 18,848 85,113 45,579 1,952,623 58,233 1,894,390

593,577 24,180 17,691 19,639 4,930 102,126 19,698 17,139 9,413 215,731 350,353 143,360 10,822 16,113 14,733 14,905 36,628 43,124 1,654,162 53,061 1,601,101

22.1

Salaries, wages, allowances and staff welfare include a net charge of Rs. 98.913 million - note 21.3 (2010: net charge of Rs. 82.971 million) in respect of staff retirement benefits.

22.2

Details of other expenses

114

Other fees and purchased services Security expenses hip and subscription Air conditioning expenses Housekeeping expenses Water charges Purchased gas Miscellaneous expenses


19,321 7,062 127 8,410 2,925 213 339 7,182 45,579

18,341 6,354 530 8,047 2,517 272 524 6,539 43,124

115



(Rupees ‘000)

ISTRATIVE EXPENSES Salaries, wages, allowances and staff welfare Rent, rates and taxes Repairs and maintenance Insurance Depreciation Legal, professional and other services Postage, telephone and telegram Printing and stationery Travelling, conveyance and entertainment Electricity Computer expenses Training and development expenses Miscellaneous office supplies Others Less: Reimbursement from related party

23.1

8.3

23.2 32

190,347 10,433 6,720 1,983 19,388 6,981 6,356 1,800 16,690 5,124 15,525 1,491 1,731 19,150 303,719 7,896 295,823

149,126 7,065 5,354 1,493 15,076 8,066 6,360 2,285 17,431 6,987 12,596 1,148 2,519 40,896 276,402 8,487 267,915

23.1

Salaries, wages, allowances and staff welfare include a net charge of Rs. 32.545 million - note 21.3 (2010: net charge of Rs. 25.065 million) in respect of staff retirement benefits.

23.2

Details of other expenses Other fees and purchased services Security expenses hip and subscription Air conditioning expenses Housekeeping expenses Water charges Miscellaneous expenses

5,053 1,593 3,508 4,921 2,214 152 1,709

18,753 1,746 5,258 6,613 2,048 190 6,288

19,150

40,896



(Rupees ‘000)

OTHER OPERATING INCOME Gain on disposal of fixed assets Interest income Scrap sales

24.1

133,548 3,078

16,897 78,511 4,103

Provision for doubtful trade debts no longer required written back

24.2

-

787

5,840 142,466

8,781 109,079

Others

24.1

Interest income include an amount of Rs. 12.443 million (2010: Rs. 10.231 million) on of interest income earned from Abbott Labs PTE Ltd., Singapore, a related party at the rate of 15.6% (2010: 15.6%) of half of the written down value of assets deployed by the Company on their behalf in the Company’s diagnostic division in Pakistan.

24.2

The amount is net of claim of Rs. NIL (2010: Rs. 0.562 million) given to other related party against reversal of provision.

25.

OTHER OPERATING CHARGES Workers’ Profit Participation Fund Auditors’ remuneration Loss on disposal of fixed assets Donations Workers’ Welfare Fund Central Research Fund Provision for doubtful other receivables Provision for doubtful trade debts Provision for doubtful deposits Exchange loss

116

25.1

Auditors’ remuneration Statutory audit fee Special certifications Out of pocket expenses


6.3 25.1 25.2

17.2 14.2 11.1

127,542 2,183 207 1,409 48,466 23,988 181 59 36,654 240,689

93,526 1,582 3,752 35,747 17,589 160 1,118 28,840 182,314

1,350 750 83 2,183

1,350 150 82 1,582

117


Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 (Rupees ‘000) 25.2

26.

27.

Donations include following amount paid to a donee in which the Company’s Chief Executive has interest: Payee

Relationship

Overseas Investors Chamber of Commerce & Industries (OICCI)

Asif Jooma, Chief Executive of the Company is the member of OICCI Managing Committee

FINANCE COST Bank charges

-

3,216

3,530

653,597 26,606 680,203 50,037 730,240

535,904 32,854 568,758 (4,445) 564,313

2,374,826

1,741,257

35%

35%

831,189 26,606

609,440 32,854

9,621 (140,023)

14,532 (100,354)

2,847

7,841

730,240

564,313

TAXATION - net - Current year - Prior year Deferred

27.1

100

Relationship between tax expense and ing profit ing profit before taxation Tax rate Tax on ing profit Tax for prior years Tax effect of: - Expenses that are not deductible in determining taxable profit - Applying lower tax rates to certain income - Others (including the impact arising as a consequence of reversal of deferred tax liability and change in allocation ratio of revenue chargeable under FTR and Non-FTR)



(Rupees ‘000)

EARNINGS PER SHARE - BASIC / DILUTED 1,644,586


1,176,944

Number of shares Weighted average number of ordinary shares in issue during the year / period

97,900,302

97,900,302

(Rupees) 16.80

Earnings per share 28.1

There is no dilutive effect on the basic earnings per share of the Company.

29.

CASH GENERATED FROM OPERATIONS

12.02

(Rupees ‘000) Profit before taxation Adjustment for: Depreciation Amortisation on intangible asset Loss / (gain) on disposal of property, plant and equipment Interest income

8.3 9 24 & 25 24

Expense recognised in profit or loss in respect of equity-settled share-based compensation Pension retirement benefit Finance cost Working capital changes 29.1

1,741,257

269,855 10,045 207 (133,548)

256,102 (16,897) (78,511)

26,080

23,314

105,461 3,216 (93,007) 2,563,135

76,839 3,530 (493,611) 1,512,023

(4,457) (246,929) (148,546) (43,040) (17,068) 26,577 (433,463)

(3,333) (394,633) (29,082) (89,591) (43,536) 1,338 (558,837)

340,456 (93,007)

65,226 (493,611)

Working capital changes (Increase) / decrease in current assets net of provision Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and short-term prepayments Other receivables Increase in current liabilities Trade and other payables - net

118

26 29.1

2,374,826


30.

119


SHARE BASED COMPENSATION Share-based compensation plans As at December 31, 2011, the Company’s equity settled share-based compensation plan includes restricted stock units plan. Under the plan, the Company employees, eligible as per policy are awarded restricted stock units of Abbott International LLC., USA (the “Parent company”). The plan entitles eligible employees shares of the parent company which are vested equally over next three years, subject to certain vesting conditions. In accordance with IFRS 2 (Share-Based Payments), services received from employees as consideration for stock units are recognized as an expense in the profit and loss , with the corresponding entry recorded as equity. The expense corresponds to the fair value of the stock unit of the Abbott International LLC., USA and is charged against income on a straight-line basis over the vesting period of the plan. The fair value of restricted stock units plan is measured at the date of grant using the Black-Scholes option pricing model with the following assumptions:

Volatility Dividend yield Risk free interest rate

2010

2009

2008

22.00% 3.20% 2.90%

22.00% 3.00% 2.70%

24.00% 2.60% 3.00%

A summary of units outstanding is given below: December 31, 2011 Average exercise price per stock unit (USD) At January 1, Granted Exercised / cancelled At December 31,

48.18 46.67 45.72 49.05

December 31, 2010

Stock units

6,778 7,300 6,981 7,097

Average exercise price per stock unit Stock units (USD) 23.52 54.49 23.80 48.18

12,783 5,500 11,505 6,778

Stock units outstanding at the end of the year have the following expiry date and exercise prices: December 31, 2011 December 31, 2010 Exercise Price Exercise Price Year of vesting Stock units Stock units (USD) (USD) 2011 2012 2013 2014

4,294 2,611 192 7,097

50.09 47.53 46.59 49.05

4,378 2,061 339 6,778

44.74 54.44 54.49 48.18


31.

CAPACITY The capacity and production of the Company’s plants is indeterminable as these are multi-product plants involving varying processes of manufacture. The Company’s production was according to market demand.

32.

TRANSACTIONS WITH RELATED PARTIES The related parties of the Company comprises other related parties, employee retirement benefit plans, directors and key management personnel. Transactions with related parties essentially entail sale and purchase of goods and services and expenses charged between these companies. Transactions with related parties are as follows: Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 Note

(Rupees ‘000)

Other related parties Sale of goods Purchase of materials Technical service fee Reimbursements from a related party on of: Other operating income Selling and distribution expenses istrative expenses Pension Fund Interest income earned

19 20

22 23 21.3 24.1

56,959 2,154,880 99,686

54,130 2,297,507 89,237

58,233 7,896 3,931 12,443

562 53,061 8,487 1,335 10,231

97,596

85,906

46,172

42,852

114,444 14,835

109,129 14,369

Contributions paid in respect of staff retirement benefit plans Pension Fund Provident Fund

21.1.3 21.3

Key management personnel

120

Short-term employee benefits Post-employment benefits


121


32.1

Disposals of property, plant and equipment to key management personnel are disclosed in note 8.4.

32.2

Outstanding balances in respect of related party sales and purchases, reimbursements and staff retirement benefits are included in notes 6, 14, 17 and 21.

32.3

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. The Company considers all of their executive management team, including the chief executive and directors, to be key management personnel. Outstanding balances of loans and advances to key management personnel are disclosed in note 10 and note 15.

33.

REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amounts charged in the financial statements in respect of remuneration, including all benefits to the chief executive, directors and executives of the Company were as follows: Twelve months ended Thirteen months ended December 31, 2011 December 31, 2010 Chief Chief Executive Directors Executives Executive Directors Executives (Rupees ‘000)

Short-term employee benefits Managerial remuneration Leave age / encashment Medical expenses Rent / utility / maintenance / furnishing Retirement benefits Number of persons

27,069 1,391 34

27,042 1,415 264

297,605 18,824 12,288

24,314 1,030 101

23,864 2,694 339

230,178 16,195 13,527

-

197

615

-

165

716

28,494 3,782 32,276 1

28,918 3,681 32,599 *2

329,332 46,879 376,211 165

25,445 3,335 28,780 1

27,062 3,477 30,539 *2

260,616 36,614 297,230 115

*Includes 1 alternate Director

33.1

In addition, Rs. 26.080 million (2010: Rs. 23.314 million) has been charged in the profit and loss in respect of share-based payments to chief executive, directors and certain executives of the Company as mentioned in notes 2.23 and 30.

33.2

Managerial remuneration includes Rs. 62.150 million (2010: Rs. 50.188 million) charged in the profit and loss in respect of bonus to chief executive, directors and certain executives of the Company.

33.3

Directors and certain other executives are provided with free use of Company maintained cars, club hip and telephone facilities as per of employment.

33.4

The aggregate amount charged in these financial statements for fees to non-executive directors is Rs. 0.675 million (2010: Rs. 0.240 million).


34.

SEGMENT WISE OPERATING RESULTS Twelve months ended December 31, 2011 PharmaNutritional ceutical

Others

Thirteen months ended December 31, 2010 PharmaNutritional ceutical

Total

Others

Total

(Rupees ‘000) Sales Less: Sales returns and discounts

10,122,143

1,841,335

1,366,908 13,330,386

8,765,444

1,514,898

1,074,054 11,354,396

56,965

10,216

10,092

77,273

78,155

20,297

27,167

125,619

-

171,136

135,009

306,145

-

140,947

92,129

233,076

10,065,178

1,659,983

1,221,807 12,946,968

8,687,289

1,353,654

Cost of goods sold and services - note 34.3

6,505,903

1,002,736

771,851

8,280,490

5,823,315

866,528

618,820

7,308,663

Gross prof it

3,559,275

657,247

449,956

4,666,478

2,863,974

487,126

335,938

3,687,038

Selling and distribution expenses - note 34.4

1,419,212

238,453

236,725

1,894,390

1,175,626

219,563

205,912

1,601,101

255,550

27,320

12,953

295,823

235,871

22,890

9,154

267,915

1,674,762

265,773

249,678

2,190,213

1,411,497

242,453

215,066

1,869,016

1,884,513

391,474

200,278

2,476,265

1,452,477

244,673

120,872

1,818,022

Less: Sales tax and excise duty Sales - net

istrative expenses - note 34.5 Segment result

954,758 10,995,701

Unallocated corporate expenses / income Other operating income

142,466

109,079


240,689

182,314

2,378,042

1,744,787

Profit before finance cost and taxation Other Information Segment assets employed

4,585,342

236,799

528,876

3,818,535

226,638

402,855

4,448,028

2,054,312

1,342,393

Total assets

7,405,329

5,790,421

Segment liabilities

848,014

102,081

59,505

1,009,600

981,704

81,453

60,269

1,123,426

Unallocated corporate liabilities

1,209,546

754,456

Total liabilities

2,219,146

1,877,882

Capital expenditure during the year / period

544,318

3,562

166,895

Unallocated corporate capital expenditure Total capital expenditure Depreciation / amortisation Unallocated depreciation / amortisation Total depreciation / amortisation

122

5,351,017

Unallocated corporate assets


192,972

7,577

79,351

714,775

375,955

15,433

101,451

492,839

-

-

714,775

492,839

279,900

186,048

7,523

62,531

256,102

-

-

279,900

256,102

123


Twelve months Thirteen months ended ended December 31, December 31, 2011 2010 (Rupees ‘000) 34.1

Geographical information Sales to external customers, net of returns, discounts, sales tax and excise duty Pakistan Afghanistan Srilanka Netherland Bangladesh Egypt Syria

34.2

12,291,359 489,841 105,566 56,959 3,243 12,946,968

10,370,187 434,772 129,510 54,130 3,361 3,674 67 10,995,701

Segment assets consist primarily of property, plant and equipment, trade debts and stock-in-trade. Segment liabilities comprise of trade creditors and an apportionment of accrued expenses. Assets and liabilities which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and liabilities.


34.3

Segment wise cost of goods sold and services Twelve months ended December 31, 2011 Pharmaceutical

Nutritional

Others

Total

Thirteen months ended December 31, 2010 Pharmaceutical

Nutritional

Others

Total

(Rupees `000)

Opening work-in-process

92,153

135

3,497

95,785

186,174

4,105

2,634

192,913

4,768,795

46,206

206,579

5,021,580

3,932,644

20,595

183,624

4,136,863

4,860,948

46,341

210,076

5,117,365

4,118,818

24,700

186,258

4,329,776

828,187

17,506

26,610

872,303

778,723

19,056

20,612

818,391

89,784

1,896

2,882

94,562

58,184

1,422

1,541

61,147

Fuel and power

177,290

3,744

5,691

186,725

175,340

4,291

4,641

184,272

Depreciation

125,340

2,631

3,999

131,970

132,168

3,234

3,498

138,900

Repairs and maintenance

99,942

2,111

3,208

105,261

63,175

1,546

1,672

66,393

Technical service fee

97,687

1,999

-

99,686

87,159

2,078

-

89,237

Insurance

7,019

148

225

7,392

6,079

149

161

6,389

Printing and stationery

4,186

88

134

4,408

3,282

80

87

3,449

Travelling and entertainment

6,173

130

198

6,501

5,137

126

136

5,399

Raw and packing materials consumed Manufacturing expenses: Salaries, wages, allowances and staff welfare Stores and spares consumed

Rent, rates and taxes

1,999

42

64

2,105

2,447

60

65

2,572

Laboratory testing supplies

20,050

423

644

21,117

23,088

565

611

24,264

Computer expenses

22,801

482

732

24,015

17,033

417

451

17,901

Postage, telephone and telegram

9,966

210

320

10,496

9,866

241

261

10,368

91,917

2,005

6,086

100,008

80,621

1,480

3,849

85,950

1,582,341

33,415

50,793

1,666,549

1,442,302

34,745

37,585

1,514,632

6,443,289

79,756

260,869

6,783,914

5,561,120

59,445

223,843

5,844,408

(187,838)

(271)

(3,113)

(191,222)

(92,153)

(135)

(3,497)

(95,785)

Cost of goods manufactured and services 6,255,451

79,485

257,756

6,592,692

5,468,967

59,310

220,346

5,748,623

Others

Closing work-in-process

Finished goods Opening stock

497,904

197,854

167,174

862,932

340,082

244,658

116,679

701,419

Purchases

307,482

922,383

488,672

1,718,537

512,170

760,414

448,969

1,721,553

7,060,837

1,199,722

913,602

9,174,161

6,321,219

1,064,382

785,994

8,171,595

(554,934)

(196,986)

(141,751)

(893,671)

(497,904)

(197,854)

(167,174)

(862,932)

6,505,903

1,002,736

771,851

8,280,490

5,823,315

866,528

618,820

7,308,663

124

Closing stock


34.4

125


Segment wise selling and distribution expenses Twelve months ended December 31, 2011 Thirteen months ended December 31, 2010 PharmaPharmaNutritional Others Total Nutritional Others Total ceutical ceutical (Rupees `000) Salaries, wages, allowances and 467,578

71,812

74,773

614,163

464,146

69,098

60,333

593,577


staff welfare

25,169

2,964

2,458

30,591

20,139

2,007

2,034

24,180


13,155

1,371

1,914

16,440

14,365

1,096

2,230

17,691

Royalty

19,510

-

-

19,510

19,639

-

-

19,639

6,074

631

909

7,614

4,088

339

503

4,930

Depreciation

40,448

3,611

74,438

118,497

40,834

3,217

58,075

102,126

Amortisation of intangible asset

10,045

-

-

10,045

-

-

-

-

Legal, professional and other services

Insurance

18,103

1,653

338

20,094

18,821

758

119

19,698


9,366

1,173

5,364

15,903

11,357

2,097

3,685

17,139

Printing and stationery

7,168

867

895

8,930

8,186

918

309

9,413

169,136

22,682

27,238

219,056

160,089

26,694

28,948

215,731

302,283

87,816

96,375

486,474

187,670

69,120

93,563

350,353

156,935

28,302

2,640

187,877

107,355

32,158

3,847

143,360

Travelling, conveyance and entertainment Advertising, samples and sales promotion Forwarding expenses Electricity

10,053

737

646

11,436

9,902

658

262

10,822

Computer expenses

16,113

2,579

1,841

20,533

13,243

1,609

1,261

16,113

Training and development expenses

10,981

4,720

219

15,920

10,506

4,154

73

14,733

Packing and miscellaneous supplies

14,590

2,867

1,391

18,848

12,385

1,659

861

14,905

Distributor commission

85,113

-

-

85,113

36,628

-

-

36,628

Others

37,392

4,668

3,519

45,579

36,273

3,981

2,870

43,124

1,419,212

238,453

294,958

1,952,623

1,175,626

219,563

258,973

1,654,162

-

-

58,233

58,233

-

-

53,061

53,061

1,419,212

238,453

236,725

1,894,390

1,175,626

219,563

205,912

1,601,101

Less: Reimbursement from related party


34.5

Segment wise istrative expenses Twelve months ended December 31, 2011 Pharmaceutical

Nutritional

Others

Total

Thirteen months ended December 31, 2010 Pharmaceutical

Nutritional

Others

Total

(Rupees `000) Salaries, wages, allowances and staff welfare

166,053

17,471

6,823

190,347

130,079

13,101

5,946

149,126


9,573

860

-

10,433

5,376

779

910

7,065


5,509

374

837

6,720

4,681

197

476

5,354

Insurance

1,483

220

280

1,983

1,182

44

267

1,493

17,139

1,335

914

19,388

13,046

1,072

958

15,076

Legal, professional and other services

Depreciation

6,773

183

25

6,981

7,402

635

29

8,066


5,036

1,090

230

6,356

5,625

578

157

6,360

Printing and stationery Travelling, conveyance and entertainment Electricity

1,404

67

329

1,800

2,048

3

234

2,285

12,240

3,756

694

16,690

12,194

4,618

619

17,431

3,048

201

1,875

5,124

4,949

183

1,855

6,987

Computer expenses

10,854

147

4,524

15,525

9,158

407

3,031

12,596

609

757

125

1,491

1,006

77

65

1,148

1,446

74

211

1,731

1,960

483

76

2,519

14,383

785

3,982

19,150

37,165

713

3,018

40,896

255,550

27,320

20,849

303,719

235,871

22,890

17,641

276,402

-

-

7,896

7,896

-

-

8,487

8,487

255,550

27,320

12,953

295,823

235,871

22,890

9,154

267,915

Training and development expenses Miscellaneous office supplies Others

Less: Reimbursement from related party

35.

FINANCIAL RISK MANAGEMENT The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk). The Company’s overall risk management programme focuses on minimizing potential adverse effects on the Company’s financial performance. The overall risk management of the Company is carried out by the Company’s senior management team under policies approved by the Board of Directors. Such policies entail identifying, evaluating and addressing financial risks of the Company. The Company’s overall risk management procedures to minimize the potential adverse affects of financial market on the Company’s performance are as follows:

35.1

Credit risk

126

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss without taking into the fair value of any collateral.


127


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 ability to meet contractual obligations to be similarly affected by changes in economical, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry. Credit risk of the Company arises principally from the trade debts, loans and advances, trade deposits, other receivables and balances with banks. The carrying amount of financial assets represents the maximum credit exposure. To reduce the exposure to credit risk on trade debts, the Company has developed a formal approval process, whereby credit limits are applied to its customers. The management continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery. The credit risk on liquid funds such as balances with banks is limited because the counter parties are banks with reasonably high credit ratings. December 31, 2011

December 31, 2010

(Rupees ‘000) The maximum exposure to credit risk at the reporting date is as follows: Loans and advances to executive employees Deposits Trade debts Accrued profit Other receivables Balances with banks

71,154 40,883 411,813 1,425 38,659 1,423,914

64,456 41,012 263,267 705 67,313 801,407

1,987,848

1,238,160

The Company is not significantly exposed to concentrations of credit risk in respect of trade debts because the Company’s sales are primarily against advance payment / collection on delivery (COD) . Ageing of trade debts past due but not impaired is as follows: 61-90 days 91-180 days 181-360 days Over 360 days

32,171 47,109 35,116 26,509

10,789 18,221 27,619 18,188

The impaired trade debts and the basis of impairment are disclosed in notes 14 and 2.7 respectively.


The credit quality of balances with banks can be assessed with reference to external credit ratings as follows: Ratings Name of Bank

Deutsche Bank AG

Rating Agency

Short- Longterm term

Standard & A-1+ Poor’s (S&P)

Date of Rating


AA-

Jan 2011

1,615

14,832

MCB Bank Limited

PACRA

A1+

AA+

July 2011

638

33

Standard Chartered Bank (Pakistan) Limited

PACRA

A1+

AAA

June 2011

299,748

283,872

HSBC Bank Middle East Limited

Moody’s

P-1

A-1

April 2011

16

30

Bank of Tokyo-Mitsubishi UFJ Limited

S&P

A-1

A+

May 2011

700,112

500,002

Citibank N.A.

S&P

A-1

A+* March 2011

8,753

88

National Bank of Pakistan

JCR-VIS

A-1+

AAA

June 2011

2,275

1,987

Faysal Bank Limited

PACRA

A1+

AA

June 2011

67

563

Barclays Bank PLC

S&P

A-1+

AA -

Jan 2011

410,690

-

* Rating Outlook Negative 35.2

Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or encounters difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Company manages liquidity risk by maintaining sufficient cash / bank balance and the availability of funding through an adequate amount of committed credit facilities. As at December 31, 2011, the Companys financial liabilities of Rs. 1,119.584 million (2010: Rs. 993.854 million) are all current and due in next financial year.

35.3

Market risk

128

Market risk is the risk that the value of financial instrument may fluctuate as a result of changes


129


in market interest rates or the market price due to a change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The Company is not exposed to other price risk whereas the exposure to currency risk and interest rate risk is given below: 35.3.1 Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions entered into foreign currencies. December 31, December 31, 2011 2010 Rupees US Dollars Rupees US Dollars (‘000) The Company’s exposure to foreign currency risk at the reporting date was as follows: Cash and cash equivalents Due from related parties Bills payable to related parties Payable to related parties

118,647 23,989 (267,905) (37,970)

1,310 265 (2,957) (419)

76,930 49,433 (236,455) (34,938)

897 576 (2,756) (407)

(163,239)

(1,801)

(145,030)

(1,690)

Balance sheet date rate

Average rate Twelve Thirteen December 31, December 31, months ended months ended 2011 2010 December 31, December 31, 2011 2010 (Rupees)

The following significant exchange rates were applied during the year / period: US Dollars

90.6

85.8

86.45

85.2

A ten percent strengthening / weakening of the Pakistani Rupee against the US Dollar at the reporting date would increase / decrease post tax profit for the year / period by Rs.11.304 million (2010: Rs. 9.803 million). This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for the previous year.


35.3.2

Interest rate risk Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate exposure arises from savings and deposit s with banks. December 31, 2011

December 31, 2010

(Rupees ‘000) Fixed rate instruments 1,412,774

Financial assets

799,318

The Company has not designated any financial assets or liabilities as “at fair value through profit or loss”. Therefore, a change in interest rate at the reporting date would not affect profit and loss . 35.4

Fair value of financial assets and liabilities The carrying amounts of all financial assets and liabilities reflected in the financial statements approximate their fair values.

36.

CAPITAL RISK MANAGEMENT The Company’s objective when managing capital is to safeguard the Company’s ability to remain as a going concern and continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue new shares. The current capital structure of the Company is equity based with no financing through borrowings.

37.

NON - ADJUSTING EVENT AFTER THE BALANCE SHEET DATE In their meeting held on February 14, 2012, the Board of Directors of the Company have proposed a final cash dividend for the year ended December 31, 2011 of Rs. 4.0 per share (2010: cash dividend of Rs. 3.0 per share). This is in addition to interim cash dividend of Rs. 2.0 per share (2010: Rs. 2.0 per share). The total dividend declared during the year and dividend per share have been summarised below:

Cash dividend

130

Cash dividend per share


December 31, December 31, 2011 2010 (Rupees ‘000) 587,402 489,502 (Rupees) 6.00 5.00

131


In addition, the Board has proposed a transfer of Rs. 1,150.000 million from Unappropriated Profit to General Reserve (2010: Rs. 650.000 million). The financial statements for the year ended December 31, 2011 do not include the effect of the final cash dividend nor the effect of the proposed transfer between reserves which will be ed for in the financial statements for the year ending December 31, 2012. 38.

DATE OF AUTHORISATION These financial statements were authorised for issue on February 14, 2012 by the Board of Directors of the Company.

Chief Executive

Director

Pattern of Shareholding As at December 31, 2011

Size of Holding Rs. 10 Shares 1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 45,001 50,001 55,001 60,001 85,001 135,001 140,001 195,001 215,001 235,001 395,001 435,001 440,001 490,001 495,001 510,001 535,001 600,001 695,001 720,001 745,001 765,001 780,001 830,001 1,135,001 1,240,001 1,265,001 2,670,001 76,000,001

132

TOTAL


100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 90,000 140,000 145,000 200,000 220,000 240,000 400,000 440,000 445,000 495,000 500,000 515,000 540,000 605,000 700,000 725,000 750,000 770,000 785,000 835,000 1,140,000 1,245,000 1,270,000 2,675,000 76,300,000

Number of Shareholders

Total Shares

818 715 350 631 101 35 10 9 1 1 4 2 2 1 2 2 1 1 1 1 1 1 1 1 1 1 3 1 1 1 2 1 1 1 1 1 1 1 1 1 1

34,094 201,676 274,631 1,390,783 755,321 428,418 183,838 202,072 26,275 32,995 148,414 82,173 93,619 52,075 114,986 125,743 87,378 135,600 140,627 200,000 219,303 236,766 396,869 438,689 442,105 490,926 1,492,019 514,434 536,689 603,822 1,396,764 721,281 746,093 765,028 780,150 830,624 1,137,977 1,242,596 1,267,462 2,670,538 76,259,449

2,712

97,900,302

133


Categories of Shareholders As at December 31, 2011

No. of No. of Shares Shareholders

S.No

Shareholders Category

1 2 3 4

Associated Companies, Undertakings and Related Parties NIT and I Directors, CEO and Their Spouses Executives

3 3 7 -

77,189,064 2,671,518 37,243 -

78.84 2.73 0.04 -

5 6

Public Sector Companies and Corporations Banks, Development Finance Institutions, Non-Banking Finance Institutions, Insurance Companies, Modaraba and Mutual Funds Others Individuals

1

830,624

0.85

23

5,083,063

5.19

43 2,632

125,909 11,962,881

0.13 12.22

2,712

97,900,302

100.00

7 8

TOTAL

%

List of Associated Companies, Undertakings and Related Parties S.No Folio

Name

Holding

1 2

4502 03277-2083

M/S. ABBOTT ASIA INVESTMENTS LIMITED TRUSTEES OF ABBOTT LABORATORIES (PAKISTAN) LIMITED STAFF PENSION FUND

76,259,449 438,689

3

03277-7217

TRUSTEES OF ABBOTT LABORATORIES (PAKISTAN) LIMITED STAFF PENSION FUND

490,926

TOTAL

77,189,064

Name

Holding

NATIONAL BANK OF PAKISTAN (TRUSTEE DEPARTMENT) N. B. P. TRUSTEE DEPARTMENT NATIONAL BANK OF PAKISTAN-TRUSTEE DEPARTMENT NI(U)T FUND

100 880 2,670,538

TOTAL

2,671,518

List of NIT and I S.No Folio 1 2 3

2405 4171 02154-27


List of Directors S.No Folio 1 2 3 4 5 6 7

4113 4487 4579 4607 4663 03277-144 06122-5280

Name

Holding

MR. THOMAS C. FREYMAN MR. MUNIR AHMED SHAIKH MR. ASIF JOOMA SYED ANIS AHMED MR. ROLAND KAUT MR. KAMRAN Y. MIRZA MR. SHAMIM AHMAD KHAN

1 1 1 1 1 36,098 1,140

TOTAL

37,243

Public Sector Companies and Corporations S.No Folio 1

02683-23

Name

Holding

STATE LIFE INSURANCE CORP. OF PAKISTAN

830,624

TOTAL

830,624

Shareholders holding 10% or more voting interest S.No Folio

134

1

4502

Name

Holding

M/S. ABBOTT ASIA INVESTMENTS LIMITED

76,259,449

TOTAL

76,259,449


135



Banks, Development Finance Institutions, Non-Banking Finance Institutions, Insurance Companies, Modaraba and Mutual Funds S.No Folio 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

3031 3137 00083-36 00307-40281 02295-39 02394-29 03277-3711 03277-7520 03277-10526 03277-57588 03277-69871 03798-52 03889-28 03889-44 04127-28 06411-21 07088-39 10728-27 11320-25 11353-22 12278-21 12526-29 12534-28

Name

Holding

M/S. GOLDEN ARROW SELECTED STOCK UNITED INSURANCE CO. OF PAK. LTD. IDBP (I UNIT) INNOVATIVE INVESTMENT BANK LIMITED FAYSAL BANK LIMITED NIB BANK LIMITED ADAMJEE INSURANCE COMPANY LIMITED FIRST HABIB MODARABA HABIB INSURANCE CO. LIMITED ATLAS INSURANCE LIMITED ASIA CARE HEALTH & LIFE INSURANCE CO. LTD. THE BANK OF KHYBER NATIONAL BANK OF PAKISTAN NATIONAL BANK OF PAKISTAN MCB BANK LIMITED - TREASURY CDC - TRUSTEE AKD INDEX TRACKER FUND THE BANK OF PUNJAB, TREASURY DIVISION. CDC - TRUSTEE HBL - STOCK FUND B.R.R. GUARDIAN MODARABA NATIONAL INVESTMENT TRUST LIMITED MC FSL-TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND MCBFSL-TRUSTEE URSF-EQUITY SUB FUND MCBFSL-TRUSTEE UIRSF-EQUITY SUB FUND

48 2 3,205 1,000 498,153 721,281 1,242,596 1,000 200,000 10,361 4,500 56,986 236,766 1,267,462 135,600 6,015 498,346 42,117 52,075 64,050 25,000 8,250 8,250

TOTAL

5,083,063

Notice of Annual General Meeting NOTICE is hereby given that the 63rd Annual General Meeting of the Company will be held on Monday, 23rd April, 2012, at 10:30 a.m. in the Jasmine Hall of Beach Luxury Hotel, Moulvi Tamizuddin Khan Road, Karachi, to transact the following business: ORDINARY BUSINESS 1.

To receive, consider and adopt the Audited s together with the Directors and Auditors’ Reports thereon for the year ended December 31st, 2011.

2.

To approve a cash dividend.

3.

To appoint the Auditors of the Company up to the next Annual General Meeting and to authorise the Directors to fix their remuneration. By Order of the Board

Malik Saadatullah Company Secretary Karachi : dated this 14th day of February 2012 Notes: The Share Transfer books of the Company will remain closed from Saturday 14th April , 2012 to Saturday 21st April, 2012 (both days inclusive). Transfer received in order by our Shares Registrar, FAMCO Associates (Pvt) Limited, State Life Building No 1-A, 1st Floor, I.I. Chundrigar Road, Karachi-74000 at the close of business on Friday, 13th April, 2012 will be considered in time for entitlement of cash dividend.

2.

A member of the Company entitled to attend the vote at the meeting may appoint a proxy to attend, speak and vote instead of him/her. Proxies must be deposited at the Company’s ed office not less than 48 hours before the time of holding the meeting. A proxy need, not be a member of the Company. The proxy shall produce his/her original CNIC or port to prove his/her identity.

3.

Attested copies of CNIC or port of the Beneficial Owner of the shares of the Company in the Central Depository System of the Central Depository Company (CDC) and the proxy, entitled to attend and vote at the meeting, shall be furnished with the proxy form to the Company.

4.

The Beneficial owner of the shares of the Company in the Central Depository System of the CDC of his/ her proxy entitled to attend and vote at this meeting, shall produce his/her original CNIC or port to prove his/her identity.

5.

In case of corporate entity, the Board of Director’s resolution/power of attorney with specimen signature

136

1.


137


of the nominee shall be submitted with the proxy form to the Company, and the same shall be produced in original at the time of the meeting to authenticate the identity. 6.

Shareholders are requested to notify the Company of any change in their addresses, if any immediately.

7.

who have not yet submitted photocopy of their computerized national identity cards to the Company are requested to send the same at the earliest.

8.

Form of proxy is attached in the Annual Report.

9.

CDC Holders will further have to follow the under mentioned guidelines as laid down in Circular 1 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan.

A.

For Attending the Meeting:

(i)

In case of individuals, the holder or sub- holder and/or the person whose securities are in group and their registration details are ed as per the Regulations, shall authenticate his/ her identity by showing his/her original Computerized National Identity Card (CNIC) or original port at the time of attending the meeting.

(ii)

In case of corporate entity, the Board of Directors’ resolution/ power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the Meeting.

B.

For Appointing Proxies:

(i)

In case of individuals, the holder or sub- holder and/or the person whose securities are in group and their registration details are ed as per the Regulations, shall submit the proxy form as per the above requirement.

(ii)

The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.

(iii) Attested copies of CNIC or the port of the beneficial owners and of the Proxy shall be furnished with the proxy form. (iv) The Proxy shall produce his/her original CNIC or original port at the time of the Meeting. (v)

In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form to the Company.

Calendar of Financial Events

Tentative dates for announcement of financial results for the Financial Year 2012: 1st quarter ending March 31, 2012

3rd week of April, 2012

2nd quarter ending June 30, 2012

2nd week of August, 2012

3rd quarter ending September 30, 2012

3rd week of October, 2012

Year ending December 31, 2012

2nd week of February, 2013

138

Actual dates for announcement of financial results for the Financial year 2011 : 1st quarter ended March 31, 2011

April 23, 2011

2nd quarter ended June 30, 2011

August 16, 2011

3rd quarter ended September 30, 2011

October 19, 2011

Year ended December 31, 2011

February 14, 2012


Details Karachi City Office 8th Floor, Faysal House St-02, Shahrah-e-Faisal, Karachi.

ed Office Opp. Radio Pakistan Transmission Centre, Hyderabad Road, Landhi, P.O. Box 7229, Karachi.

Distribution Offices Multan Hassan Abad Gate # 2 Near Pak Arab Fertilizers Khanewal Road Multan, 60650. Tel: 061-4551818, 061-4556145 Fax: 061-4551817 Lahore 16-Km Shah Pur Kanjran Multan Road Lahore, 53700. Tel: 042-37512188, 042-37512199 Fax: 042-37511171 Islamabad Plot # 136 Street # 9, I-10/3 Industrial Area Islamabad, 44800. Tel: 051-4445020, 051-4447464, 051-4448278 Fax: 051-4449868 Website www.abbott.com.pk

139


ABBOTT LABORATORIES (PAKISTAN) LIMITED P.O. Box 7229, Karachi-74400

Proxy Form I/We of in the district of being a member of ABBOTT LABORATORIES (PAKISTAN) LIMITED and holder of Ordinary Shares as per Share Folio No. and/or CDC Participant I.D. No. appoint and Sub No. hereby appoint (Name) of or failing him (Name) of as my / our proxy to vote for me/us and on my/our behalf at the 63rd Annual General Meeting of the Company to be held on Monday, April 23rd, 2012 at 10:30 a.m. and at any adjournment thereof. As witnessed given under my/our hand(s) 1.

2.

Witness: Signature: Name: CNIC No. Address:

Witness: Signature: Name: CNIC No. Address:

day of

2012

Affix Revenue stamps of Rs. 5/-

Signature of Member Shareholder’s Folio No. CDC A/c No. CNIC No.

Note: 1.

Proxies in order to be effective, must be received by the Company Secretary, Abbott Laboratories (Pakistan) Limited P.O. Box 7229, Landhi, not later than 48 hours before the time for holding the meeting and must be duly stamped, signed and witnessed.

2.

Attested copies of CNIC or port of the Beneficial Owner of the shares of the Company in the Central Depository System of the Central Depository Company (CDC) and the proxy, entitled to attend and vote at this meeting, shall be furnished along with the proxy form to the Company.

3.

The Beneficial Owner of share of the Company in the Central Depository System of the Central Depository Company (CDC) of his/her proxy entitled to attend and vote at this meeting, shall produce his/her original CNIC or port to prove his/her identity.

4.

In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature of the nominees shall be submitted with the proxy form to the Company and the same shall be produced in original at the time of the meeting to authenticate the identity.

AFFIX CORRECT POSTAGE

ABBOTT LABORATORIES (PAKISTAN) LIMITED P.O. Box 7229, Landhi KARACHI-74400.

ABBOTT LABORATORIES (PAKISTAN) LIMITED P.O. Box 7229, Karachi-74400 Tel: (92-21) 111 Abbott (111-222-688) Fax: (92-21) 35001903 URL: www.abbott.com.pk

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