Shell Annual Report 08 C

Annual Report2OO8Shell Pakistan Limited32

Shell Pakistan Limited 12Annual Report2OO7

Highlights Financial Statistical Summary

Sales volume

Sales revenue

Profit before taxation

Profit after taxation

New capital expenditure

Shareholders’ equity

Dividend

Earnings per share - diluted

Tonnes

Rs / mn

Rs / mn

Rs / mn

Rs / mn

Rs / mn

Rs / mn

Rs

2,644,857

130,130

379

707

1,383

9,461

877

12.90

Year endedJune 30, 2008

Year endedJune 30, 2007

2,826,851

157,626

7,723

5,137

934

13,612

2,740

93.76

Share capital

Reserves

Shareholders’ equity

Break up value

Dividend per share

Bonus

Profit before tax

Profit after tax

Earnings per share of Rs.10

Price earnings ratio

Current assets to current liabilities

Number of days stock

Number of days trade debts

Profit after tax as %of average capital employed

Profit after tax as %of average shareholders’ equity

Cost of sales as % of sales

Profit before tax as % of sales

Profit after tax as % of sales

Total debt ratio %

Rs. / mn

Rs. / mn

Rs. / mn

Rs.

Rs.

Rs. / mn

Rs. / mn

Rs.

2008

Work ing Capital

Performance

2006

351

7,952

8,303

237

35.0

1 : 4

3,643

2,451

55.9

9.9

1.1

22

10

31.4

31.8

91.0

3.7

2.5

0.8

351

6,781

7,132

203

35.0

–

2,189

1,508

43.0

8.1

1.0

22

8

21.4

21.7

92.2

2.8

1.9

1.4

351

5,501

5,852

167

35.0

–

1,900

1,255

35.8

11.8

0.9

16

6

21.1

21.5

94.1

2.1

1.4

1.7

351

5,470

5,821

166

18.0

–

1,572

1,063

30.3

7.3

1.2

24

5

18.6

19.0

94.3

2.0

1.3

1.7

351

5,039

5,390

154

12.5

–

1,630

1,056

30.1

9.3

1.2

14

3

20.3

20.8

94.9

2.2

1.4

1.9

351

4,421

4,772

136

16.5

–

2,013

1,299

37.0

7.0

1.2

18

3

28.6

29.4

94.7

3.2

2.1

2.5

351

3,701

4,051

116

12.5

–

1,341

881

25.1

6.4

1.2

18

4

20.8

23.0

94.1

2.7

1.8

5.2

351

3,258

3,609

103

8.5

–

922

592

19.6

8.6

1.2

15

4

18.8

21.3

94.9

2.1

1.4

3.3

438

9,718

10,157

232

30.0

1 : 4

4,640

3,147

57.4

8.4

1.1

28

14

33.9

34.1

91.5

3.9

2.7

0.3

548

8,913

9,461

173

16.0

–

379

707

12.9

31.8

1.0

31

13

7.2

7.2

94.5

0.30

0.6

0.3

2005 2004 2003 2002 2001 2000 1999 1998


548

13,064

13,612

248

50.0

1: 4

7,723

5,137

93.76

8.5

1.3

39

11

38.9

44.53

90.7

4.90

3.26

0.40

2007


Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 35Annual Report2OO8

with the Code of Corporate Governance and Best Practices on Transfer Pricing

A. Statement of Compliance w ith the Code of Corporate Governance[As required by the Listing Regulations]

1. The term of office of the Board of Directors ended on June 12, 2008. At an Extraordinary General Meetingof the Company held on May 28, 2008, Mr. Zaiviji Ismail bin Abdullah, Mr. Yousuf Ali, Mr. Leon Menezes,Mr. Saw Choo Boon, Mr. Farrokh K. Captain and Mr. Asif Sindhu were re-elected while Ms. Trudy Bovay,Mr. Imran R. Ibrahim, Mr. Badaruddin Vellani, Ms. Shahnaz Wazir Ali and Mr. Zaffar Khan were electedDirectors of the Company with effect from June 13, 2008 for a term of three years.

The Company encourages representation of independent non-executive Directors and Directors representingminority interests on its Board of Directors. At present the Board includes five independent non-executiveDirectors, two of whom represent 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. To the best of our knowledge all the resident Directors of the Company are registered as taxpayers and noneof them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a memberof stock exchange, has been declared as a defaulter by that stock exchange.

4. All casual vacancies occurring in the Board were filled up by the Directors within 30 days thereof.

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

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

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

8. The meetings of the Board were presided over by the Chairman and the Board met at least once in everyquarter. Written notices of the Board meetings, along with agenda, were circulated at least seven days beforethe meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The present Board of Directors has assumed office with effect from June 13, 2008. A comprehensive coursedesigned to apprise the Directors of their duties and responsibilities will be conducted before the end of thecurrent calendar year. The re-elected Directors received appropriate computer-based training during theprevious year.

10. The Board has approved appointment of Head of Internal Audit, including her remuneration and terms andconditions of employment, as determined by the CEO. There was no change in the appointment of CFO andCompany Secretary during the year.

11. The Directors’ report for this year has been prepared in compliance with the requirements of the Code andit fully describes the salient matters required to be disclosed. Matters relating to the risks and uncertaintiessurrounding the Company and significant deviations, if any, in the financial statements from the prior yearhave been highlighted in the Chairman’s review.

12. The financial statements of the Company were duly endorsed by the CEO and the CFO before approval bythe Board.

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

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

15. The Board has formed an audit committee. It comprises four members, of whom three are non-executiveDirectors including the Chairman of the committee.

16. The meetings of the audit committee were held at least once every quarter prior to approval of interim andfinal results of the Company and as required by the Code. The terms of reference of the Committee havebeen formulated and advised to the Committee for compliance.

17. The Board has set-up an effective internal audit function.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating underthe quality control review programme of the Institute of Chartered Accountants of Pakistan, that they or anyof the partners of the firm, their spouses and minor children do not hold shares of the Company and thatthe firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelineson code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide other servicesexcept in accordance with the listing regulations and the auditors have confirmed that they have observedIFAC guidelines in this regard.

20. We confirm that all other material principles contained in the Code have been complied with.

B. Statement of Compliance with the Best Practices on Transfer Pricing[As required by the Listing Regulations]

The Company has fully complied with the Best Practices on Transfer Pricing as contained in the Listing Regulationsof the Stock Exchange.

Zaiviji Ismail bin AbdullahChairman & Chief ExecutiveKarachi: August 11, 2008

Statement of Compliance



to the Members on Statement of Compliance with Best Practices of theCode of Corporate Governance

Review Report

We have audited the annexed balance sheet of Shell Pak istan Limited as at June 30, 2008 and the relatedprofit and loss account, cash flow statement and statement of changes in equity together with the notes formingpart thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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, andprepare and present the above said statement in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above said statementsare free of any material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the above said statements. An audit also includes assessing the accounting policiesand significant estimates made by management, as well as, evaluating the overall presentation of the above saidstatements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, wereport that:

(a) in our opinion, proper books of accounts have been kept by the Company as required by the CompaniesOrdinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up inconformity with the Companies Ordinance, 1984, and are in agreement with the books of account andare further in accordance with accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the Company’s business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were in accordancewith 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 balancesheet, profit and loss account, cash flow statement and statement of changes in equity together with the notesforming part thereof conform with approved accounting standards as applicable in Pakistan, and, give theinformation required by the Companies Ordinance, 1984, in the manner so required and respectively givea true and fair view of the state of the Company’s affairs as at June 30, 2008 and of the profit, its cash flowsand changes in equity for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was deducted by theCompany and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.

A. F. Ferguson & Co.Chartered Accountants

Karachi: August 20, 2008

We have reviewed the Statement of Compliance with the best practices contained in the Code of CorporateGovernance prepared by the Board of Directors of Shell Pakistan Limited to comply with the Listing RegulationNo. 37 of the Karachi Stock Exchange and Chapter XIII of the Lahore Stock Exchange where the Companyis listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directorsof the Company. Our responsibility is to review, to the extent where such compliance can be objectivelyverified, whether the Statement of Compliance reflects the status of the Company's compliance with theprovisions of the Code of Corporate Governance and report if it does not. A review is limited primarily toinquiries of the Company personnel and review of various documents prepared by the Company to complywith the Code.

As part of our audit of the financial statements we are required to obtain an understanding of the accountingand internal control systems sufficient to plan the audit and develop an effective audit approach. We havenot carried out any special review of the internal control system to enable us to express an opinion as towhether the Board's statement on internal control covers all controls and the effectiveness of such internalcontrols.

Based on our review, nothing has come to our attention, which causes us to believe that the Statement ofCompliance does not appropriately reflect the Company's compliance, in all material respects, with the bestpractices contained in the Code of Corporate Governance as applicable to the Company for the year endedJune 30, 2008.

A. F. Ferguson & Co.Chartered Accountants

Karachi: August 20, 2008

Auditors’ Report to the Members



Note 2008

(Rupees `000)

2007

The annexed notes 1 to 45 form an integral part of these financial statements.

345678

91011121314

15

16

8171819

1720212223

24

25

26

27

2829

30

31

32

4.1

33

34

Appropriations have been reflected in the statement of changes in equity.

Note 2008

(Rupees `000)

2007

The annexed notes 1 to 45 form an integral part of these financial statements.

157,626,491

119,915 20,205

341,349

158,107,960 18,263,271

139,844,689 124,694,471

15,150,218 2,950,422 2,109,289

10,090,507 306,453

10,396,960 1,915,601

8,481,359 970,267

7,511,092 212,248

7,723,340 2,586,246

5,137,094

Rupees

93.76

130,129,844)

141,615) 17,909)

447,517)

130,736,885) 15,691,451)

115,045,434) 108,664,932)

6,380,502)3,366,555)1,716,707)

1,297,240) 215,322)

1,512,562) 377,978)

1,134,584) 878,098)

256,486) 122,250)

378,736) (327,923)

706,659)

Rupees

12.90

as at June 30, 2008

Balance Sheetfor the year ended June 30, 2008

Profit and Loss Account

SalesNon-fuel retail- Sales- Others

Other revenue

Less: Sales tax

Net revenueCost of products sold

Gross profitDistribution expensesAdministrative and marketing expenses

Other operating income

Other operating expenses

Operating profitFinance cost

Share of profit of associate - net of tax

Profit before taxationTaxation


Earnings per share

Zaiviji Ismail bin AbdullahChairman & Chief Executive

Farrokh K. CaptainDirector



ASSETS

Non-current assetsFixed assetsLong-term investmentsLong-term loans and advancesLong-term deposits and prepaymentsLong-term debtorsDeferred taxation - net

Current assetsStores and sparesStock-in-tradeTrade debtsLoans and advancesTrade deposits and short-term prepaymentsOther receivablesTaxationCash and bank balances

Total assets

EQUITY AND LIABILITIES

EQUITY

Share capitalReservesUnappropriated profit

LIABILITIES

Non-current liabilitiesDeferred taxation - netLiabilities against assets subject to finance leaseLong-term loanAsset retirement obligation

Current liabilitiesCurrent maturity of liabilities against assets subject to finance leaseShort-term running finances utilised under mark-up arrangementsShort-term loansTrade and other payablesMark-up accrued Taxation

Total Equity and Liabilities

Contingencies and commitments



for the year ended June 30, 2008

Cash Flow Statementfor the year ended June 30, 2008

Statement of Changes in Equity





Appropriations made by the Directors subsequent to the year ended June 30, 2008 are disclosed in note 43 of thesefinancial statements.

The annexed notes 1 to 45 form an integral part of these financial statements.The annexed notes 1 to 45 form an integral part of these financial statements.

Note 2008

(Rupees `000)

2007

(Rupees ‘000)

Issued,subscribed

and paid-upcapital

Reservefor issueof bonusshares

Capitalreserves-

sharepremium

Generalrevenuereserves

Unappro-priatedprofit

Total

Balance as at June 30, 2006

Final dividend for the year ended June 30, 2006declared subsequent to the year end

Transfer to reserve for issue of bonusshares in respect of stock dividendfor the year ended June 30, 2006declared subsequent to the year end

Issue of bonus shares

Interim dividend declared for the yearended June 30, 2007

Profit after taxation for the yearended June 30, 2007


Final dividend for the year ended June 30, 2007 declared subsequent to the year end

Interim dividend declared for the yearended June 30, 2008

Profit after taxation for the yearended June 30, 2008


438,323

–

–

109,581

–

–

547,904

–

–

–

547,904

–

–

109,581

(109,581)

–

–

–

–

–

–

–

2,026,024

–

–

–

–

–

2,026,024

–

–

–

2,026,024

207,002

–

–

–

–

–

207,002

–

–

–

207,002

7,485,397)

(964,311)

(109,581)

–

(438,323)

706,659)

6,679,841)

(438,323)

(547,904)

5,137,094)

10,830,708)

10,156,746)

(964,311)

–

–

(438,323)

706,659)

9,460,771)

(438,323)

(547,904)

5,137,094)

13,611,638)

CASH FLOW FROM OPERATING ACTIVITIES

Cash generated from operationsMark-up on short-term finances and short-term loans paidTaxes paidLong-term loans and advances (net)Long-term deposits and prepayments (net)Mark-up received on short-term depositsLong term debtors (net)

Net cash generated from operating activities

)CASH FLOW FROM INVESTING ACTIVITIES

Fixed capital expenditureProceeds from sale of property, plant and equipmentDividend received from associate

Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES

Dividends paid )Repayment of liability under finance leaseProceeds from long-term loan

Net cash generated from / (used in) financing activities

Net increase / (decrease) in cash and cash equivalentsCash and cash equivalents at July 1

Cash and cash equivalents at June 30

3,033,014) (848,056)

(1,261,536) 36,198)

(90,724) 21,162)

102,785)

992,843)

(933,830) 121,860) 93,000)

(718,970)

(986,257) (32,235)

2,500,000)

1,481,508)

1,755,381) (6,721,306)

(4,965,925)

2,259,708) (729,776)

(1,055,695) (42,939)

(549) 5,807)

(328,227)

108,329)

(1,383,390) 21,080) 28,600)

(1,333,710)

(1,387,277) (59,985)

–

(1,447,262)

(2,672,643) (4,048,663)

(6,721,306)

38

39



1. THE COMPANY AND ITS OPERATIONS

The Company is a limited liability Company incorporated in Pakistan and is listed on the Karachi and LahoreStock Exchanges. The address of its registered office is Shell House, 6, Ch. Khaliquzzaman Road,Karachi-75530, Pakistan.

The Company markets petroleum products and compressed natural gas. It also blends and markets variouskinds of lubricating oils.

1.1 The Company has investments in two non-trading subsidiaries, namely Shell Pakistan Provident Trust (Private)Limited and Shell Pakistan Pensions Trust (Private) Limited. The management has decided to liquidate thesubsidiary companies and the process of liquidation in this respect has already commenced. In view of theliquidation process, the Company applied to the Securities and Exchange Commission of Pakistan (SECP)requesting for exemption from preparation of the consolidated financial statements as required under Section237 of the Companies Ordinance, 1984. The exemption was granted by the SECP vide their letter No.EMD/233/411/2002-6489 dated June 17, 2008. The audited financial statements of the subsidiaries willbe annexed in the annual report of the Company.

1.2 The Board of Directors of the Company in its meeting held on February 12, 2008 has decided to changethe financial year of the Company from July - June to January - December to bring it in line with theaccounting year followed by Royal Dutch Shell Plc, the ultimate parent company. Permission for change inthe year end has been obtained from the Commissioner of Income Tax vide their letters CIT/E&C/LTU/2008/63and CIT/E&C/LTU/2008 dated July 10, 2008 and July 15, 2008 respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

2.1 Basis of preparation

a) Statement of compliance

These financial statements have been prepared in accordance with the approved accounting standards asapplicable in Pakistan. Approved accounting standards comprise of such International Financial ReportingStandards (IFRSs) issued by the International Accounting Standards Board as are notified under the CompaniesOrdinance, 1984, the requirements of the Companies Ordinance, 1984 and the directives issued by theSecurities and Exchange Commission of Pakistan (SECP). Where the requirements of the CompaniesOrdinance, 1984 and the directives issued by SECP differ with the requirements of IFRS, the requirementsof the Companies Ordinance, 1984 and the directives issued by SECP prevail.

b) Accounting convention

These financial statements have been prepared under the historical cost convention except that obligationsin respect of certain employee benefit schemes and asset retirement are measured at their present value.

c) Critical accounting estimates and judgements

The preparation of financial statements in conformity with International approved accounting standardsrequires the use of certain critical accounting estimates. It also requires management to exercise its judgementin the process of applying the Company's accounting policies. The areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates are significant to the financial statements,are disclosed in note 41 to these financial statements.

d) Standards, interpretations and amendments to published approved accounting standards thatare effective in 2008

The following standards, interpretations and amendments to existing standards have been published thatare mandatory and relevant for the companies accounting period beginning on July 1, 2007:

i. IAS 1 - Presentation of Financial Statements - Capital Disclosures effective from January 1, 2007

Adoption of IAS 1 - Presentation of Financial Statements - Capital Disclosures impacts the extent of disclosurespresented in note 40.3 to the financial statements.

ii. IFRS 2 - Share-based payment effective from January 1, 2007

The Company has adopted IFRS 2 - Share-based payment with effect from July 1, 2007. The accounting policyon share-based payment is disclosed in note 2.18.

Other new standards, interpretations and amendments to existing standards that are mandatory for accountingperiods beginning on or after July 1, 2007 which are not considered relevant nor have any significant effect onthe Company's operations are not detailed in these financial statements.

e) Standards, interpretations and amendments to published approved accounting standards thatare not yet effective

The following standards, interpretations and amendments of approved accounting standards, effective for theCompany's accounting periods beginning on or after July 1, 2008 are either not relevant to the Company'soperations or are not expected to have a significant impact on the Company's financial statements other thanincreased disclosures in certain cases:

IAS 1 - Presentation of Financial Statements effective from January 1, 2009(Revised September 2007)

IAS 23 - Borrowing Costs (Revised March 2007) effective from January 1, 2009

Amendments to IAS 27 (Revised) - Consolidated andSeparate Financial Statements effective from July 1, 2009

IFRS 3 (Revised) - Business Combinations effective from July 1, 2009

IFRS 7 - Financial Instruments: Disclosures effective from April 28, 2008

IFRS 8 - Operating Segments effective from January 1, 2009

IFRIC 12 - Service Concession Arrangements effective from January 1, 2008

IFRIC 13 - Customer Loyalty Programmes effective from July 1, 2008

IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset,Minimum Funding Requirement and their interaction effective from January 1, 2008

IFRIC 15 - Agreements for the Construction of Real Estate effective from January 1, 2009

IFRIC 16 - Hedges of a Net Investment in a Foreign Operation effective from October 1, 2008

Notes to the Financial Statementsfor the year ended June 30, 2008






Investments in associates

Associates are all entities over which the Company has significant influence but no control, generallyrepresented by a shareholding of 20% to 50% of the voting rights. Investment in associates are accountedfor using the equity method of accounting and are initially recognised at cost in accordance with therequirements of IAS 28: "Investments in Associates".

The Company's share of an associate's post acquisition profits or losses is recognised in the profit and lossaccount and its share in the post acquisition movement of reserves is recognised in reserves. The cumulativepost acquisition movements are adjusted against the carrying value of the investment. When the Company'sshare of losses in an associate equals or exceeds its interest in the associate, including any other unsecuredreceivables, the Company does not recognise future losses, unless it has incurred obligations or madepayments on behalf of the associate.

Unrealised gains on transactions between the Company and its associate are eliminated to the extent of theCompany's interest in the associate.

Investments in subsidiaries

As disclosed in note 1.1, the Company has investment in two non-trading subsidiaries which are in theprocess of liquidation. The investment in these subsidiaries is carried at cost, less any provision for diminution.

2.4 Stores and spares

Stores are valued at the lower of average cost and net realisable value whereas spares are valued at thelower of cost worked out on a first-in first-out basis and net realisable value. Items in transit are stated atcost incurred to date.

Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarilyto be incurred to make the sale. Provision is made in the financial statements for obsolete and slow movingstores and spares based on the management's best estimate.

2.5 Stock -in-trade

Stock-in-trade is valued at the lower of cost, calculated on a first-in first-out basis, and net realisable value.Charges such as excise and customs duties and similar levies on unsold stock of products are added to thevalue of the stock and carried forward.

Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarilyto be incurred to make the sale.

Stock-in-transit is valued at cost comprising invoice value plus other charges incurred thereon. Provision ismade in the financial statements for obsolete and slow moving stock-in-trade based on management's bestestimate.

2.6 Trade debts

Trade debts are recognised initially at invoice value, which approximates fair value, and subsequentlymeasured at amortised cost using the effective interest method, less provision for impairment. A provisionfor impairment of trade debts is established when there is objective evidence that the Company will not beable to collect all the amount due according to the original terms of the receivable. Significant financialdifficulties of the debtors, probability that the debtor will enter bankruptcy and default or delinquency inpayments are considered indicators that the trade debt is impaired.

2.2 Fixed assets

Property, plant and equipment - tangible

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses, if any, except freehold land and capital work-in-progress which are stated at cost less impairmentlosses, if any.

Subsequent costs are included in the asset's carrying amounts or recognised as a separate asset, asappropriate, only when it is probable that future benefits associated with the item will flow to the Companyand the cost of the item can be measured reliably.

Depreciation is charged to income applying the straight-line method whereby the depreciable amount ofan asset is written off over its estimated useful life at the rates given in note 3.1. The residual values, usefullives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date.

Depreciation on additions is charged from the month in which an asset is put to use while no depreciationis charged for the month in which an asset is disposed of.

Repairs and maintenance are charged to income as and when incurred.

Profit and loss arising on disposal of property, plant and equipment is included in income in the year ofdisposal.

Provision for asset retirement obligation is based on current requirements, technology and price levels andis stated at fair value. The associated asset retirement costs are capitalised as part of the carrying amountof the related property, plant and equipment. The effects of changes resulting from revisions to the timingor the amount of the original estimate of the liability are incorporated on a prospective basis.

Intangible

Costs that are clearly associated with an identifiable non-monetary asset without physical substance, whichhas a probable economic benefit beyond one year, are recognised as intangible assets. Associated costsinclude staff costs of the development team and an appropriate portion of relevant overheads.

Expenditure that enhances and extends the benefits of computer software programmes beyond their originalspecifications and useful lives is recognised as a capital improvement and added to the original cost of thesoftware.

Intangible assets are amortised using the straight-line method over their estimated useful lives.

2.3 Investments

Available for sale

Investment in unlisted equity securities classified as available for sale is carried at cost, in the absence offair market value. Provision is made for any diminution in the carrying amount in the event of any permanentimpairment in the value of investment.





2.7 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flowstatement, cash and cash equivalents include cash in hand, balances with banks in current accounts andshort-term finances.

2.8 Impairment

The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whetherthere is any indication of impairment loss. If any such indication exists the asset's recoverable amount isestimated in order to determine the extent of impairment loss, if any. Impairment losses are recognised asan expense in the profit and loss account.

2.9 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources will be required to settle the obligation and a reliableestimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted toreflect the current best estimate.

2.10 Liabilities against assets subject to finance lease

Liabilities against assets subject to finance lease are accounted for at the net present value of minimumpayments under the lease arrangements.

Finance charges under lease arrangements are allocated to periods during the lease term so as to producea constant periodic rate of financial cost on the remaining balance of principal liability for each period.

2.11 Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortisedcost.

2.12 Taxation

Current

Provision for current taxation is based on taxable income at the current rates of taxation after taking intoaccount tax credits and rebates available, if any. The charge for current taxation also includes adjustmentswhere necessary, relating to prior years which arise from assessments framed/finalised during the year.

Deferred

Deferred taxation is recognised on all temporary differences between the carrying amounts for financialreporting purposes and the amounts used for taxation purposes. A net deferred tax asset is recognised tothe extent that it is probable that future taxable profits will be available against which the asset can beutilised.

2.13 Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the financial statementsin the period in which such dividends are declared by the Company and approved by the shareholders.

2.14 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Companyand the revenue can be measured reliably. Revenue is measured at the fair value of consideration receivedor receivable on the following basis:

- Sales are recorded when significant risks and rewards of ownership of the goods have passed to thecustomers which coincides with despatch of goods to customers.

- Non-fuel retail income and other revenue (including licence fee) is recognised on an accrual basis.

- Dividend income is recognised when the Company's right to receive the dividend is established.

2.15 Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases are charged to the profit and lossaccount on a straight-line basis over the period of the lease.

2.16 Staff retirement benefits

Except for certain expatriates for whom benefits are provided by membership of their respective Shellretirement benefit funds, staff retirement benefits include:

i) Approved funded gratuity schemes for management and unionised staff and contributory pension schemefor management and non-contributory pension scheme for unionised staff. Contributions are made tothese schemes on the basis of actuarial recommendations. The actuarial valuations are carried out usingthe Projected Unit Credit Method. Actuarial gains and losses are amortised over the expected futureservice of the current members;

ii) Approved contributory provident funds for all employees; and

iii) Un-funded post retirement medical benefits for all management staff. Annual provision is made in thefinancial statements for this scheme on the basis of actuarial recommendation. The actuarial valuationis carried out using the Projected Unit Credit Method. Actuarial gains and losses are amortised over theexpected future service of the current employees.

Retirement benefits are payable to staff on completion of prescribed qualifying periods of service underthese schemes.

2.17 Employees' compensated absences

The Company accounts for the liability in respect of employees' compensated absences in the year in whichthese are earned. Provision to cover the obligation under the scheme is made based on the current leaveentitlements of the employees and by using the current salary levels of employees.

2.18 Employee share-based payment

The Shell Group awards shares under a Performance Share Plan (PSP) to certain employees from time totime. The fair value of these shares, which is eventually recharged by the parent company to Shell PakistanLimited, is recognised as an expense, with a corresponding increase in liabilities, over the period that theemployees become entitled to the award. The liability is remeasured at each reporting date and at settlementdate. These are recognised as salaries, wages and benefits in the profit and loss account.

Annual Report 2OO8Shell Pakistan Limited 48

Shell Pakistan Limited 12 Annual Report 2OO7Shell Pakistan Limited 49 Annual Report 2OO8

Not

es to

the

Fina

ncia

l Sta

tem

ents

for

the

year

end

ed J

une

30,

2008

Not

es to

the

Fina

ncia

l Sta

tem

ents

2.1

9

Fore

ign c

urr

enci

es

Tran

sact

ions

in fo

reig

n cu

rren

cies

are

acc

ount

ed fo

r in

Pak

ista

ni R

upee

s at

the

rate

s pr

evai

ling

on th

e da

teof

tran

sact

ion.

Mon

etar

y as

sets

and

liab

ilitie

s in

for

eign

cur

renc

ies

are

tran

slat

ed in

to R

upee

s at

the

rate

sof

exc

hang

e w

hich

app

roxi

mat

e th

ose

prev

ailin

g at

the

bala

nce

shee

t dat

e. E

xcha

nge

diffe

renc

es a

re ta

ken

to th

e pr

ofit

and

loss

acc

ount

.

2.2

0

Financi

al in

stru

ments

Fina

ncia

l ins

trum

ents

car

ried

on

the

bala

nce

shee

t inc

lude

inve

stm

ents

, loa

ns a

nd a

dvan

ces,

dep

osits

, deb

tors

,ot

her

rece

ivab

les,

cas

h an

d ba

nk b

alan

ces,

long

-term

loan

, lia

bilit

ies

agai

nst a

sset

s su

bjec

t to

finan

ce le

ase,

shor

t-ter

m r

unni

ng fi

nanc

es u

tilis

ed u

nder

mar

k-up

arr

ange

men

ts, s

hort

-term

loan

s, tr

ade

and

othe

r pa

yabl

esan

d m

ark-

up a

ccru

ed.

At t

he ti

me

of in

itial

rec

ogni

tion,

all

the

finan

cial

ass

ets

and

liabi

litie

s ar

e m

easu

red

at c

ost,

whi

ch is

the

fair

val

ue o

f co

nsid

erat

ion

give

n or

rec

eive

d fo

r it.

The

car

ryin

g am

ount

of

the

asse

tsis

rev

iew

ed a

t eac

h ba

lanc

e sh

eet d

ate

to d

eter

min

e w

heth

er th

ere

is a

ny in

dica

tion

of im

pair

men

t of

any

asse

t or

a gr

oup

of a

sset

s. If

suc

h in

dica

tion

exis

ts,

the

reco

vera

ble

amou

nt o

f suc

h as

sets

is e

stim

ated

and

the

impa

irm

ent l

oss

is r

ecog

nise

d in

the

prof

it an

d lo

ss a

ccou

nt.

2.2

1

Borr

ow

ings

Borr

owin

gs a

re r

ecog

nise

d in

itial

ly a

t fai

r va

lue,

net

of t

rans

actio

n co

sts

incu

rred

. Bor

row

ings

are

sub

sequ

ently

stat

ed a

t am

ortis

ed c

ost,

any

diffe

renc

e be

twee

n th

e pr

ocee

ds (ne

t of t

rans

actio

n co

sts)

and

the

rede

mpt

ion

valu

e is

rec

ogni

sed

in th

e in

com

e st

atem

ent o

ver

the

peri

od o

f th

e bo

rrow

ings

usi

ng th

e ef

fect

ive

inte

rest

met

hod.

Borr

owin

gs a

re c

lass

ified

as

curr

ent

liabi

litie

s un

less

the

Com

pany

has

an

unco

nditi

onal

rig

ht t

o de

fer

settl

emen

t of t

he li

abili

ty fo

r at

leas

t 12 m

onth

s af

ter

the

bala

nce

shee

t dat

e.

Borr

owin

g co

sts

incu

rred

for

the

cons

truc

tion

of a

ny q

ualif

ying

ass

et a

re c

apita

lised

dur

ing

the

peri

od o

ftim

e th

at i

s re

quir

ed t

o co

mpl

ete

and

prep

are

the

asse

t fo

r its

int

ende

d us

e. O

ther

bor

row

ing

cost

s ar

eex

pens

ed in

the

prof

it an

d lo

ss a

ccou

nt in

the

peri

od in

whi

ch th

ey a

rise

.

2.2

2

Off

sett

ing

Fina

ncia

l ass

ets

and

liabi

litie

s ar

e of

fset

whe

n th

e C

ompa

ny h

as a

lega

lly e

nfor

ceab

le r

ight

to o

ffse

t and

inte

nds

to s

ettle

eith

er o

n a

net b

asis

or

to r

ealis

e th

e as

set o

r se

ttle

the

liabi

lity

sim

ulta

neou

sly.

2.2

3

Funct

ional and p

rese

nta

tion c

urr

ency

Item

s in

clud

ed i

n th

e fin

anc

ial

state

men

ts a

re m

easu

red u

sing

the

cur

renc

y of

the

pri

mary

eco

nom

icen

viro

nmen

t in

whi

ch th

e C

ompa

ny o

pera

tes.

The

fin

anci

al s

tate

men

ts a

re p

rese

nted

in P

akis

tani

Rup

ees,

whi

ch is

the

Com

pany

’s fu

nctio

nal a

nd p

rese

ntat

ion

curr

ency

.

3.

FIX

ED A

SSET

S

Pro

pert

y, pla

nt and e

quip

ment

Ope

ratin

g fix

ed a

sset

sC

apita

l wor

k-in

-pro

gres

s

Inta

ngib

le a

ssets

Note

2008 (R

upee

s `0

00

)200

7

3.1

3.6

3.1

9,854,6904,846,227 5,008,463

5,008,463 1,102,961

125,817 89,232 36,585

578,296 5,496,543

10,831,8345,335,291 5,496,543

291,123 253,234 37,889

37,889 –

10,102 1,776 8,326

10,378 19,185

281,021261,836 19,185

20

Buildings onleasehold

land

2,860,952868,394

1,992,558

1,992,558 256,121

2,810 1,811

999

145,483 2,102,197

3,114,2631,012,066 2,102,197

5

Tanks andpipelines

1,500,213739,427 760,786

760,786 79,137

3,164 1,747 1,417

48,989 789,517

1,576,186786,669 789,517

4

Plant andmachinery

230,974188,211 42,763

42,763 5

1,092 646 446

2,833 39,489

229,887190,398 39,489

5

Aircondi-tioningplant

39,39330,367 9,026

9,026 1,166

– – –

1,058 9,134

40,55931,425 9,134

6.67

Dispensingpumps

1,291,458709,412 582,046

582,046 88,489

89,098 60,785 28,313

55,865 586,357

1,290,849704,492 586,357

6.67

Rollingstock andvehicles

198,210168,021 30,189

30,189 66,567

5,739 4,711 1,028

11,829 83,899

259,038175,139 83,899

5 to 20

Electrical,mechanical

and firefighting

equipment

1,441,610621,137 820,473

820,473 442,254

5,156 3,956 1,200

110,866 1,150,661

1,878,708728,047

1,150,661

5 to 10

Furniture,office

equipmentand other

assets

1,156,468783,809 372,659

372,659 108,738

2,097 1,192

905

136,428 344,064

1,263,109919,045 344,064

5 to 20

Computersauxiliaries

336,016318,995 17,021

17,021 1,248

– – –

6,385 11,884

337,264325,380 11,884

33.33

Mainframe

84,70272,295 12,407

12,407 –

– – –

4,014 8,393

84,70276,309 8,393

25

Plant andMachinery

152,37148,668

103,703

103,703 551

– – –

14,507 89,747

152,92263,175

89,747

5

Vehicles

287,261207,061 80,200

80,200 58,685

16,61714,360 2,257

35,011 101,617

329,329227,712

101,617

20

At July 1, 2007

CostAccumulated depreciation / amortisationNet book value

Year ended June 30, 2008

Opening net book valueAdditions

Disposals / write - off (Note 3.5)CostAccumulated Depreciation

Depreciation / amortisationcharge for the yearClosing net book value

At June 30, 2008


Depreciation rate % per annum

At July 1, 2006



Opening net book valueAdditions

DisposalsCostAccumulated Depreciation

Depreciation / amortisationcharge for the yearClosing net book value

At June 30, 2007


Depreciation rate % per annum

10,831,8345,335,291

5,496,543

5,496,543 1,253,444

331,974 218,203 113,771

670,918 5,965,298

11,753,3045,788,006

5,965,298

281,021261,836 19,185

19,185 –

– ––

8,714 10,471

281,021270,550 10,471

20

Totaloperating

fixedassets

Computersoftware

(Rupees in ‘000)

Owned assets


Leased assets Intangible

Totaloperating

fixedassets

Computersoftware

Owned assets


Leased assets Intangible

3.1 The follow ing is a statement of operating tangible and intangible fixed assets:

98,125–

98,125

98,125–

1,047––

–97,078

97,078–

97,078

–

Freeholdland

62,53836,462 26,076

26,076–

– – –

3,017 23,059

62,53839,479 23,059

5

Leaseholdland

3,114,2631,012,066 2,102,197

2,102,197 354,799

34,187 4,823

29,364

183,944 2,243,688

3,434,8751,191,187 2,243,688

5

Buildings onleasehold

land

1,576,186786,669

789,517

789,517 88,540

6,614 1,067 5,547

48,911 823,599

1,658,112834,513

823,599

4

Tanks andpipelines

229,887190,398 39,489

39,489

–4,0373,313 724

3,338 35,427

225,850 190,423 35,427

5

Plant andmachinery

40,55931,425 9,134

9,134 –

– – –

1,200 7,934

40,55932,625 7,934

6.67

Aircondi-tioningplant

8,1814,679 3,502

3,502 –

– – –

294 3,208

8,1814,973 3,208

6.67

Lifts Dispensingpumps

1,290,849704,492

586,357

586,357 33,722

52,603 27,577 25,026

54,336 540,717

1,271,968731,251

540,717

6.67

259,038175,139 83,899

83,899 127,703

28,326 25,280 3,046

23,957 184,599

358,415173,816 184,599

5 to 20

Rollingstock andvehicles

1,878,708728,047

1,150,661

1,150,661 474,690

36,811 9,186

27,625

143,011 1,454,715

2,316,587 861,872

1,454,715

5 to 10

Electrical,mechanical

and firefighting

equipment

1,263,109919,045 344,064

344,064 100,197

61,036 48,153 12,883

136,576 294,802

1,302,2701,007,468 294,802

5 to 20

Furniture,office

equipmentand other

assets

337,264325,380 11,884

11,884 9,018

10,329 10,329

–

7,288 13,614

335,953322,339 13,614

33.33

Computersauxiliaries

84,70276,309 8,393

8,393 6,332

– – –

4,926 9,799

91,03481,235 9,799

25

Mainframe

152,92263,175 89,747

89,747 -

130 22

108

14,518 75,121

152,79277,671 75,121

5

Plant andMachinery

329,329227,712

101,617

101,617 58,443

95,462 88,340 7,122

43,922 109,016

292,310 183,294 109,016

20

Vehicles

106,17454,293 51,881

51,881 –

1,392 113

1,279

1,680 48,922

104,78255,860 48,922

2.50

Buildingson freehold

land

(Rupees in ‘000)

Freeholdland

98,125–

98,125

98,125–

–––

–98,125

98,125–

98,125

–

Leaseholdland

62,53833,442 29,096

29,096–

–––

3,020 26,076

62,53836,462 26,076

5

Buildingson freehold

land

106,21852,603 53,615

53,615–

44 24 20

1,714 51,881

106,17454,293 51,881

2.50

Lifts

8,1814,385

3,796

3,796–

– – –

294 3,502

8,1814,679

3,502

6.67

5,9

65,2

98

851,0

79

6,8

16,3

77

10,4

71

6,8

26,8

48

5,4

96,5

43

1,0

64

,26

5 6

,56

0,8

08

19

,18

5

6,5

79

,99

3





3.2 The depreciation and amortisation charge for the year has been allocated as follow s:

Cost of products sold

Administrative and marketing expenses- Depreciation - tangible assets - Amortisation - intangible assets

3.3 Company assets include tanks, dispensing pumps and electrical equipments having a cost of Rs 1,358.669million (2007: Rs 1,250.512 million) which have been installed at dealer sites. Due to the significant numberof dealers involved, the particulars of the assets not in the possession of the Company as required by theFourth Schedule to the Companies Ordinance, 1984 have not been disclosed here.

3.4 The following assets with a book value exceeding Rs.50,000 were disposed off during the year:

Note 2008

(Rupees `000)

2007

2929

15,517

655,4018,714

664,115

679,632

13,890

564,406 10,378

574,784

588,674

Freehold land

Buildings on freehold land

Buildings on leasehold land

Tanks and pipelines

Plant and machinery

Dispensing pumps

Rolling stock and vehicles

19,165

15,282

571

14,641

90

5,607

2,942

469

536

377

348

377

437

698

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Company policy

Company policy

Company policy

Company policy

Company policy

Company policy

Shams Petrochemical, Karachi


M/s Gulzar & Co, Karachi






Omar Malik - Executive

Yousuf Ali -Key management personnel

Ali Rizvi - Executive

Hassan - Executive

Mustaq Khan - Executive

Khalid Siddiq - Executive

(Rupees `000)

SalesProceeds

AccumulatedDepreciationCost

BookValue

Mode of Disposal Particulars of Buyers

1,047

1,378

3,208

4,171

256

1,548

838

14,344

943

943

795

943

795

1,576

-

112

390

571

64

170

115

8,189

786

810

656

822

654

771

1,047

1,266

2,818

3,600

192

1,378

723

6,155

157

133

139

121

141

805

Electrical, mechanical and fire fighting equipment

435

377

318

318

318

318

569

705

858

2,590

532

840

Company policy

Company policy

Company policy

Company policy

Company policy

Company policy

Company policy

Press advertisement

Press advertisement

Press advertisement

Press advertisement

Negotiation

Munir Ahmad - Executive

Ejaz Alam - Executive

Zarak Khan - Executive

Adnan Sadiq - Executive

Asfandyar - Executive

Amir Millwala - Executive

Anwar Shami - Executive

M. Siddique Awan, Karachi




Pak-Arab Refinery Limited,Karachi

(Rupees `000)

SalesProceeds

AccumulatedDepreciationCost

BookValue

Mode of Disposal Particulars of Buyers

1,088

373

381

381

795

795

795

1,675

12,131

738

765

847

963

277

250

250

663

688

670

977

1,864

101

279

158

125

96

131

131

132

107

125

698

10,267

637

486

689



Kamran Ahmed, Karachi

Wasim Mirza, Karachi

Syed Ahmed Ali, Karachi

Commercial Union, Karachi

Raja Baber - Executive

S. A. Salahuddin - Executive

Usman Najeeb - Executive

Ijaz A. Khan -Key management personnel

Zahra Ahmed - Executive

Jawad Bari, Karachi

Adnan Bhatti, Karachi

Wasim Mirza, Karachi

Zulfiqar Shaikh - Executive

Furniture and office equipment

Assets held under finance lease - vehicles

165

408

926

632

650

798

659

823

695

969

471

856

611

572

318

Press advertisement

Press advertisement

Press advertisemen

Press advertisement

Press advertisement

Insurance claim

Company policy

Company policy

Company policy

Company policy

Company policy

Press advertisement

Press advertisement

Press advertisement

Company policy

186

127

1,219

835

1,002

969

879

886

1,189

4,257

1,178

1,225

835

795

795

47

27

406

408

461

343

330

332

463

3,192

903

558

390

557

623

139

100

813

427

541

626

549

554

726

1,065

275

667

445

238

172

3.5 Disposal of fixed assets include assets written - off having a cost of Rs 96.268 million (2007: Rs Nil) and a net book value of Rs 62.141 million (2007: Rs Nil).





3.6 Capital w ork -in-progress

Buildings on leasehold landTanks and pipelinesPlant and machineryAirconditioning plantDispensing pumpsRolling stock and vehiclesElectrical, mechanical and fire fighting equipmentFurniture, office equipment and other assetsComputer auxiliariesComputer software and consultancy costsCapital stores and spares

2008

(Rupees `000)

2007

4. LONG-TERM INVESTMENTS

Investment in associate - unquotedPak-Arab Pipeline Company Limited (PAPCO)18,720,000 (2007: 18,720,000) ordinaryshares of Rs 100 each

Others - held as available for sale - at costNon-trading subsidiariesArabian Sea Country Club Limited 500,000(2007: 500,000) ordinary shares of Rs 10 each

Note

4.1

4.2

2008 2007

PercentageHolding

26

100

–

PercentageHolding

26

100

–

194,004 44,869 1,986

162 9,010

101,271 356,623 30,854 5,459 6,556

100,285

851,079

145,968 82,438 1,641

162 9,292

104,656 493,802

38,576 111

6,556 181,063

1,064,265

Amount(Rupees '000)

2,010,534

1

5,000

2,015,535

Amount(Rupees '000)

2,129,782

1

5,000

2,134,783

Pak-Arab Pipeline Company Limited (PAPCO) commenced its commercial operations in Pakistan in March 2005 asa joint venture between PARCO and oil marketing companies to provide transportation services of petroleum productsthrough the white oil pipeline.

4.1 Movement of investment in associate

Beginning of the yearShare of profitsShare of taxationDividend received

End of the year 5.2 Loans to staff are unsecured and are given for housing, purchase of motor cars / motorcycles and for generalpurpose in accordance with the Company's policy and are repayable over a period of two to five years.Interest is charged on loans given for housing and purchase of motor cars at 1% per annum.

The maximum aggregate amounts due from the Chief Executive, Directors and Executives at the end ofany month during the year were Rs Nil, Rs 1.246 million and Rs 66.010 million respectively (2007: Rs Nil,Rs 2.997 million and Rs 69.971 million). The loan to Director is the only key management personnel loanoutstanding at year end.

5.3 These represent advances in respect of various Company operated outlets which are primarily given in theform of petroleum products for meeting the working capital requirements of these sites.

2008

(Rupees `000)

2007

2,010,534) 342,043)

(129,795) (93,000)

2,129,782)

1,916,884) 188,231) (65,981) (28,600)

2,010,534)

The summarised financial information of the PAPCO, based on the audited financial statementsfor the year ended June 30, 2008 is as follows:

Note 2008

(Rupees `000)

2007

12

12

12

5.3

23,884,637

15,693,168

4,553,922

631,352

623) (623)

– 49,929)

(24,343)

25,586)

54,215) (18,148)

36,067) 84,728)

146,381)

24,631,263)

16,713,448)

4,352,199)

596,164)

1,303) (680)

623) 69,971)

(30,532)

39,439)

34,244) (11,508)

22,736)119,781)

182,579)

Total assets

Total liabilities

Revenues


5. LONG-TERM LOANS AND ADVANCES - Considered good

Due from DirectorsLess: Receivable within one year

Due from ExecutivesLess: Receivable within one year

Due from EmployeesLess: Receivable within one year

)

Advances to contractors

4.2 Investments in non-trading subsidiaries consist of:

- Shell Pakistan Provident Trust (Private) Limited - 2 (2007: 2) fully paid ordinary shares of Rs 100 each.- Shell Pakistan Pensions Trust (Private) Limited - 2 (2007: 2) fully paid ordinary shares of Rs 100 each.

The subsidiaries have not commenced operations to date and the Company is in the process of liquidating these companies (as disclosed in note 1.1).

5.1 Reconciliation of loans and advances (long-term and short-term)

(Rupees `000)

2008 2007

Directors Executives Directors Executives

1,303–

680

623

69,97120,51740,559

49,929

–4,8003,497

1,303

59,77650,25540,060

69,971

Opening balanceDisbursementsRepayments

Closing balance

Note 2008

(Rupees `000)

2007





7.1 These represent amounts due from customers in respect of which the Company has entered into agreementsfor recovery of outstanding balances over a period of 1 to 7 years. These balances carry interest at the rateof 15% per annum.

Note 2008

(Rupees `000)

2007

59,009 142,709

201,718

134,920

29,390) 81,604)

110,994

328,227

Note 2008

(Rupees `000)

2007

9. STORES AND SPARES

StoresSparesLess: Provision for obsolete stores

10. STOCK-IN-TRADE

Raw and packing materials

Finished goods In hand and in pipeline system In White Oil Pipeline

Less: Provision for impairment

10.1

16,885) 2,321)

(5,878)

13,328)

34,755) 1,409)

(5,878)

30,286)

1,036,141)

6,638,675) 10,430,149)

17,068,824) (9,442)

17,059,382)

18,095,523)

581,580)

3,706,394) 3,962,799)

7,669,193) (6,719)

7,662,474)

8,244,054)

6. LONG-TERM DEPOSITS AND PREPAYMENTS

DepositsPrepayments

7. LONG - TERM DEBTORS

Long-term debtors 11

10.1 Stock in White Oil Pipeline includes 55,750 MT (2007: 65,167 MT) of High Speed Diesel oil which hasbeen maintained as line fill necessary for the pipeline to operate. The aggregate cost of the inventoryamounted to Rs 4,987.516 million (2007: Rs 2,793.905 million).

10.2 The above amounts include Rs 167.230 million (2007: Rs 145.640) in respect of stock-in-transit as atJune 30, 2008.

8. DEFERRED TAXATION - NET

This is composed of the following:

Taxable temporary difference arising in respect of -accelerated tax depreciation -investment in associate

Deductible temporary difference arising in respect of -short-term provisions -carry forward tax losses -add backs to taxable income expected to be reversed in future periods

(620,287) (25,778)

594,491) – –

(51,574)

(451,305) (13,853)

283,978) 384,799) 77,348)

280,967)

Note 2008

(Rupees `000)

2007

11.1

11.2

11.3

2,867,826) 2,172,034)

5,039,860) 907,157)

5,947,017) (907,157)

5,039,860)

304,355) 4,275,197)

4,579,552) 517,173)

5,096,725) (517,173)

4,579,552)

(Rupees `000)

Long-term(note 7)

Short-term Total

2008

(Rupees `000)

Long-term(note 7)

Short-term Total2007

11. TRADE DEBTS

Considered good- Secured- Unsecured

Considered doubtfulTrade debts - grossLess: Provision for impairment

Trade debts - net

The above trade debts are classified as follows:

Trade debts - grossLess: Provision for impairment of trade debts

Trade debts - grossLess: Provision for impairment of trade debts

11.1 These debts are secured by way of letters of credit, bank guarantees and security deposits.

11.2 This includes amounts due from related parties at the year end amounting to Rs 12.406 million(2007: Rs 953.968 million). Particulars of the amounts due from related parties are as follows:

2008

(Rupees `000)

2007

– 12,360 )

46)

12,406)

946,084) 4,690) 3,194)

953,968)

Shell Aviation LimitedShell Gas LPG (Pakistan) LimitedShell Development & Offshore Pakistan

5,721,575)(816,635)

4,904,940)

225,442)(90,522)

134,920)

5,947,017)(907,157)

5,039,860)

4,768,498)(517,173)

4,251,325)

328,227)–

328,227)

5,096,725)(517,173)

4,579,552)





14.114.2

35.1.11

22.3

14.3

63,006) 3,133)

66,139) 141,725)

207,864)

278,492) 295,733)

3,403,744) 81,194) 3,438)

41,270) 616,971) 143,329)

894) 1,410,516)

– 9,536)

6,285,117) (206,006)

6,079,111)

47,937) 3,133)

51,070) 89,169)

140,239)

197,342) 295,733)

3,291,827) 121,906)

2,088) 38,017)

450,009) 197,174)

291) 1,367,855)

4,963) 11,360)

5,978,565) (7,802)

5,970,763)

Balances with statutory authorities - Customs duty - Excise duty

Short-term prepayments

14. OTHER RECEIVABLES

Excise and customs duties Price differential on imported purchases Price differential claimService cost receivable from related partiesService cost receivable from associate company - PAPCOAdvances to suppliersInland freight equalisation mechanismStaff retirement benefit schemesMark-up receivable on short-term depositsSales taxWorkers' profit participation fundOthers

Less: Provision for impairment

623 24,343 18,148 43,114

3,915

47,029

680 30,532 11,508 42,720

–

42,720

12. LOANS AND ADVANCES - Considered good

Loans due from - Directors - Executives - Employees

Advances to - Employees

13. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

14.1 This represents amount receivable on account of price differential on imports and the ex-refinery price ondirect and retail sales during the period 1990-2002.

14.2 This represents claims for price differential receivable from the Government of Pakistan (GoP). From time to time the GoP agrees to subsidise the petroleum prices by restricting the increase in prices of various petroleum products in order to reduce the burden of rising oil prices on the end consumers. The balance as at June 30, 2008 represents the claim for the fortnight June 15, 2008 to June 30, 2008.

Note 2008

(Rupees `000)

2007

14.3 Provision for impairment

Balance at July 1Provision made during the year Amount reversed during the year

Balance at June 30

15 CASH AND BANK BALANCES

With banks on interest bearing current accountsCash in hand

3130

15.1 Current accounts with banks carry interest ranging from 0.7 % to 5.5 % (2007: 0.7 % to 5.5 %) per annum.

15.2 Included in cash and bank balances is an amount of Rs 35.065 million (2007: Rs 44.260 million) in respect of contributions received for Earthquake Relief Fund.

16. SHARE CAPITAL

Authorised capital

2008

(Number of shares)

2007

100,000,000 100,000,000

Issued, subscribed and paid-up capital

(Number of shares)

Issued forcash

Issued asbonus

Total Issued forcash

Issued asbonus

Total

2008 2007

Ordinary shares ofRs. 10 each 1,000,000

234,810

313,094547,904

–

547,904

1,000,000

234,810

203,513438,323

109,581

547,904

–

20,351,250

20,351,250

10,958,063

31,309,313

23,481,000

20,351,250

43,832,250

10,958,063

54,790,313

Note 2008

(Rupees `000)

2007

3130

517,173) 513,820)

(123,836)

907,157)

234,784 282,389

–

517,173

11.3 Provision for impairment

Balance at July 1Provision made during the year Amount reversed during the year

Balance at June 30

23,481,000

–

23,481,000

–

23,481,000

–

31,309,313

31,309,313

–

31,309,313

23,481,000

31,309,313

54,790,313

–

54,790,313

23,481,000

–

23,481,000

–

23,481,000

555

2008

(Rupees `000)

2007

Fully paid in cash

Issued as fully paid bonus shares

Issued during the year as fully paid bonus shares

Closing balance

7,802) 206,006)

(7,802)

206,006)

817,271) 55,143)

872,414)

13,196) –

(5,394)

7,802)

770,408) 44,122)

814,530)





Note 2008

(Rupees `000)

2007

22.122.1

22.2

35.2.2

22.3

2008

(Rupees `000)

2007

16.1 The Shell Petroleum Company Limited, United Kingdom, a subsidiary of Royal Dutch Shell Plc., held 41,699,176 (2007: 41,699,176) ordinary shares of Rs 10 each at June 30, 2008.

17. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

The Company has entered into lease agreements with various leasing companies for lease of motor vehiclesincluding transport vans. The liability under these agreements are payable by the year 2011 and is subjectto finance charge at rates ranging from 5.50% to 14.25% (2007: 5.50% to 15.03%) per annum. Anadditional charge of 20% is also leviable on overdue rentals.

The Company intends to exercise its options to purchase the leased assets for Rs1.86 million(2007: Rs1.01 million) upon completion of the lease period.

The amount of future payments for the finance lease and the period in which these payments will become due are as follows:

– 60,461)

553) 2,113)

63,127) (4,169)

58,958)

(56,742)

2,216)

33,593) 241) 593)–

34,427 (1,677)

32,750)

(32,203)

547)

Year

2007 – 20082008 – 20092009 – 20102010 – 2011

Less: Finance charge not due

Present value of minimum lease payments

Less: Current maturity shown under current liabilities

18. LONG-TERM LOAN - Secured

The above loan has been obtained from a commercial bank and bears mark-up at the rate of 3-month KarachiInterbank Offered Rate (KIBOR) + 0.17% (2007: Nil) per annum payable and revised quarterly. The loanamount is payable in one bullet payment on September 27, 2010. The arrangement is secured by hypothecationof the Company's stock-in-trade, trade debts and other receivables.

2,500,000) –

2008

(Rupees `000)

2007

19. ASSET RETIREMENT OBLIGATION

Balance as at July 1Liabilities incurredAccretion expense

Balance as at June 30

20. SHORT-TERM RUNNING FINANCES UTILISED UNDERMARK-UP ARRANGEMENTS – Secured

Short-term running finances utilised under mark-up arrangements

138,494 47,985 5,141

191,620

4,338,339

98,320 34,551

5,623

138,494

725,836

The facilities for short-term running finances available from various banks aggregate to Rs 15,150 million(2007: Rs 13,700 million). The rates of mark-up range from Re 0.2614 to Re 0.3784 per Rs 1,000 perday (2007: Re 0.2661 to Re 0.2986 per Rs 1,000 per day). The purchase prices are payable on variousdates by June 30, 2009. These arrangements are secured by hypothecation of the Company's stock-in-trade, trade debts and other receivables.

21. SHORT-TERM LOANS - Secured

The above loan has been obtained from a bank and carries mark-up at 12.16% (2007: 9.16% to 9.44%) per annum. The loan amount is repayable on July 14, 2008. The loan is secured by hypothecation of the Company's stock-in-trade, trade debts and other receivables.

Note

32

11,990,626 772,266 311,071

1,344,994 764,877 206,623 125,140 27,598

190,051 3,537

71,133 35,065

530,030 109,997

16,483,008

4,175,781 5,050,802

287,703 1,046,341

725,951 215,752

– 25,901 34,217 – 71,163 44,260

136,152 98,473

11,912,496

22. TRADE AND OTHER PAYABLES

CreditorsBills payableOil marketing companies Accrued liabilitiesExcise and customs duties and development surchargeDealers' and cartage contractors' security deposits Security deposits from customerProvision for post retirement medical benefitsWorkers' welfare fundWorkers' profit participation fundUnclaimed dividendsPayable to the Earthquake Relief FundAdvances received from customersOther liabilities

22.1 Amounts due to related parties at the year end aggregated to Rs 5,706.276 million (2007: Rs 7,048.931million). Particulars of the amounts due to related parties are as follows:

42,207 5,013,763

650,306

5,706,276

81,612 5,993,491

973,828

7,048,931

Associate company - PAPCOOther related partiesParent companies

2008

(Rupees `000)

2007

1,500,000 6,810,000

2008

(Rupees `000)

2007





Note 2008

(Rupees `000)

2007

22.2 The security deposits are non-interest bearing and are refundable on termination of contracts.

22.3 Workers' profit participation fund

Balance at July 1Allocation for the year

Add: Amount receivedLess: Amount paid

Balance at June 30

23. MARK-UP ACCRUED

Mark-up accrued on:- short-term running finances utilised under mark-up arrangementsshort-term loans- long-term loans

23.1 During the year, the Government of Pakistan (GoP), for the purposes of reimbursing the outstanding pricedifferential claims, arranged for the Company to obtain two term finance facilities amounting to Rs 6,000million and Rs 5,000 million from consortium of banks (the Syndicates). Accordingly, the Company enteredinto two term finance agreements (the Agreements) dated January 11, 2008 and May 14, 2008 in thisrespect. Under both agreements, the principal was due at the end of a three year term in one bullet repaymentwhere as mark-up was due semi-annually and quarterly respectively, revised quarterly and benchmarkedto 3-month Karachi Interbank Offered Rate (KIBOR).

The GoP issued irrevocable and unconditional guarantees dated January 30, 2008 and May 21, 2008 infavour of the Syndicates stating that it was fully responsible and liable as a Principal Obligor to repay thefinance, mark-up and all the obligations arising under the Agreements.

On June 30, 2008, the GoP settled the outstanding principal under the Agreements amounting to Rs 11,000million consequent to which the Syndicate banks have released the aforementioned guarantees. However,as at this date, mark-up and other charges amounting to Rs 316.742 million are still payable to the banks.The management is of the view that based on the substance of the transaction, the aforementionedmark-up will be settled by the Company upon receipt of the amount from the GoP in accordance with letterof comfort issued by the GoP in favour of the Company. Accordingly, this has not been separately recognisedas a liability and the corresponding receivable from the GoP has also not been booked. In respect of theamount settled by the GoP to the banks amounting to Rs 11,000 million which was routed through theCompany, it effectively represents settlement of price differential balances by the GoP and has been reflectedas such in the cash flow statement. Contra inflows and outflow of this balance as financing activity in thecash flow statement have not been reflected.

24. CONTINGENCIES AND COMMITMENTS

24.1 Contingencies

24.1.1 Infrastructure fee

Through the Sindh Finance Act 1994, the Government of Sindh imposed a fee, for services rendered inrespect of development and maintenance of infrastructure, on goods entering or leaving the Province fromor for outside the Country through sea or air.

The Company (SPL) and several others challenged the levy of the said infrastructure fee in constitutionalpetitions before the High Court of Sindh. However, certain amendments were made to the impugnedlegislation on three occasions during the pendency of the petitions. In 2001 the said “fee” was changedto a “cess”. Consequently the petitions filed by SPL and others were dismissed by the High Court as havingbecome infractuous.

Subsequently, SPL and others filed civil suits in the High Court of Sindh challenging the amending Ordinance.These suits were dismissed by a single judge in October 2003. Being aggrieved, SPL and others filedintra-court appeals against the said judgement on, interalia, the ground that the import, export, customsduty and highways are exclusive Federal subjects and therefore levy of the infrastructure tax/fee/cessby the Government of Sindh is ultra vires the Constitution. These appeals are currently pending adjudication.

The accumulated levy up to June 30, 2008 comes to Rs 988.031 million (2007: Rs 699.836 million). Noprovision has been made in these financial statements against the levy as SPL management expects afavourable outcome.

24.1.2 PARCO pipeline fill

The Ministry of Petroleum and Natural Resources (MOPNR) has made a claim relating to the loan arrangedby the Government of Pakistan (GoP) to the Company to finance the initial fill of the Pak-Arab RefineryLimited (PARCO) Pipeline. MOPNR has calculated the Company's liability by applying the price prevailingon August 11, 2000 to the quantity of fuel supplied at the time of initial fill.

The Company maintains that its liability is limited only to the extent of Rs 78.164 million (2007: Rs 78.164million) which has been fully paid in March 2007.

The claim, if calculated on the August 11, 2000 price as indicated by MOPNR, would amount to Rs 294million. Based on legal advice obtained, the management is confident that its exposure in this respectamounted to Rs 78.164 million and consequently no provision has been made for the additional demandraised by MOPNR.

24.1.3 Others

The aggregate amount of other claims against the Company not acknowledged as debt as at June 30,2008 amounted to approximately Rs 848.115 million (2007: Rs 533.570 million). This includes claimsby refineries, amounting to Rs 355.613 million (2007: Rs Nil) in respect of delayed payment charges.

31 (4,963)

403,537) 398,574)

4,963) (400,000)

3,537)

92,737) 63,493) 1,038)

157,268)

(532) 15,569) 15,037)

– (20,000)

(4,963)

28,288) 103,292)

–

131,580)


Shell Pakistan Limited 12




24.2 Commitments

a) Capital expenditure contracted for but not incurred as at June 30, 2008 amounted to approximately Rs 828.745million (2007: Rs 276.964 million).

b) Commitments for rentals of assets under operating lease agreements as at June 30, 2008 amountedto Rs 1,335.797 million (2007: Rs 1,150.256 million) payable as follows:

Note 2008

(Rupees `000)

2007

28.1

28 . DISTRIBUTION EXPENSES

Salaries, wages and benefitsStaff trainingStores and materialsFuel and powerRent, taxes and utilitiesLease rentals and chargesRepairs and maintenanceInsuranceTravellingAdvertising and publicityLegal and professional chargesCommunication and stationeryComputer expensesStorage and other chargesOthers

Less: Handling and storage charges recoveredSecondary transportation expenses

28.1 Salaries, wages and benefits include Rs 70.644 million (2007: Rs 73.665 million) in respect of staff retirementbenefits.

798,112)) 9,153))

32,094)) 57,677))

294,891)) 11))

226,166)) 52,904))

158,566)) 410,056))

4,450)) 18,145)) 5,765))

33,471)) 18,810)))

2,120,271)) (8,166))

838,317))

2,950,422)

782,511) 18,333) 30,335) 64,553)

332,112) 2,085)

235,346) 60,946)

159,413) 450,700)

3,517) 21,536) 11,659) 18,325) 21,888)

2,213,259) (28,197)

1,181,493)

3,366,555)

27.1 Duties and levies

Petroleum development levyCustoms and excise dutyInland freight equalisation marginAdditional petroleum development levyWharfage

6,035,675 5,284,344 3,401,640

–35,976

14,757,635

29.1

3737

3.23.2

29. ADMINISTRATIVE AND MARKETING EXPENSES

Salaries, wages and benefitsStaff trainingStores and materialsFuel and powerRent, taxes and utilitiesLease rentals and chargesRepairs and maintenanceInsuranceTravellingAdvertising and publicityTechnical service feeTrade marks and manifestations license feeLegal and professional chargesCommunication and stationeryComputer expensesDepreciation - tangible assetsAmortisation - intangible assetsOthers

Less: Costs recovered under Service Level Agreement from related parties

278,335)) 6,699))

274)) 19,539)) 23,140))

– 7,831)) 8,587))

37,456)) 20,837))

583,169)) 162,118)) 63,474)) 91,857))

145,593)) 655,401))

8,714)) 4,724))

2,117,748)

(8,459)

2,109,289)

221,027) 5,349)

307) 14,945)

9,111) 416)

13,494) 2,265)

34,542) 16,717)

539,682) 65,242) 40,365) 63,014)

122,376) 564,406) 10,378)

– 1,723,636)

(6,929)

1,716,707)

10

27.1 10

26. OTHER REVENUE

License/franchise fee charged to dealers

27. COST OF PRODUCTS SOLD

Opening stock of raw and packing materialsRaw and packing materials purchasedLess: Closing stock of raw and packing materials

Raw and packing materials consumedAdd: Manufacturing expenses

Cost of products manufacturedNon-fuel retail purchasesOpening stock of finished productsFinished products purchasedDuties and leviesLess: Closing stock of finished products

341,349)

581,580) 5,105,250)

(1,036,141)

4,650,689) 117,227)

4,767,916) 118,802)

7,662,474) 114,934,880) 14,269,781)

(17,059,382)

124,694,471)

447,517)

552,963) 3,840,029) (581,580)

3,811,412) 119,487)

3,930,899) 138,953)

9,426,923) 88,072,996) 14,757,635) (7,662,474)

108,664,932)

25. SALES

Gross salesLess: Trade discounts and rebates

158,585,360) 958,869)

157,626,491)

131,040,241) 910,397)

130,129,844)

2008

(Rupees `000)

2007Note

Not later than one yearLater than one year and not later than five yearsLater than five years

53,770222,447

1,059,580

1,335,797

41,669173,097935,490

1,150,256

c) Post-dated cheques have been deposited with the Collector of Customs Port Qasim and Karachi Port Trustin accordance with the Customs' Act 1969 as an indemnity to adequately discharge the liability for the dutiesand taxes leviable on imports, as required under the Finance Bill 2005. As at June 30, 2008 the value ofthese cheques amounts to Rs 5,339.763 million (2007: Rs 4,820.228 million). The maturity dates of thesecheques extend to November 30, 2008.

d) Letters of credit and bank guarantees outstanding as at June 30, 2008 amount to Rs 3,830 million (2007:Rs 3,635 million).

2008

(Rupees `000)

2007Note

2,106,094 7,138,542 4,811,180

165,41348,552

14,269,781





30 . OTHER OPERATING INCOME

Income from financial assets / liabilitiesReversal of provision for impairment of trade debtsReversal of provision for impairment of other receivablesLiabilities no longer payable written backMark-up on short-term depositsMark-up on delayed payments

Income from non-financial assetsScrap salesProfit on disposal of property, plant and equipmentSundries

11.314.3

29.1 Salaries, wages and benefits include Rs 24.637 million (2007: Rs 18.961 million) in respect of staff retirementbenefits.

Note 2008

(Rupees `000)

2007

31 . OTHER OPERATING EXPENSES

Workers' profit participation fundWorkers' welfare fundExchange lossProvision for impairment of trade debtsProvision for impairment of other receivablesOther receivables written offFixed assets written offAuditors' remunerationLoss on disposal of property, plant and equipmentDonations

403,537156,115529,025513,820206,00622,22462,1413,535

–19,198

1,915,601

15,56910,72131,821

282,389 –

834 –

3,44815,50517,691

377,978

22.3

11.314.3

3.531.1

31.2

31.1 Auditors’ remuneration

Audit feeFee for substantiating inland freight equalisation marginAudit of Provident, Pension, Gratuity and Workers' Profit Participation FundsSpecial certifications, HSSE assurance audits and sundry advisory servicesOut of pocket expenses

33. TAXATION

Current - for the year - for prior periodsDeferred

2,053,705 200,000 332,541

2,586,246

31.2 Interest of the Directors or their spouses in the donations made during the year is as follow s:

Name of Donee and address

Shell LiveWIRE Trust(Shell House, 6, Ch.Khaliquzzaman Road, Karachi)

The Layton Rahmatulla Benevolent Trust(37-C, Phase II, Sunset LaneNo. 4, DHA, Karachi)

The Kidney Centre PostGraduate Training Institute(172/R, Rafiqui Shaheed Road,Karachi)

The Aga Khan University Hospital(Stadium Road, Karachi)

Lahore University ofManagement Sciences(DHA, Lahore Cantt.)

SOS Children's Villages of Pakistan(Ferozepur Road, Lahore)

Names of interested Directors and nature of interest

Mr. Zaiviji Ismail bin Abdullah -Chairman Board of Trustees

Mr. Yousuf Ali - TrusteeMr. Asif Sindhu - Trustee

(2007: Mr. Quentin D'Silva -Ex-Chairman Board of Trustees

Mr. Zaiviji Ismail bin Abdullah -Chairman Board of Trustees

Mr. Yousuf Ali - TrusteeMr. Asif Sindhu - Trustee)

Mr. Zaiviji Ismail bin Abdullah - TrusteeMr. Farrokh K. Captain - Trustee

(2007: Zaiviji Ismail bin Abdullah - TrusteeMr. Farrokh K. Captain - Trustee)

Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors

(2007: Mr. Quentin D'Silva - Ex-Member,Board of Governors

Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors)

(2007: Mr. Quentin D'Silva - Ex-Member,The Resource Development Committee

Mr. Zaiviji Ismail bin Abdullah - Member,The Resource Development Committee)

Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors

(2007: Mr. Manzoor H. Noon - Vice President)

2,000

3,000

2,000

–

1,150

–

2,000

4,500

4,200

100

–

500

32. FINANCE COST

Bank chargesAccretion expenseMark-up on short-term running finances and short-term loansFinance charge on liabilities against assets subject to finance lease

87,9705,141

873,7443,412

970,267

85,5295,623

783,611 3,335

878,098

89,779) (84,432)

(333,270)

(327,923)

123,836 7,802

14,52021,7657,345

14,432 70,230 46,523

306,453

– 5,394

168,186 5,7082,246

7,902 –

25,886

215,322

2,000 384

125

666 360

3,535

1,800 364

125

781 378

3,448

2008

(Rupees `000)

2007

2008

(Rupees `000)

2007Note

19





35. EMPLOYEE BENEFITS

35.1 Pension & Gratuity

As mentioned in note 2.16, the Company operates funded gratuity and pension schemes for all itsemployees. Contributions are made to these schemes on the basis of actuarial recommendations. The latestactuarial valuation was carried out as at June 30, 2008.

The information provided in notes 35.1.1 to 35.1.11, 35.2 and 35.3 has been obtained from the actuarialvaluations carried out as at June 30, 2008.

34. EARNINGS PER SHARE

34.1 Profit after taxation

Average number of ordinary shares in issue during the year

Earnings per share

5,137,094

54,790,313

93.76

No. of Shares

Rupees

33.1 Relationship betw een tex t expense and accounting profit

Accounting profit before taxation (excluding share of associate)

Tax rate

Tax on accounting profitTax effect of lower tax on certain income of the CompanyTax charge / (reversal) in respect of prior yearsTax impact on account of lower tax rate on share of profit of associateOthers

Tax expense for the current year

7,723,340

35%

2,703,169) (303,702) 200,000) (53,062) 39,841)

2,586,246)

2008

(Rupees `000)

2007

378,736)

35%

132,558(340,706) (84,432)(30,563) (4,780)

(327,923)

706,659

54,790,313

12.90

% per annum

11.09 13.25 13.25

35.1.1 Actuarial assumptions

The following significant assumptions were used in the valuation of these schemes:

- Expected long-term rate of increase in salary level- Discount rate- Expected long-term rate of return on assets

2008 2007

8.90 11.00 11.00

35.1.2 Net asset arising

Fair value of plan assets

Less: Present value ofdefined benefit obligation

Surplus / (deficit)

Unrecognised past service cost

Actuarial (gains) / losses to berecognised in future periods inaccordance with the Company'saccounting policy

Asset in respect of staff retirementbenefit schemes

2008

Management Non-Management Total

Pension Gratuity Pension Gratuity

(Rupees ‘000)

1,345,689)

(1,248,072)

97,617)

–

1,644)

99,261)

82,780)

(158,971)

(76,191)

–

85,694)

9,503)

64,759)

(35,941)

28,818)

–

(7,976)

20,842)

7,287

–

7,287

–

–

7,287

1,500,515)

(1,442,984)

57,531)

–

79,362)

136,893)

35.1.3 Movement in the fair value of plan assets

2008



2007



Total plan assets as at July 1

Expected return on plan assets

Contribution by the Company

Contribution by the employees

Benefits paid

Inter fund transfer

Actuarial (losses) / gains on plan assets

Total plan assets as at June 30

(Rupees ‘000) (Rupees ‘000)

1,215,336)

134,060)

63,241)

9,209)

(65,490)

–

(10,667)

1,345,689)

6,844)

753)

–

–

–

–

(310)

7,287)

65,398)

7,224)

568)

–

–

–

(8,431)

64,759)

1,371,199)

150,955)

83,141)

9,209)

(90,063)

–

(23,926)

1,500,515)

Note

35.1.3

35.1.4

89,789)

8,871)

17,323)

–

(32,712)

–

350)

83,621)

1,089,853)

117,130)

61,937)

8,726)

(77,442)

–

15,132)

1,215,336)

6,520)

703)

–

–

–

(230)

(149)

6,844)

59,173)

6,381)

540)

–

(502)

230)

(424)

65,398)

1,245,335)

133,085)

79,800)

8,726)

(110,656)

–

14,909)

1,371,199)

83,621)

8,918)

19,332)

–

(24,573)

–

(4,518)

82,780)

34.2 There were no convertible potential ordinary shares in issue as at June 30, 2008 and June 30, 2007.

2007



(Rupees ‘000)

1,215,336)

(1,110,297)

105,039)

–

(24,623)

80,416)

83,621)

(145,145)

(61,524)

–

76,542)

15,018)

65,398)

(31,781)

33,617)

1,096)

(17,098)

17,615)

6,844

–

6,844

–

–

6,844

1,371,199)

(1,287,223)

83,976)

1,096)

34,821)

119,893)





35.1.4 Movement in the present value of defined benefit obligation

Present value of obligation as at July 1

Current service cost

Interest cost

Benefits paid

Past service cost

Actuarial losses / (gains) on obligation

Present value of obligation as at June 30

2008



2007




1,110,297)

70,378)

118,625)

(65,490)

–

14,262)

1,248,072)

145,145)

14,955)

14,650)

(24,573)

–

8,794)

158,971)

–

–

–

–

–

–

–

31,781)

1,447)

3,496)

–

–

(783)

35,941)

1,287,223)

86,780)

136,771)

(90,063)

–

22,273)

1,442,984)

35.1.5 Amount recognised in the profit and loss account

2008



2007



Current service cost

Interest cost

Expected return on plan assets

Past service cost

Actuarial (gain) / loss recognised during the year

Employee contributions

Expense / (reversal) for the year

Actual return on plan assets


70,378)

118,625)

(134,060)

–

(1,338)

(9,209)

44,396)

123,393)

14,955)

14,650)

(8,918)

–

4,160)

–

24,847)

4,400)

–

–

(753)

–

310)

–

(443)

(1,207)

1,447)

3,496)

(7,224)

1,096)

(1,474)

–

(2,659)

443)

86,780)

136,771)

(150,955)

1,096)

1,658)

(9,209)

66,141)

127,029)

1,030,062)

65,859)

106,973)

(77,442)

–

(15,155)

1,110,297)

139,141)

14,188)

13,281)

(32,712)

–

11,247)

145,145)

4

–

–

–

–

(4)

–

27,971)

1,315)

2,989)

(502)

1,096)

(1,088)

31,781)

1,197,178)

81,362)

123,243)

(110,656)

1,096)

(5,000)

1,287,223)

65,859)

106,973)

(117,130)

322)

(8,726)

47,298)

132,262)

14,188)

13,281)

(8,871)

3,730)

–

22,328)

9,221)

–

–

(703)

145)

–

(558)

554)

1,315)

2,989)

(6,381)

(1,454)

–

(3,531)

5,957)

81,362)

123,243)

(133,085)

2,743)

(8,726)

65,537)

147,994)

35.1.6 Movement in the asset / (liability) recognised in the balance sheet

2008



2007



Balance at July 1

Net (charge) / reversal for the year

Contributions by the Company

Transfers between funds

Asset in respect of staff retirement benefit schemes

Current account balance with funds

Balance in respect of secondedstaff


80,416)

(44,396)

63,241)

–

99,261)

2,649)

(15,475)

86,435)

15,018)

(24,847)

19,332)

–

9,503)

12,200)

(5,413)

16,290)

17,615)

2,659)

568)

–

20,842)

477)

–

21,319)

6,844)

443)

–

–

7,287)

–

(442)

6,845)

119,893)

(66,141)

83,141)

–

136,893)

15,326)

(21,330)

130,889)

2008



2007



Defence Saving Certificates (DSC's)

Others (PIB's,TFC's etc)

Mutual Fund Units

Cash

Receivable and (payable) balances

35.1.7 Plan assets comprised of the follow ing

2008



2007



Defence Saving Certificates (DSC's)

Others (PIB's,TFC's etc)

Mutual Fund Units

Cash

Receivable and (payable) balances


(Percentage Composition) (Percentage Composition)

–

52,496)

40,388)

7,107)

(17,211)

82,780)

153,804)

1,084,048)

102,962)

28,054)

(23,179)

1,345,689)

2,745)

2,316)

2,232)

2)

(8)

7,287)

–

27,111)

10,463)

29,350)

(2,165)

64,759)

156,549)

1,165,971)

156,045)

64,513

(42,563)

1,500,515)

11%

81%

8%

2%

(2% )

100%

0%

63%

49%

9%

(21% )

100%

38%

32%

30%

0%

0%

100%

0%

42%

16%

45%

(3% )

100%

10%

78%

11%

4%

(3% )

100%

65,777)

(47,298)

61,937)

–

80,416)

37,835)

(17,322)

100,929)

20,023)

(22,328)

17,323)

–

15,018)

17,274)

(4,260)

28,032)

13,314)

3,531)

540)

230)

17,615)

(7,061)

–

10,554)

6,516)

558)

–

(230)

6,844)

(12,060)

–

(5,216)

105,630)

(65,537))

79,800)

–

119,893)

35,988)

(21,582)

134,299)

13,135)

24,816)

26,443)

37,134)

(17,907)

83,621)

647,104)

129,086)

63,300)

409,578)

(33,732)

1,215,336)

2,473)

2,248)

1,999)

281)

(157)

6,844)

38,922)

–

–

29,749)

(3,273)

65,398)

701,634)

156,150)

91,742)

476,742)

(55,069)

1,371,199)

53%

11%

5%

34%

(3%)

100%

16%

30%

32%

44%

(22%)

100%

36%

33%

29%

4%

(2%)

100%

60%

0%

0%

45%

(5%)

100%

51%

11%

7%

35%

(4%)

100%





35.1.8 The expected return on plan assets was taken as 13.25%, which is representative of yields on long-termGovernment bonds and term deposits with banks. Due to the increased volatility in the equity prices inrecent months, there is no clear indication of return on equity. It is therefore assumed that the yield onequity matches that on debt.

35.1.9 Expected contributions to the above schemes for the year ending June 30, 2008 is Rs 134 million.

35.1.10 The balances due from / payable to the funds are interest free and repayable on demand.

35.1.11 The break-up of balance receivable from staff retirement benefit schemes is:

Total balance receivable in respect of defined benefit schemesTotal balance receivable in respect of defined contribution schemes

35.2 Post retirement medical benefits

The Company also provides post retirement medical benefits to its management staff. Actuarial valuationof the scheme is carried out annually. The amount recognised in the balance sheet is based on a valuationcarried out as at the balance sheet date and is as follows:

2008

(Rupees `000)

2007

130,88912,440

143,329

134,29962,875

197,174

2008 2007

- Discount rate- Expected long-term rate of increase in medical cost

13.3%7.9%

11.0%5.7%

35.2.1 Actuarial assumptions

2008

(Rupees `000)

2007

Present value of defined benefit obligationLess: Fair value of plan assets

Actuarial losses to be recognised in future periods in accordance with the Company's accounting policy

Liability recognised at June 30

38,503 –

38,503

10,905

27,598

38,304 –

38,304

12,403

25,901

The following significant assumptions were used in the valuation of this scheme:

35.2.2 Amount recognised in the balance sheet

2008

(Rupees `000)

2007

Balance at July 1Add: Charge for the yearLess: Payments during the year

Balance at June 30

Current service costInterest costActuarial loss recognised during the year

25,901) 5,622)

(3,925)

27,598)

983) 4,003)

636)

5,622)

24,025) 5,255)

(3,379)

25,901)

907) 3,726)

622)

5,255)

35.2.3 Movement in the liability recognised in the balance sheet

35.2.4 Amount recognised in the profit and loss account

35.2.5 The effect of a 1% movement in the assumed medical cost trend rate is as follow s:

Increaseof 1%

Decreaseof 1%

7924,462

(629) (3,696)

Additional expense / (income)- Effect on the aggregate of the current service cost and interest cost for the year- Effect on the defined benefit obligation as at June 30, 2008

35.3 Five year data on surplus / deficit of the plans and experience adjustments

The Company amortises gains and losses over the expected remaining service of current plan members.The following table shows the total pension, gratuity and post retirement medical benefit obligation at theend of each year and the proportion thereof resulting from experience loss during the year, Similarly, itshows the total pension and gratuity plan assets at the end of each year and the proportion thereofresulting from experience gain during the year.

2008 2007 2006 2005 2004 ----------------------------- (Rupees '000) -------------------------------

Present value of defined benefit obligation 1,481,487 1,325,527 1,233,387 1,076,567 956,352Fair value of plan assets 1,500,515 1,371,199 1,245,335 1,099,066 1,111,049

Surplus 19,028 45,672 11,948 22,499 154,697

Experience adjustments:Loss on obligation 1 - 2 7 2(Loss) / gain on plan assets (2) 1 1 (7) 3

----------------------------------- (Percentage) -------------------------------





35.4 The value of investments made by the staff retirement funds operated by the Company as per their lastaudited financial statements are as follows:

Shell Pakistan Management Staff Provident FundShell Pakistan Staff Provident FundShell Pakistan Labour Provident FundShell Pakistan Management Staff Gratuity FundShell Pakistan Labour and Clerical Staff Gratuity FundShell Pakistan Management Staff Pension FundShell Pakistan Staff Pension Fund

394,17116,53183,02654,87455,795

1,235,1967,170

2007

(Rupees `000)

2006

December 31

35.5 Aggregate amount charged in these financial statements in respect of the staff retirement benefit schemesare as follows:

2008

(Rupees `000)

2007

- in respect of pension and gratuity schemes- in respect of provident funds- in respect of post retirement medical benefit schemes

66,14123,5185,622

95,281

65,537 21,834

5,255

92,626

391,791 14,005 73,418 85,098 62,409

1,099,001 6,470

35.6 Share based payment

The Shell Group had a Performance Share Plan (PSP) which was launched in 2005. Under the PSP a conditionalnumber of Royal Dutch Shell Plc. (RDS) shares were awarded to some of the Company's employees. Underthis scheme if certain Performance Conditions of Shell Group are met, a number of shares may be awardedto the participants at the end of the three year performance period. These shares vested with employees in thecurrent year and the benefit provided is recharged by RDS to Shell Pakistan Limited. The cost of this benefithas been disclosed in note 36.

In the current year, effective January 1, 2008, the Shell Group has launched another PSP for three years withsimilar conditions under which shares may be awarded at the completion of performance period. No amounthas been accrued in the financial statements in respect of this plan as it is presently not determinable.

36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

2008

ChiefExecutive

Directors Executives

2007

ChiefExecutive

Directors Executives

36.1 Aggregate amount charged in the financial statements for the year for fee to 5 Non-Executive Directorswas Rs 250,000 (2007: 5 Non-Executive Directors Rs 175,000). In addition, an amount of Rs 3,848 millionwas charged in these financial statements in respect of share based compensation to the former ChiefExecutive of the Company.

36.2 In addition, the Chief Executive, Directors and some of the Executives were also provided with free use ofCompany maintained cars and the Chief Executive was also provided with Company provided furnishedaccommodation.

(Rupees ‘000)

Short-term employee benefitsManagerial remuneration (including bonus)Housing: - Rent - Utilities - Other items

Medical expensesShares based payment

Post-employment benefitsCompany's contribution to pension,gratuity and provident fund

Number of persons at year end

14,287

3,136 1,461 3,421

1061,835

24,246

–

24,246

1

20,548

– 1,040

458

234 2,884

25,164

2,993

28,157

3

660,201

– 34,730

5,048

7,922 10,923

718,824

90,500

809,324

443

11,451

1,912 916

2,569

509 –

17,357

210

17,567

1

476,024

– 26,601

4,821

11,021 –

518,467

64,307

582,774

271

22,032

– 753 228

237 –

23,250

2,279

25,529

4





37. RELATED PARTY TRANSACTIONS

(i) Purchases

(ii) Sales

(iii)Other items

- Technical service fee charged

- Trade marks and manifestations license fee charged

- Computer expenses charged (Global Infrastructure Desktop charges)

- Expenses recovered from related parties

- Other expenses charged by related parties

- Legal charges

80,999,199

3,091,364

–

162,118

80,821

82,806

111,088

395

49,986,635

6,792,163

–

65,242

87,869

53,021

90,164

2,369

37.1 In addition to this, the Company also paid pipeline transportation expenses amounting to Rs 969.860million (2007: Rs. 1,012.743 million) to PAPCO which is an associate of the company.

37.2 Purchases from / sales to related parties are made on commercially agreed terms negotiated by the Company.The related outstanding balances have been disclosed in relevant notes to these financial statements.

37.3 Technical services include advice and assistance on the implementation of strategies and in the Company'soperations. The costs for these services and the fees have been determined on the basis of agreementsbetween the Company and related Shell Group companies based on an agreed methodology.

37.4 Trade marks and manifestations license fee and Global Infrastructure Desktop charges are based on theagreements entered into by the Company.

37.5 Transactions and balances with staff retirement benefit schemes are disclosed in note 35 to these financialstatements.

37.6 Transactions and outstanding balance in respect of the Workers' Profit Participation Fund are disclosed in note 22.3 to these financial statements.

37.7 Expenses recovered from / charged by related parties are based on actuals. The related outstanding balanceshave been disclosed in notes 14 and 22.1 to these financial statements.

37.8 Key management personnel are those persons having authority and responsibility for planning, directingand controlling the activities of the company directly or indirectly. The Company considers its Chief Executiveand Executive Directors to be key management personnel.

Particulars of transactions entered with key management personnel are as per the terms of their employmentand are disclosed in note 3.4, 5 and 36 to these financial statements.

Other related parties

2008 2007

(Rupees ‘000)

–

–

583,169

–

132,599

–

–

–

–

539,682

–

–

150,798

–

–

Parent company

2008 2007

Note

29

29

Note 2008

(Rupees `000)

2007

15

2021

3.23231143130

14.330 & 31

4.13032

38.1

38. CASH GENERATED FROM OPERATIONS

Profit before taxation

Adjustment for non-cash charges and other items:

Depreciation / amortisation expense charged to the profit and loss accountAccretion expense in respect of asset retirement obligationProvision for impairment of trade debtsProvision for impairment of other receivablesFixed assets written offReversal of provision for impairment of trade debtsReversal of provision for impairment of other receivables(Profit) / loss on disposal of property, plant and equipmentShare of profit of associateMark-up on short-term depositsMark-up on short-term running finances and loansWorking capital changes

38.1 Work ing capital changes

Decrease / (increase) in current assetsStores and sparesStock-in-trade (net)Trade debtsLoans and advances (net)Trade deposits and short-term prepayments (net)Other receivables (net)

Increase / (decrease) in current liabilities Trade and other payables

(excluding unclaimed dividends)

39. CASH AND CASH EQUIVALENTS

Cash and bank balancesShort-term running finances utilised under mark-up arrangementsShort-term loans

7,723,340)

679,632) 5,141)

513,820)206,006)62,141)

(123,836)(7,802)

(70,230)(212,248)(21,765)873,744)

(6,594,929)

3,033,014)

16,958)(9,851,469)

(953,077)(4,309)

(67,625)(305,949)

(11,165,471)

4,570,542)

(6,594,929)

872,414)

(4,338,339)(1,500,000)

(4,965,925)

378,736)

588,674)5,623)

282,389)7,802)–––

15,505)(122,250)

(5,708)784,321)324,616)

2,259,708)

(1,421)1,735,832)

698,013)(899)

27,078)(2,017,123)

441,480)

(116,864)

324,616)

814,530)

(725,836)(6,810,000)

(6,721,306)





40. FINANCIAL ASSETS AND LIABILITIES

40.1 The Company's exposure to interest rate risk on its financial assets and liabilities at the balance sheet dateare summarised as follows:

Financial assets

InvestmentsLoans and advancesDepositsTrade debtsOther receivablesCash and bank balances

Financial liabilities

Liabilities against assets subject to finance leaseRunning finance utilised under mark-up arrangementsLoansTrade and other payablesMark-up accrued

On balance sheet gap (a)

2008

(Rupees ‘000)

Non Interest / Mark-up bearing

Maturity

upto one

year

Maturity

after one

year

Subtotal Total

Interest / Mark-up bearing

Maturity

upto one

year

Maturity

after one

year

Subtotal

a) The on balance sheet gap represents the net amounts of on-balance sheet items.

Financial assets

InvestmentsLoans and advancesDepositsTrade debtsOther receivablesCash and bank balances

Financial liabilities

Liabilities against assets subject to finance leaseRunning finance utilised under mark-up arrangementsLoansTrade and other payablesMark-up accrued

On balance sheet gap (a)

– 41,883)

–328,227

– 770,408)

812,291)

32,203)

725,836) 6,810,000)

– –

7,568,039)

(6,755,748)

– 61,580

– – – –

61,580

547

– – – –

547

61,033

– 103,463)

– – –

770,408)

873,871)

32,750)

725,836) 6,810,000)

– –

7,568,586)

(6,694,715)

– 837)

–)4,251,325)

4,165,412) 44,122)

8,789,923)

–

– –

11,126,427) 131,580)

11,258,007)

(2,468,084)

5,000 120,999 29,390

– – –

155,389

–

– – – –

–

155,389

5,000) 121,836) 29,390)

4,579,552) 4,165,412)

44,122)

8,945,312)

–

– –

11,126,427) 131,580)

11,258,007)

(2,312,695)

5,000) 225,299)

29,390) 4,579,552) 4,165,412)

814,530)

9,819,183)

32,750)

725,836) 6,810,000)

11,126,427) 131,580)

18,826,593)

(9,007,410)

2007

(Rupees ‘000)

Non Interest / Mark-up bearing

Maturityupto one

year

Maturityafter one

yearSubtotal Total

Interest / Mark-up bearing

Maturityupto one

year

Maturityafter one

yearSubtotal

–

42,259)

–

291,541)

–

817,271)

1,151,071)

56,742)

4,338,339)

1,500,000)

–

–

5,895,081)

(4,744,010)

–

102,924)

–

426,461)

–

817,271)

1,346,656)

58,958)

4,338,339)

4,000,000)

–

–

8,397,297)

(7,050,641)

–

60,665)

–

134,920)

–

–

195,585)

2,216)

–

2,500,000)

–

–

2,502,216)

(2,306,631)

–

4,770)

–

4,613,399)

4,205,504)

55,143)

8,878,816)

–

–

–

17,026,699)

157,268)

17,183,967)

(8,305,151)

5,000

85,716

59,009

–

–

–

149,725

–

–

–

–

–

–

149,725

5,000)

90,486)

59,009)

4,613,399)

4,205,504)

55,143)

9,028,541)

–

–

–

17,026,699)

157,268)

17,183,967)

(8,155,426)

5,000)

193,410)

59,009)

5,039,860)

4,205,504)

872,414)

10,375,197)

58,958)

4,338,339)

4,000,000)

17,026,699)

157,268)

25,581,264)

(15,206,067)

The effective interest / mark-up rates for the monetary financial assets and liabilities are mentioned in therespective notes to the financial statements.

40.2 Financial risk management objectives and policies

The Company finances its operations through equity, borrowings and management of working capitalwith a view to maintaining an appropriate mix between various sources of finance to minimise risk.Taken as a whole, the Company's risk arising from financial instruments is limited as there is no significantexposure to price and cash flow risk in respect of such instruments.

40.2.1 Credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date if counter partiesfailed completely to perform as contracted.

The Company’s credit risk is primarily attributable to its receivables. Out of the financial assets aggregatingRs 10,375.197 million (2007: Rs 9,819.183 million) the financial assets subject to credit risk amountto Rs 10,320.054 million (2007: Rs 9,775.061 million). The Company manages credit risk of receivablesthrough the monitoring of credit exposures, limiting transactions with customers and continuing assessmentof the credit worthiness of customers. Credit risk for balances at bank is limited by dealing with variousbanks with reasonably high credit rating.

Significant receivable balances relate to the balances due from the Government of Pakistan (includingits related agencies) and balances due from related parties. The Company believes that it is not exposedto any specific credit risk in respect of these balances.

40.2.2 Currency risk

Foreign currency risk arises mainly where payables exist due to imports of goods and transactions withforeign related parties as well as trade receivables from foreign related parties. The Company obtainsforward exchange cover, where necessary and permissible, to hedge foreign currency exposure.

40.2.3 Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulties in raising funds to meet commitmentsassociated with financial instruments.

Through its treasury function, the Company continually monitors its liquidity position and ensuresavailability of funds by maintaining flexibility in funding by keeping committed credit lines available.

During the course of the year, the Company faced unprecedented liquidity issues on account of delayin settlement of Price Differential Claims (PDC) recoverable from Government of Pakistan (GoP), wherebythe Company had to enhance its borrowing limits with Commercial banks. The Company has vigorouslyengaged with the concerned stakeholders at various forums for the early recovery and settlement ofthese receivables. As at June 30, 2008 the GoP has settled all outstanding claims of PDC upto June 15,2008.

40.2.4 Interest rate risk

Interest risk arises from possibility that changes in interest rate will affect the value of financial instruments.The company is not materially exposed to interest rate changes.



40.3 Capital Risk Management

The Company's prime objective when managing capital is to safeguard its ability to continue as a goingconcern in order to provide adequate returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paidto shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. Thisratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cashand bank balances. Total capital is calculated as equity as shown in the balance sheet plus net debt.

Total BorrowingsLess: Cash and bank balances

Net DebtTotal Equity

Total Capital

Gearing Ratio

40.4 Financial risk management objectives and policies

The Company finances its operations through equity, borrowings and management of working capital witha view to maintaining an appropriate mix between various sources of finance to minimise risk. Taken asa whole, the Company's risk arising from financial instruments is limited as there is no significant exposureto price and cash flow risk in respect of such instruments.

40.5 Fair value of financial instruments

The carrying value of financial instruments reflected in the financial statements approximate their fair values.

41. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with approved accounting standards requires the useof certain critical accounting estimates. It also requires management to exercise its judgement in the processof applying the Company's accounting policies. Estimates and judgements are continually evaluated andare based on historical experience, including expectations of future events that are believed to be reasonableunder the circumstances. The areas where various assumptions and estimates are significant to the Company'sfinancial statements or where judgement was exercised in application of accounting policies are as follows:

i) Provision for impairment of trade debts and other receivables (note 11 and note 14);ii) Asset retirement obligations (note 19);iii) Taxation (note 33); andiv) Accounting for staff retirement benefit schemes (note 35).

(Rupees ‘000)

2008 2007


42. CORRESPONDING FIGURES

For better presentation the following significant reclassifications in the corresponding figures have been made:

Description

Long-term debtors

Workers’ profit participation fund

Workers’ welfare fund

Exchange loss

Provision for impairment oftrade debts

Other receivables written off

Auditors’ remuneration

Loss on disposal of property,plant and equipment

Donations

43. DIVIDENDS

Subsequent to the year end, the Board of Directors of the Company in their meeting held on August 11,2008 have proposed a final cash dividend for the year ended June 30, 2008 of Rs 40.00 per share(400%). This is in addition to the interim cash dividend of Rs 10.00 per share resulting in a total cashdividend for the year of Rs 50.00 per share (2007: Rs 16.00 per share) amounting to Rs 2,739.516million (2007: Rs 876.645 million). The Directors have also recommended a stock dividend through theissue of bonus shares in the proportion of 1 share for every 4 shares held (25%). The bonus shares, soissued shall not be eligible for the final cash dividend declared for the year ended June 30 2008. Theapproval of the members for the final cash dividend and proposed bonus issue will be obtained in theAnnual General Meeting to be held on September 25, 2008.

44. GENERAL

Figures have been rounded off to the nearest thousand.

45. DATE OF AUTHORISATION

These financial statements were authorised for issue on August 11, 2008 by the Board of Directors ofthe Company.

Head of account of thefinancial statements for theyear ended June 30, 2007

Trade debts (note 11)

Profit and loss account

Profit and loss account

Finance cost (note 32)

Administrative and marketingexpenses (note 29)





Head of account of thefinancial statements for theyear ended June 30, 2008

Long-term debtors (note 7)

Other operating expenses (note 31)








(Rupees ‘000)

328,227

15,569

10,721

31,821

282,389

834

3,448

15,505

17,691


8,397,297)

(872,414)

7,524,883)

13,611,638)

21,136,521)

35.6%

7,568,586)(814,530)

6,754,056)9,460,771)

16,214,827)

41.7%





Attendance at Board Meetingsfor the year ended June 30, 2008

Pattern of Shareholdingfor the year ended June 30, 2008

Number ofShares Held

8,016,484881,793

2,446,496551,71465,382

944,16441,699,176

142,14542,959

54,790,313

* This category represents the foreign shareholding of The Shell Petroleum Company Ltd., London.

** This category represents shareholders of Bangladesh, whose dividend is paid to the Administrator,Abandoned Properties Organisation, Government of Pakistan.

Shareholding

67,886573,920580,079

1,811,848942,568498,877235,752355,743268,774161,57036,675

129,80195,363

105,022170,717186,20065,001

145,500175,73796,718

100,212215,600129,687135,400284,520173,000178,202220,000232,137249,312262,776274,885375,740413,725548,375812,968

1,780,84741,699,17654,790,313

Total Numberof Shares Held

100500

1,0005,000

10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,00070,00075,00090,000

100,000105,000110,000130,000140,000145,000175,000180,000220,000235,000250,000265,000275,000380,000415,000550,000815,000

1,785,00041,700,000

To

1101501

1,0015,001

10,00115,00120,00125,00130,00135,00140,00145,00150,00155,00160,00165,00170,00185,00195,001

100,001105,001125,001135,001140,001170,001175,001215,001230,001245,001260,001270,001375,001410,001545,001810,001

1,780,00141,695,001

From

1,6092,000

79483813641131610

51322331221121121111111111111

5,502

Number ofShareholders

––––––––––––––––––––––––––––––––––––

Percentage %

14.631.614.461.010.121.72

76.110.260.08

100.00

5,389219

6048119

5,502

ShareholdersCategory

IndividualsInvestment CompaniesInsurance CompaniesJoint Stock CompaniesModaraba CompaniesFinancial InstitutionsAssociated Companies*Abandoned Properties**Others


Mr. Zaiviji Ismail bin Abdullah 6 6

Mr. Yousuf Ali 6 6

Mr. Akber Aziz 6 6

Mr. Saw Choo-Boon 6 2

Mr. Farrokh K. Captain 6 5

Mr. Hussain Dawood 4 1

Mr. Ijaz A. Khan 6 5

Mr. M. Azam Khan 6 6

Mr. Leon Menezes 6 6

Mr. Manzoor H. Noon 6 3

Mr. Asif Sindhu 6 6

Mr. Fatehali W. Vellani 2 2

*held during the period concerned Director was on the Board.

Total No.of Board Meetings*

No. of BoardMeetings AttendedName of Directors


Pattern of Shareholdingfor the year ended June 30, 2008

Additional Information

Shareholders’ Category

Associated companiesThe Shell Petroleum Company Limited, London

NIT and ICPNational Investment TrustNational Bank of Pakistan Trustee DepartmentInvestment Corporation of Pakistan

DirectorsMr. Farrokh K. CaptainMr. Imran R. IbrahimMr. Zaffar A. KhanMr. Badaruddin F. VellaniMs. Shahnaz Wazir Ali

Chief Executive Officer

Directors’ / CEO’s spousesMs. Samina

w/o. Mr. Imran R. Ibrahim

Executives

Public sector companies and corporations

Banks, Development Finance Institutions, Non-bank ing FinanceInstitutions, Insurance Companies,Modarabas and Mutual Funds

Shareholders holding 10% or more voting interestThe Shell Petroleum Company Limited, London

1

–1–

11111

–

1

7

3

39

1

Numberof Shares Held


41,699,176

–1,835

–

375,853781

3,125100

5

–

1,085,030

3,121

2,507,424

1,830,411

41,699,176

as of December 31, 2007

Shell Pakistan Limited

Accounts of Subsidiary Companies



Shell Pakistan Provident Trust (Pvt.) Ltd.

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Shell Pak istan Provident Trust (Private) Limited as at December 31, 2007 togetherwith the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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 statement in conformity with the approved accounting standards and the requirements of the Companies Ordinance,1984. Our responsibility is to express an opinion on the statement based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we planand perform the audit to obtain reasonable assurance about whether the above said statement is free of any material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statement. An auditalso includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statement. We believe that our audit provides a reasonable basis for our opinion and, after dueverification, we report that:

a) in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

b) in our opinion:

i) the balance sheet together with the notes thereon has been drawn up in conformity with the Companies Ordinance, 1984, andis in agreement with the books of account;

ii) no business was conducted, expenditure incurred or investments made during the year;

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet together withthe notes thereon conforms with approved accounting standards as applicable in Pakistan, and, gives the information required bythe Companies Ordinance, 1984, in the manner so required and gives a true and fair view of the state of the company's affairsas at December 31, 2007; and

d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

A.F.Ferguson & Co.Chartered AccountantsKarachi: August 20, 2008

AUTHORISED CAPITAL10 ordinary shares of Rs 100 each

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL2 ordinary shares of Rs 100 each fully paid in cash

ASSETSCash in hand

Balance Sheet as at December 31, 2007

Note 1: The Board of Directors of the company has decided to liquidate the company and the process of liquidation has commenced.

Note 2: As there were no transactions during the year, no profit and loss account has been prepared.

1,000

200

200

1,000

200

200

2007(Rupees)

2006(Rupees)


Leon MenezesDirector

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Shell Pak istan Pensions Trust (Private) Limited as at December 31, 2007 togetherwith the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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 statement in conformity with the approved accounting standards and the requirements of the Companies Ordinance,1984. Our responsibility is to express an opinion on the statement based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we planand perform the audit to obtain reasonable assurance about whether the above said statement is free of any material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statement. An auditalso includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statement. We believe that our audit provides a reasonable basis for our opinion and, after dueverification, we report that:

a) in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

b) in our opinion:

i) the balance sheet together with the notes thereon has been drawn up in conformity with the Companies Ordinance, 1984, andis in agreement with the books of account;

ii) no business was conducted, expenditure incurred or investments made during the year;

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet together withthe notes thereon conforms with approved accounting standards as applicable in Pakistan, and, gives the information required bythe Companies Ordinance, 1984, in the manner so required and gives a true and fair view of the state of the Company's affairsas at December 31, 2007; and

d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

A.F.Ferguson & Co.Chartered AccountantsKarachi: August 20, 2008

AUTHORISED CAPITAL10 ordinary shares of Rs 100 each

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL2 ordinary shares of Rs 100 each fully paid in cash

ASSETSCash in hand

Balance Sheet as at December 31, 2007

Note 1: The Board of Directors of the company has decided to liquidate the company and the process ofliquidation has commenced.

Note 2: As there were no transactions during the year, no profit and loss account has been prepared.

1,000

200

200

1,000

200

200

2007(Rupees)

2006(Rupees)


Leon MenezesDirector

Shell Pakistan Pensions Trust (Pvt.) Ltd.

Form of ProxyThe SecretaryShell Pak istan LimitedShell House6, Ch. Khaliquzzaman RoadP.O. Box No. 3901Karachi – 75530

I/We

of in the district of

being a member of Shell Pakistan Limited and holder of

Ordinary Shares as per Share Register Folio(No. of Shares)

No. and/or CDC Participant I. D. No.

and Sub Account No. hereby appoint

of in the district of

or failing him of

as my/our proxy to vote for me/us and on my/our behalf at the Thirty-Ninth Annual General Meeting of the Company

to be held on September 25, 2008 at 10 a.m. and at any adjournment thereof.

Signed this day of 2008.

WITNESSES:

1. Signature

Name

Address

NIC or

Passport No.

2. Signature

Name

Address

NIC or

Passport No.

Note:

1. A member entitled to be present and vote at the Meeting may appoint a proxy to attend. A proxy is entitled tospeak, vote, demand or join in demanding a poll. A proxy need not be a member of the Company.

2. Proxies in order to be effective must be received at the Registered Office of the Company not less than 48 hoursbefore the Meeting.

3. CDC Shareholders and their Prox ies must each attach an attested photocopy of their National Identity Cardor Passport with this proxy form.

Signature

(Signature should agree with the specimen

signature registered with the Company)

Documents

Shell Annual Report 08 C