Annual Report 2017 Dawood Hercules Corporation Limited Who We Are Dawood Hercules Corporation Limited (DH Corp) listed on the Pakistan Stock Exchange, with a market capitalization of approximately USD 580 million. DH Corp’s vision is to make fundamental necessities available, affordable and sustainable for the developing world via pairing capital with capability and with ideas that will have the biggest impact. CONTENTS 02 Vision 03 Purpose 04 Governance 10 Performance highlights 12 Company information 14 Board of Directors 21 Committees 24 Operating Highlights 24 Six years at a glance 26 Horizontal analysis (Balance sheet) 28 Vertical analysis (Balance sheet) 30 Horizontal analysis (Profit & loss) 30 Vertical analysis (Profit & loss) 32 Statement of value addition 34 Notice of annual general meeting 47 Directors training programme 40 Chairman’s Review 47 Related party transactions 43 Directors’ Report 48 Future outlook 43 Economic scenario 48 Acknowledgment 44 Business overview 50 Review report on statement of compliance 45 Financial performance 51 Statement of compliance 45 Earnings per share 54 Financial Statements 45 Auditors 55 Auditor’s report to the members 45 Shares traded 56 Financial statements 46 Pattern of shareholding 61 Notes to the financial statements 46 Market capitalization & book value 95 Consolidated financial statements 46 Appropriation 97 Auditor’s report 46 Entity rating 98 Consolidated financial statements 46 Contribution to the national exchequer 105 Notes to the consolidated financial and economy statements 46 Provident & gratuity funds 199 Pattern of shareholding 46 Board of Directors 203 Form of proxy 46 Board meetings 220 Directors' Report (Urdu) 47 Statement of directors’ responsibility © 2017-18 Dawood Hercules Corporation Limited All Rights Reserved. No part of this publication may be reproduced without the prior written permission of the publisher. Vision To make fundamental necessities affordable and sustainable for the developing world via pairing capital with capability and with ideas that will have the biggest impact. Purpose Basic human and industrial necessities are inextricably linked to economic empowerment. Population and GDP growth are putting more pressure on the existing supply of food and energy, as well as connectivity infrastructure. Thus we believe that achieving our vision will require supply side innovation to improve productivity. We have a long track record of improving efficiencies and productivity in multiple sectors. We believe in deep collaboration between group companies that will allow us to innovate in ways others can’t, and we will only participate in markets where we can make a significant contribution. We are not going to settle for anything less than excellence in every aspect of our work. Governance The Board of Directors provides the required Governance to lead the company in on the path to achieve its Vision and Purpose. CORE VALUES Diversity We respect the dignity, rights and views of others and will provide unrestricted opportunity for personal advancement to employees irrespective of gender, ethnicity, beliefs, cultures and religions. CORE VALUES Teamwork We are committed to work as a team to achieve common goals whilst fairly recognizing and rewarding individual contributions on merit. CORE VALUES Accountability We will be accountable as individuals and as employees for our ethical conduct and for compliance with applicable laws and policies and directives of the Board. CORE VALUES Commitment to Excellence We will drive and achieve results while pursuing the highest standards and maximizing the use of resources. CORE VALUES Integrity We will conduct ourselves with uncompromising ethics and honesty at all times, in all situations, both professionally and personally. PERFORMANCE HIGHLIGHTS CONSOLIDATED Key Figures 2017 PKR Revenue 128,593 18% Million 2016 PKR 157,208 Million 2017 PKR 16,246 After Tax Million -78% 2017 2016 PKR Share Price -22.48% PKR 111.88 73,438 Million 2016 PKR 144.33 10 Dawood Hercules Corporation Limited 2017 PKR Shareholders 177,465 Equity Million 2.6% 2016 PKR 172,962 Million 2017 PACRA Rating AA- (Long Term) 2017 PKR 2016 4 Distribution Per Share AA- 2016 PKR 15.5 Per Share Annual Report 2017 11 COMPANY INFORMATION Board of Directors Chief Financial Officer & Mr. Hussain Dawood - Chairman Company Secretary Mr. M. Abdul Aleem - Director Mr. Shafiq Ahmed Mr. Shahzada Dawood - Director Mr. Samad Dawood - Director Registered Office Ms. Sabrina Dawood - Director Dawood Centre, M.T. Khan Road Karachi-75530 Mr. Parvez Ghias - Director Tel: +92 (21) 35686001 Mr. Shabbir Hussain Hashmi - Director Fax: +92 (21) 35633972 Mr. Muneer Kamal - Director Email: [email protected] Mr. Hasan Reza Ur Rahim - Director Website: www.dawoodhercules.com Mr. Inam ur Rahman - Chief Executive Officer Bankers Board Audit Committee Allied Bank Limited Mr. M. Abdul Aleem - Chairman Bank Alfalah Limited Mr. Shabbir Hussain Hashmi - Member Bank Al-Habib Limited Mr. Parvez Ghias - Member Habib Bank Limited Habib Metropolitan Bank Limited Board Compensation Committee JS Bank Limited Mr. Samad Dawood - Chairman MCB Islamic Bank Limited Mr. M. Abdul Aleem - Member United Bank Limited Mr. Parvez Ghias - Member 12 Dawood Hercules Corporation Limited Auditors Tax Consultants A.F. Ferguson & Co. A.F. Ferguson & Co. Chartered Accountants Chartered Accountants State Life Building No 1-C I.I. Chundrigar Road State Life Building No 1-C I.I. Chundrigar Road P.O. Box 4716, Karachi- 74000 P.O. Box 4716, Karachi- 74000 Tel: +92 (21) 32426682-6 Tel: +92 (21) 32426682-6 Fax: +92 (21) 32415007, 32427938 Fax: +92 (21) 32415007, 32427938 Shares Registrar Legal Advisors FAMCO Associates (Private) Limited HaidermotaBNR & Co. 8-F, Next to Hotel Faran, Nursery, Block 6 (Barristers at law) P.E.C.H.S, Shahrah-e-Faisal, Karachi D-79, Block – 5, Clifton Tel: +92 (21) 34380101-2, KDA Scheme No.5 Fax: +92 (21) 34380106 Karachi- 75600 Tel: +92 (21) 111520000, 35879097 Fax: +92 (21) 35862329, 35871054 Annual Report 2017 13 BOARD OF DIRECTORS Hussain Dawood Chairman Hussain Dawood is a Pakistani businessman and ardent philanthropist. He chairs an array of profit and not-for-profit ventures namely Dawood Hercules Corporation Ltd. the group’s flagship holding arm with investments in foods and energy, Engro Corporation Ltd.; Karachi Education Initiative, which funds the graduate management school Karachi School of Business & Leadership, and The Dawood Foundation, with its legacy of establishing various education and health institutions across the country. His social responsibilities include Memberships of the World Economic Forum and its Global Agenda Councils of Anti-Corruption and Education. He was conferred the award “Ufficiale Ordine Al merito della Repubblica Italiana” by the Republic of Italy. Hussain Dawood holds an MBA from the Kellogg School of Management, Northwestern University, USA, and is a graduate in Metallurgy from Sheffield University, UK. He joined the Board in April 1974. M. Abdul Aleem Director Mohammad Abdul Aleem started his career with A.F. Ferguson and then worked for National Refinery Ltd., before moving on to a Senior Executive role in Exxon Chemicals Pakistan, now Engro Corporation. During his 16 years with Exxon/Engro he served both in Pakistan and Singapore. he joined Pakistan Tobacco Co. in 1991 as its CFO before being elevated in 1995 as the CEO of British American Tobacco subsidiaries overseas. On return to Pakistan in 2004, Mr. Aleem was inducted in leadership positions for leading GOP owned corporations, PTA and PIA before moving on in 2008 as MD, Pakistan State Oil. Currently he is the CEO and Secretary General of Overseas Investors Chamber of Commerce and Industry. Mr. Aleem has also been active on the corporate governance front and has in the past been a board member of LUMS and Pakistan Refinery and Chairman of Telephone Industries of Pakistan, and Faysal Asset Management company. Currently, he is the Board member and Chairman Audit Committee of Engro Corporation, Meezan Bank and Dawood Hercules Corporation. He is also the Vice Chairman of Professional Education Foundation and Chairman of Intellect School Board. Mr. Aleem is a Fellow Chartered Accountant (Gold Medalist) as well as a Fellow member of the Institute of Cost and Management Accountants. He joined the Board in January 2010. Shahzada Dawood Director Shahzada Dawood serves as a Director on the Boards of Engro Corporation Limited, Dawood Hercules Corporation Limited and Dawood Lawrencepur Limited. He is Chairman of Inbox Business Technologies, an enterprise digital services firm and a Trustee of The Dawood Foundation, supporting education initiatives. Shahzada is an M.Sc. in Global Textile Marketing from Philadelphia University, USA, and an LLB from Buckingham University, UK. He is a Certified Director of Corporate Governance from the Pakistan Institute of Corporate Governance. He joined the Board in May 1996. 16 Dawood Hercules Corporation Limited Samad Dawood Director Samad Dawood is a Certified Director of Corporate Governance from the Pakistan Institute of Corporate Governance. He is Chairman of Engro Foods Limited and Director on the Boards of Dawood Hercules Corporation Limited, Dawood Lawrencepur Limited, Engro Corporation Limited and Engro Fertilizers Limited. Samad is a member of Young Presidents’ Organization, Pakistan Chapter. He is a graduate in Economics from University College London, UK. He joined the Board in January 2002. Sabrina Dawood Director Sabrina Dawood is the CEO of The Dawood Foundation.