Financial Statements

Financial Statements
For the year ended June 30, 2010
36
| Pakistan Telecommunication Company Limited
Annual Report 2010 | 37
Auditors Report to the Members

We have audited the annexed statement of financial position of Pakistan Telecommunication Company Limited (the Company) as at June 30, 2010 and the related statement of comprehensive income, statement of cash flows and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) In our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984; (b) In our opinion: (i) the statement of financial position and statement of comprehensive income together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied except for the changes as stated in note 2.1 to the financial statements with which we concur; (ii) the expenditure incurred during the year was for the purpose of the Companys business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; (c) in our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, statement of comprehensive income, statement of cash flows and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Companys affairs as at June 30, 2010 and of the comprehensive income, its cash flows and changes in equity for the year then ended; and (d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
A. F. Ferguson & Co. Chartered Accountants Islamabad.
Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants Islamabad.
Audit Engagement Partners Name: M. Imtiaz Aslam
Audit Engagement Partners Name: Sajjad Hussain Gill
Dated: August 26, 2010
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Statement of Financial Position

As at June 30, 2010
Note 2010 (Rupees in thousand) 2009
Equity and liabilities

Share capital and reserves Share capital Revenue reserves Insurance reserve General reserve Unappropriated profit 6 51,000,000 2,113,704 30,500,000 16,145,007 99,758,711 Non current liabilities Long term security deposits Deferred taxation Employees retirement benefits Deferred government grants 7 8 9 10 720,964 2,949,770 15,512,803 1,632,701 20,816,238 990,055 2,379,000 14,142,099 1,061,044 18,572,198 51,000,000 1,683,074 30,500,000 16,206,485 99,389,559
Current liabilities Trade and other payables Payable to PTA against WLL license fee Dividend payable Provision for taxation 11 12 24,922,197 1,894,950 3,375,631 30,192,778 26,114,171 1,953,971 7,650,000 368,180 36,086,322
150,767,727 Contingencies and commitments 13
154,048,079
The annexed notes from 1 to 43 form an integral part of these financial statements.
Chairman
Note
2010 (Rupees in thousand)
2009
Assets
Non current assets Fixed assets Property, plant and equipment Intangible assets
14 15
88,219,285 3,079,031 91,298,316
87,567,351 3,320,670 90,888,021 5,607,439 3,332,378 99,827,838
Long term investments Long term loans
16 17
6,681,965 7,337,210 105,317,491
Current assets Stores, spares and loose tools Trade debts Loans and advances Accrued interest income Recoverable from tax authorities Receivable from Government of Pakistan Other receivables Short term investments Cash and bank balances 18 19 20 21 22 23 24 25 26 4,075,863 10,171,530 599,031 571,127 7,164,971 2,164,072 787,633 13,493,865 6,422,144 45,450,236 5,201,991 10,760,974 590,061 821,027 1,059,608 2,164,072 698,270 21,017,790 11,906,448 54,220,241
150,767,727
154,048,079
President & CEO
40
Statement of Comprehensive Income

Revenue Cost of services Gross profit Administrative and general expenses Selling and marketing expenses Other operating income Operating profit Voluntary separation scheme Finance cost Profit before tax Taxation Profit after tax Other comprehensive income for the year Total comprehensive income for the year
27 28
57,174,527 (38,258,711) 18,915,816
59,239,001 (37,732,282) 21,506,719 (8,935,261) (1,817,071) 4,267,172 15,021,559 (92,118) (908,524) 14,020,917 (4,869,732) 9,151,185 9,151,185
29 30 31
(7,223,780) (2,142,324) 5,134,646 14,684,358 (403,240) 14,281,118
32
33
(4,986,966) 9,294,152 9,294,152
Earnings per share basic and diluted (Rupees)
39
1.82
1.79
Chairman
President & CEO
Statement of Cash Flows

Cash flows from operating activities

Cash generated from operations Long term security deposits Employees retirement benefits paid Payment of other VSS components Finance cost paid Consideration paid against adjustment of tax losses of PTML Income tax paid Net cash inflow from operating activities 36 24,899,178 (269,091) (524,142) (5,323) (223,123) (1,198,943) (9,648,994) 13,029,562 34,337,391 38,437 (1,470,335) (840,927) (265,232) (2,894,844) 28,904,490
Cash flows from investing activities

Capital expenditure Purchase of intangible assets Proceeds from disposal of property, plant and equipment Short term investments Increase in long term investments Long term loans net PTA WLL license fee Loan to the wholly owned subsidiary PTML Return on long term loans and short term investments Government grants received Dividend income Net cash outflow from investing activities (12,870,439) 140,578 1,221,886 (1,074,526) (53,655) (210,550) (4,000,000) 3,952,363 571,657 695,239 (11,627,447) (9,455,527) (397,979) 206,039 (1,221,886) (2,000,000) 62,565 (3,000,000) 2,751,824 966,044 (12,088,920)
Cash flows from financing activities

Dividend paid Net cash outflow from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 37 (13,188,458) (13,188,458) (11,786,343) 31,702,352 19,916,009 (2,742) (2,742) 16,812,828 14,889,524 31,702,352
Chairman
President & CEO
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Statement of Changes in Equity

Issued, subscribed and paidup capital Class A Class B Insurance reserve Revenue reserves General reserve Unappropriated profit Total
(Rupees in thousand)
Balance as at July 01, 2008 Total comprehensive income for the year Interim dividend for the year ended June 30, 2009 Rs. 1.5 per share Balance as at June 30, 2009 Total comprehensive income for the year Transfer to insurance reserve Interim dividend for the year ended June 30, 2010 Rs. 1.75 per share Balance as at June 30, 2010
37,740,000 37,740,000 37,740,000
13,260,000 13,260,000 13,260,000
1,683,074 1,683,074 430,630 2,113,704
30,500,000 30,500,000 30,500,000
14,705,300 9,151,185 (7,650,000) 16,206,485 9,294,152 (430,630) (8,925,000) 16,145,007
97,888,374 9,151,185 (7,650,000) 99,389,559 9,294,152 (8,925,000) 99,758,711
Chairman
President & CEO
Notes to and Forming Part of the Financial Statements

For the year ended June 30, 2010 1.
1.1
Legal status and nature of business

Constitution and ownership Pakistan Telecommunication Company Limited (the Company) was incorporated in Pakistan on December 31, 1995 and commenced business on January 01, 1996. The Company is listed on Karachi, Lahore and Islamabad stock exchanges. The Company was established to undertake the telecommunication business formerly carried on by Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 01, 1996 under the Pakistan Telecommunication (Reorganization) Act, 1996 at which date the Company took over all the properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters, G8/4, Islamabad.
1.2
Activities The Company provides telecommunication services in Pakistan. It owns and operates telecommunication facilities and provides domestic and international telephone services and other communication facilities throughout Pakistan. The Company has also been licensed to provide such services to territories of Azad Jammu and Kashmir and Gilgit Baltistan.
2.
Statement of compliance
These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
2.1
Adoption of new and revised standards and interpretations Changes in accounting policies and disclosures: (i) IAS 1 (Revised), Presentation of financial statements (effective for annual periods beginning on or after January 01, 2009). The revised standard prohibits the presentation of items of income and expenses (that is nonowner changes in equity) in the statement of changes in equity, requiring nonowners changes in equity to be presented separately from owners changes in equity. All nonowners changes in equity are required to be shown in a performance statement. Companies can choose whether to present one performance statement (the statement of comprehensive income) or two statements (statement of comprehensive income and statement of other comprehensive income). The Company has preferred to present one statement. IFRS 3 (Revised), Business Combinations (effective for annual periods beginning on or after July 01, 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisitionbyacquisition basis to measure the noncontrolling interest in the acquiree at fair value or at the noncontrolling interests proportionate share of the acquirees net assets. All acquisition related costs should be expensed. The Companys acquisition during the year has been recorded in accordance with IFRS 3 (Revised). IAS 23 (Revised), Borrowing Costs (effective for annual periods beginning on or after January 01, 2009). The revised standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The Companys previous policy was in line with the revision and therefore the adoption of the revised IAS 23 and the consequent change in accounting policy had no impact on the earnings of the Company during the year ended June 30, 2010. IFRIC 18, Transfer of assets from customers (effective for annual periods beginning on or after July 01, 2009). The interpretation clarifies the accounting treatment of consideration received from customers to construct or acquire an item of property, plant and equipment for provision of services to customers. The
(ii)
(iii)
(iv)
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interpretation requires recognition of property, plant and equipment in accordance with IAS 16 Property, plant and equipment and recognition of income as per IAS 18 Revenue. The Companys current accounting policy is in compliance with this interpretation and therefore there is no effect on the Companys financial statements. 2.2 Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted by the Company:
Effective date (annual periods beginning on or after)
IFRS 2 IFRS 5 IFRS 8 IAS 1 IAS 7 IAS 17 IAS 24 IAS 32 IAS 36 IAS 39 IFRIC 14 IFRIC 19
Share based payments (Amendments) Non current assets held for sale and discontinued operations (Amendments) Operating segments (Amendments) Presentation of financial statements (Amendments) Statement of cash flows (Amendment) Leases (Amendments) Related party disclosures (Revised) Financial instruments: Presentation (Amendments) Impairment of assets (Amendments) Financial instruments: Recognition and measurement (Amendments) IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction (Amendments) Extinguishing financial liabilities with equity Instruments
January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2011 February 01, 2010 January 01, 2010 January 01, 2010 January 01, 2011 July 01, 2010
The management anticipates that except for the effects on the financial statements, of IFRS 2 Share based payments (Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no material impact on the Companys financial statements except for additional disclosures. The management is currently considering the implications of IFRS 2 (Amendments).
3.
Basis of preparation
These financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments at fair value and the recognition of certain employees retirement benefits on the basis of actuarial assumptions.
4.
Significant accounting judgement and estimates

The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Companys accounting policies. Estimates and judgements are continually evaluated and are based on historic experience including expectation of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows:
(a)
Provision for employees retirement benefits Actuarial valuation of pension, gratuity, medical and compensated leave absences contributions (note 5.21) requires use of certain assumptions related to future periods including increase in remuneration / medical costs, expected long term return on plan assets and the discount rate used to convert future cash flows to current values.
(b)
Provision for income taxes The Company recognizes tax provisions using estimates based upon expert opinions of tax / legal advisors. Differences, if any, between the income tax provision and the tax liability is recorded on final determination of such liability. Deferred income tax (note 5.20) is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantially enacted by the date of statement of financial position.

(c) Useful lives and residual values of fixed assets The Company reviews the useful lives and residual values of fixed assets (note 5.10) on a regular basis. Any change in estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible assets with a corresponding effect on the depreciation / amortization charge. (d) Provision for doubtful receivables Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook of the concerned receivable party. It is reviewed by the management on a regular basis.
5.
Summary of significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
5.1
Functional and presentation currency Items included in the financial statements of the Company are measured and presented using the currency of the primary economic environment in which the entity operates (the functional currency), which is the Pakistan Rupee (Rs).
5.2
Foreign currency transactions and translation Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the statement of financial position. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items at year end exchange rates, are charged to income for the year.
5.3
Insurance reserve The assets of the Company are self insured. The Company has created an insurance reserve. Appropriation out of profits are made on the discretion of the Board of Directors. The reserve is to be utilized to meet any loss resulting from theft, fire or natural disasters.
5.4
Government grants Government grants are recognized at their fair value as deferred income, when there is reasonable assurance that the grant will be received and the Company will comply with the conditions associated with the grant. Grants that compensate the Company for expenses incurred are recognized in income for the year on a systematic basis in the same period in which the related expenses are recognized. Grants that compensate the Company for cost of an asset are recognized in income for the year on a systematic basis over the expected useful life of the related asset, upon its capitalization.
5.5
Borrowings and borrowing costs Borrowings are recognized at the proceeds received. Any difference, between the proceeds (net of transaction costs) and the redemption value, is recognized in income for the year over the period of the borrowings, using the effective interest method. Borrowing costs which are directly attributable to the acquisition and construction of a qualifying asset are capitalized as part of the cost of that asset. All other borrowing costs are charged to income for the year.
5.6
Trade and other payables Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for the goods and / or services received, whether or not billed to the Company.
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5.7 Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the reliable estimate of the amount can be made. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate. 5.8 Dividend distribution Final dividend distribution to the Companys shareholders is recognized as a liability in the financial statements, in the period in which the dividend is approved by the Companys shareholders; interim dividend distribution is recognized in the period in which it is declared by the Board of Directors. 5.9 Contingent liabilities A contingent liability is disclosed when the Company has a possible obligation as a result of past events, whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events, not wholly within the control of the Company; or the Company has a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability. 5.10 (a) Fixed assets Property, plant and equipment Property, plant and equipment, except freehold land, is stated at cost less accumulated depreciation and any identified impairment losses; freehold land is stated at cost less identified impairment loss, if any. Cost includes expenditure, related overheads, mark up and borrowing costs referred to in note 5.5, that is directly attributable to the acquisition of the asset. Subsequent costs, if reliably measurable, are included in the assets carrying amount, or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to income for the year during the period in which they are incurred. Depreciation is calculated using the straightline method to allocate their cost over their estimated useful lives, at the rates mentioned in note 14, after taking into account their residual values. Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount less the residual value over its estimated useful life. The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying amount of the asset, is recognized in income for the year. (b) Intangible assets (i) Licenses These are stated at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using the straightline method to allocate the cost of the license over its estimated useful life, at the rate specified in note 15, and is charged to income for the year. The amortization on licenses acquired during the year, is charged from the month in which a license is acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license. (ii) Computer software These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using the straightline method to allocate the cost of the software over its estimated useful life, at

the rate specified in note 15, and is charged to income for the year. Costs associated with maintaining computer software, are recognized as an expense as and when incurred. Amortization on additions to computer software is charged from the month in which an intangible is acquired or capitalized, while no amortization is charged for the month in which the intangible is disposed off. 5.11 Investments in subsidiaries and associates Investments in subsidiaries and associates where the Company has control or significant influence are measured at cost in the Companys financial statements. The profits and losses of subsidiaries and associates are carried in the financial statements of the respective subsidiaries and associates, and are not dealt within the financial statements of the Company, except to the extent of dividends declared by the subsidiaries and associates. 5.12 Impairment of nonfinancial assets Assets that have an indefinite useful life, for example land, are not subject to depreciation and are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment at each statement of financial position date, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount for which the assets carrying amount exceeds its recoverable amount. An assets recoverable amount is the higher of its fair value less cost to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels, for which there are separately identifiable cash flows. Nonfinancial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each statement of financial position date. Reversals of the impairment loss are restricted to the original cost of the asset. An impairment loss or reversal of impairment loss is recognized in income for the year. 5.13 Stores, spares and loose tools These are stated at lower of cost and net realizable value. Cost is determined using the moving average method. Items in transit are valued at cost comprising invoice value and other related charges incurred up to the date of statement of financial position. 5.14 Trade debts Trade debts are carried at their original invoice amount less any estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 5.15 Financial instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument, and derecognized when the Company loses control of the contractual rights that comprise the financial assets, and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These are subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year. 5.16 (a) Financial assets Classification The Company classifies its financial assets in four categories: held to maturity, loans and receivables, fair value through profit or loss and availableforsale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (i) Held to maturity A financial asset is classified in this category if it is acquired by the Company with the intention and ability to hold it till its maturity.
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(ii) Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. The Companys loans and receivables comprise Trade debts, Loans and advances, Accrued interest income, Receivable from Government of Pakistan, Other receivables, Short term investments and Cash and bank balances. (iii) Fair value through profit or loss Financial assets at fair value through profit or loss, are financial assets held for trading. A financial asset is classified in this category, if acquired principally for the purpose of selling in the shortterm. Assets in this category are classified as current assets. (iv) Availableforsale Availableforsale financial assets are nonderivatives, that are either designated in this category or not classified in any of the other categories. These are included in noncurrent assets unless management intends to dispose off these assets within twelve months of the date of statement of financial position. (b) Recognition and measurement Regular purchases and sales of financial assets are recognized on the trade date the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and the related transaction costs are charged to income for the year. Investments classified as availableforsale are initially measured at cost being the fair value of the consideration given. At subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments in which a quoted market price is not available, are measured at cost if it is not possible to apply any other valuation methodology. Unrealised gains and losses arising from the changes in the fair value are included in income for the year in the period in which they arise. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held to maturity financial assets are carried at amortized cost using the effective interest method. Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have been transferred. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are recognized as income for the period in which they arise. Dividend income from availableforsale investments and financial assets at fair value through profit or loss, is recognized in income for the year, when the Companys right to receive dividend is established. (c) Impairment The Company assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as availableforsale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the security is impaired. If any such evidence exists for availableforsale financial assets, the impairment loss is reduced from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in income on equity instruments are not reversed. 5.17 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the statement of financial position if the Company has a legally enforceable right to set off the recognized amounts and the Company intends to settle on a net basis or realize the asset and settle the liability simultaneously. 5.18 Cash and cash equivalents Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash equivalents comprise cash in hand, other short term highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

5.19 Revenue recognition Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication, broadband and related services in the ordinary course of the Companys activities. Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Company, and the amount of revenue, and the associated cost incurred or to be incurred, can be measured reliably, and when specific criteria have been met for each of the Companys activities as described below: (i) Rendering of telecommunication services Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly line rent, line usage and provision of telecommunication services (including data services). Revenue also includes the net income received and receivable from revenue sharing arrangements entered into with overseas and local telecommunication companies. Revenue is recognized based on the fair value received or receivable for the services rendered, net of services tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the air time, or the credit expires. (ii) Income on bank deposits Return on bank deposits and investments is recognized using the effective interest method. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. 5.20 Taxation The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year, except to the extent that it relates to items recognized directly in the statement of other comprehensive income, where the related tax is also recognized in statement of other comprehensive income. (a) Current The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date. Management periodically evaluates positions taken in tax returns, with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. (b) Deferred Deferred income tax is accounted for using the balance sheet liability method, in respect of all temporary differences arising between the carrying amount of assets and liabilities in the financial statement and the corresponding tax base used in the computation of taxable profit. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantially enacted by the statement of financial position date. 5.21 Employees retirement benefits The Company operates various retirement / post retirement benefit schemes. The plans are generally funded through payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001. The Company has constituted both defined contribution and defined benefit plans.
50

(a) Defined contribution plan The Company operates an approved funded provident plan covering permanent employees. For the purposes of the plan, a separate trust titled the PTCL Employees GPF Trust (the Trust) has been established. Monthly contributions are deducted from the salaries of employees, and are paid to the Trust by the Company. Interest is paid at the rate announced by the Federal Government and this rate for the year was 14% (2009: 15%) per annum. The Company also contributes to the fund the differential, if any, of the interest paid / credited for the year and the income earned on the investments made by the Trust. (b) Defined benefit plans The Company operates the following defined benefit plans: (i) Pension plans The Company operates an approved funded pension plan through a separate trust called the Pakistan Telecommunication Employees Trust (PTET) for its employees recruited prior to January 01, 1996 when the Company took over the business from PTC. The Company also operates an unfunded pension scheme for employees recruited on a regular basis on or after January 01, 1996. (ii) Gratuity plan The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTC) / contractual employees. (iii) Medical benefits plan The Company provides post retirement medical facility to pensioners and their families. Under the unfunded plan, all such exemployees, their spouses and children up to the age of 21 except unmarried daughters which are not subject to 21 years age limit and parents residing with and dependent on the employee are entitled to this benefit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse. There are no annual limits to the cost of drugs, hospitalized treatment and consultation fees. (iv) Accumulating compensated absences The Company provides a facility to its employees for accumulating their annual earned leave. Under this plan, regular employees are entitled to four days of earned leaves per month. Unutilized leave can be accumulated without limit and can be used at any time, subject to the Companys approval, up to 120 days in a year without providing medical certificate, 180 days with medical certificate and 365 days during the entire service of the employee. Up to 180 days of accumulated leave can be encashed on retirement, provided the employee has a minimum leave balance of 365 days. Leaves are encashed at latest emoluments applicable for monthly pension. New Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of service. Leaves can be accumulated after completion of the second year of service, to a maximum of 28 days. New Terms and Conditions (NTC) / contractual employees are entitled to three days earned leave per month. Unutilized leaves can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on departure at gross pay. The liability recognized in the statement of financial position in respect of defined benefit plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any, together with adjustments for unrecognized actuarial gains / losses, if any. The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method. The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation, is determined by discounting the estimated future cash outflows using interest rates of highquality corporate bonds, that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, in excess of the corridor (10% of the higher of the fair value of the plan assets or the present value of the defined benefit obligation) at the beginning of the current reporting year, are recognized over the expected average remaining working lives of employees participating in the defined benefit plan. Actuarial gains and losses arising on compensated absences are recognized immediately.

6.1
Share capital
Authorized share capital
2010 2009 2010 (Rupees in thousand) 2009
(Number of shares in thousand)
11,100,000 3,900,000 15,000,000 6.2
11,100,000 3,900,000 15,000,000
A class ordinary shares of Rs 10 each Bclass ordinary shares of Rs 10 each
111,000,000 39,000,000 150,000,000
111,000,000 39,000,000 150,000,000
Issued, subscribed and paid up capital

3,774,000
3,774,000
A class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash note 6.3 B class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash note 6.3
37,740,000
37,740,000
1,326,000
1,326,000
13,260,000 51,000,000
13,260,000 51,000,000
5,100,000 6.3
5,100,000
These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities transferred from Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited (PTCL) under the Pakistan Telecommunication (Reorganization) Act, 1996 as referred to in note 1.1. Except for voting rights, the A and B class ordinary shares rank pari passu in all respects. A class ordinary shares carry one vote and B class ordinary shares carry four votes, save for the purposes of election of directors. A class ordinary shares cannot be converted into B class ordinary shares. However, B class ordinary shares may be converted into A class ordinary shares at the option, exercisable in writing, submitted to the Company by the holders of three fourths of the B class ordinary shares. In the event of termination of the license issued to the Company under the provisions of Pakistan Telecommunication (Reorganization) Act, 1996, the B class ordinary shares shall be automatically converted into A class ordinary shares. The Government of Pakistan through an Offer for Sale document, dated July 30, 1994 issued to its domestic investors a first tranche of vouchers exchangeable for A class ordinary shares of the Company; subsequently, through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to the international investors, also exchangeable, at the option of voucher holders, for A class ordinary shares or Global Depository Receipts ( GDRs ) representing A class ordinary shares of the Company. Out of 3,774,000 thousand A class ordinary shares, vouchers against 601,084 thousand A class ordinary shares were issued to the general public. Till June 30, 2010, 599,506 thousand (2009: 599,500 thousand) A class ordinary shares had been exchanged for such vouchers. In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 08, 2005 for sale of B class ordinary shares of Rs 10 each, along with management control. Emirates Telecommunication Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
6.4
6.5
6.6
52

6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:
2010 (Number of shares) 2009
Etisalat International Pakistan (LLC) SE Etisalat International Pakistan (LLC)
(B class ordinary shares) (B class ordinary shares)
407,809,524 918,190,476 1,326,000,000
407,809,524 918,190,476 1,326,000,000
7.
Long term security deposits

These represent the security deposits received from customers and are non interest bearing. These include an amount of Rs 7,354 thousand (2009: Rs Nil) received from Maskatiya Communications (Pvt) Limited (MAXCOM) a subsidiary company. The Company has adjusted Rs 222,751 thousand (2009: Rs Nil) during the current year against balances of customers in default.
8.
Deferred taxation
The liability for deferred taxation comprises of timing differences relating to: Accelerated tax depreciation / amortization Provision for doubtful trade debts Provision for doubtful advances and receivables Others 9,803,496 (6,788,892) (64,834) 2,949,770 The gross movement in deferred tax liability during the year is as follows: Balance as at July 01 Charge during the year Balance as at June 30 33 2,379,000 570,770 2,949,770 590,000 1,789,000 2,379,000 8,719,515 (6,284,901) (58,720) 3,106 2,379,000
9.
Employees retirement benefits

Liabilities for pension obligations Funded Unfunded 9.1 9.1 5,283,449 1,086,113 6,369,562 Gratuity unfunded Accumulating compensated absences Post retirement medical facility 9.1 9.1 9.1 498,256 926,338 7,718,647 15,512,803 4,550,208 841,872 5,392,080 391,609 1,025,164 7,333,246 14,142,099

9.1 The latest actuarial valuations of the defined benefit plans were conducted at June 30, 2010 using the projected unit credit method. Details of these defined benefit plans are as follows:
Pension Funded 2010 2009 Unfunded 2010 2009 2010 2009 Gratuity unfunded Accumulating compensated absences 2010 2009 (Rupees in thousand) (a) The amounts recognised in the statement of financial position: Present value of defined benefit obligations Fair value of plan assets note 9.3 62,752,225 53,610,885 (53,521,666) (50,096,598) 3,514,287 1,035,921 4,550,208 1,139,102 1,139,102 (52,989) 1,086,113 932,231 932,231 (90,359) 841,872 423,702 423,702 74,554 498,256 314,871 314,871 76,738 391,609 926,338 926,338 926,338 1,025,164 1,025,164 1,025,164 7,807,167 7,807,167 (88,520) 7,718,647 6,448,686 6,448,686 884,560 7,333,246 73,048,534 62,331,837 (53,521,666) (50,096,598) 19,526,868 (4,014,065) 15,512,803 12,235,239 1,906,860 14,142,099 Post retirement medical facility 2010 2009 2010 2009 Total
9,230,559 Unrecognized actuarial gains / (losses) (3,947,110) Liability as at June 30 (b) Changes in the present value of defined benefit obligation: Balance as at July 01 Current service cost Interest cost Past service cost Actuarial (gains) / losses Benefits paid Recognition of contractual liabilities Balance as at June 30 (c) Charge for the year: Current service cost Interest cost Past service cost Expected return on plan assets Actuarial (gains) / losses Contribution from deputationists Contractual liabilities 542,494 6,433,306 270,000 (6,512,558) (175) 733,067 (d) Significant actuarial assumptions at the date of statement of financial position: Expected rate of return on plan assets Discount rate Future salary / medical cost increase Future pension increase Average expected remaining working lives of participants Expected mortality rate Expected withdrawal rate 13% 12% 911% 8% 13 years 53,610,885 542,494 6,433,306 270,000 6,098,147 (4,202,607) 62,752,225 5,283,449
50,105,610 445,896 6,012,673 953,077 (3,906,371) 53,610,885
932,231 137,708 111,868 (37,370) (5,335) 1,139,102
709,378 131,893 85,125 11,870 (6,035) 932,231
314,871 103,717 37,785 (5,358) (27,313) 423,702
251,226 108,135 30,147 (60,858) (13,779) 314,871
1,025,164 36,900 123,020 (202,585) (56,161) 926,338
833,006 33,234 117,419 (27,825) (76,152) 145,482 1,025,164
6,448,686 64,186 773,842 955,960 (435,507) 7,807,167
5,195,430 64,052 623,452 940,121 (374,369) 6,448,686
62,331,837 885,005 7,479,821 270,000 6,808,794 (4,726,923) 73,048,534
57,094,650 783,210 6,868,816 1,816,385 (4,376,706) 145,482 62,331,837
445,896 6,012,673 (6,297,387) (1,022) 160,160
137,708 111,868 249,576
131,893 85,125 472 217,490
103,717 37,785 (7,541) 133,961
108,135 30,147 138,282
36,900 123,020 (202,585) (42,665)
33,234 117,419 (27,825) 145,482 268,310
64,186 773,842 (17,121) 820,907
64,052 623,452 (100,395) 587,109
885,005 7,479,821 270,000 (6,512,558) (227,247) (175) 1,894,846
783,210 6,868,816 (6,297,387) (127,748) (1,022) 145,482 1,371,351
13% 12% 911% 8% 13 years
12% 911% 8% 16 years
12% 911% 8% 17 years
12% 911% 6 years
12% 911% 6 years
12% 911%
12% 911%
12% 11% 14 years
12% 11% 14 years
EFU 6166* Based on experience
* Mortality table adjusted for Companys experience
54

9.2 Historical information
2010 2009 2008 2007 2006
Defined benefit pension plan funded Present value of defined benefit obligations as at June 30 Fair value of plan assets as at June 30 Deficit / (surplus) in the plan Experience adjustment on plan liabilities losses Experience adjustment on plan assets (losses) / gains Defined benefit pension plan unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit gratuity plan unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Accumulating compensated absences Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit post retirement medical facility Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities losses / (gains) 7,807,167 955,960 6,448,686 940,121 5,195,430 (51,761) 4,798,947 (274,176) 4,583,853 (673,407) 926,338 (202,585) 1,025,164 39,239 833,006 12,990 1,871,553 21,748 1,735,238 (235,937) 423,702 (5,358) 314,871 (51,220) 251,226 41,126 111,444 (77,172) 136,265 10,089 1,139,102 (37,370) 932,231 83,101 709,378 1,764 1,180,770 (96,454) 1,050,561 47,981 62,752,225 (53,521,666) 9,230,559 6,098,147 1,115,117 53,610,885 (50,096,598) 3,514,287 953,077 (1,735,854) 50,105,610 (48,441,436) 1,664,174 778,679 (522,664) 36,529,541 (45,158,318) (8,628,777) 2,581,597 3,776,675 31,413,488 (39,243,528) (7,830,040) 603,337 2,611,253
2009
9.3
Changes in the fair value of plan assets Defined benefit pension plan (funded) Balance as at July 01 Expected return on plan assets Contributions made by the Company during the year Benefits paid Actuarial gains / (losses) on plan assets Balance as at June 30 Actual return on plan assets 50,096,598 6,512,558 (4,202,607) 1,115,117 53,521,666 7,627,675 48,441,436 6,297,387 1,000,000 (3,906,371) (1,735,854) 50,096,598 4,561,533
9.4
Major categories of plan assets of the defined benefit pension plan (funded) as a percentage of total plan assets are as follows:
2010 (Percentage) 2009
Defence saving certificates Special saving certificates Pakistan investment bonds Fixed and other assets Total
84 6 10 100
43 47 6 4 100

9.5 Effect of increase / decrease in total medical cost trend rate The effect of 1% increase in the medical cost trend rate in current service cost and interest cost is Rs 22,523 thousand (2009: Rs 18,181 thousand), and the effect of 1% decrease in the medical cost trend rate in current service cost and interest cost is Rs 18,691 thousand (2009: Rs 15,063 thousand). The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand), and the effect of 1% decrease in the medical cost trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs 1,563,113 thousand). 9.6 In the next financial year, the expected contribution to be paid to the funded pension plan by the Company is Rs 1,623,346 thousand (2009: Rs 463,242 thousand).
10.
Deferred government grants

Balance as at July 01 Received during the year Balance as at June 30 10.1 1,061,044 571,657 1,632,701 95,000 966,044 1,061,044
10.1
This represents the grant from the Universal Service Fund (a Government formed agency) received as assistance towards development of telecommunication infrastructure in rural areas comprising of telecom infrastructure projects for basic telecom access, transmission and broad band services spread over the country.
11.
Trade and other payables

Trade creditors Accrued liabilities Receipts against third party works Taxes payable Income tax collected from subscribers Income tax deducted at source Sales tax payable Advances from customers Technical services fee payable to related party Retention money payable to contractors / suppliers Payable to Research and Development Fund Universal Service Fund Pakistan Telecommunication Authority Unclaimed dividend VSS benefits payable Consideration payable on acquisition of a subsidiary MAXCOM Other liabilities 11.1 11.2 6,460,776 1,799,216 678,439 411,635 4,669 416,304 993,095 1,705,615 447,441 5,394,281 2,773,454 3,523,508 6,542 131,253 55,734 67,396 469,143 24,922,197 5,414,955 1,315,240 499,556 366,426 13,017 379,443 1,061,915 1,856,153 503,467 5,914,707 2,397,144 6,122,799 34,542 120,342 61,057 432,851 26,114,171
29.2 11.1 29.4 11.3
16.3
56

2010 (Rupees in thousand) 2009
11.1
Amounts due to related parties Trade creditors: TF Pipes Limited Thuraya Satellite Company Telecom Foundation Pak Telecom Mobile Limited (PTML) Emirates Telecommunication Corporation 2,621 1,124 49,365 140,436 197,911 391,457 Retention money payable to contractors / suppliers: Telecom Foundation These relate to the normal business of the Company and are interest free. 152,248 2,232 8,929 103,017 114,178
18,911
11.2
This includes Rs 640,711 thousand (2009: Rs 573,155 thousand) representing a provision against EOBI contribution payable under the EOBI Act 1976, for employees hired subsequent to PTCLs incorporation. The Company has withheld payment to EOBI, pending the settlement of the court case, as discussed in note 13.3. The provision made during the year is Rs 67,556 thousand (2009: Rs 53,304 thousand). This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to December 31, 2008 in fifteen equal monthly installments.
11.3
12.
Payable to PTA against WLL license fee

Payable to PTA against WLL license fee Present value adjustment Present value of license fee payable Imputed interest charged to date Payment made during the year 2,105,500 (631,756) 1,473,744 631,756 2,105,500 (210,550) 1,894,950 2,105,500 (631,756) 1,473,744 480,227 1,953,971 1,953,971
13.
13.1
Contingencies and commitments

Contingencies 1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees. Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact at present. However, the management and the Companys legal advisor are of the view that the outcome of these cases is expected to be favourable and a liability, if any, arising on the settlement of these cases is not likely to be material. In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi. Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone
13.2

service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for an amount of Rs 110,033 thousand against the Company. On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs 349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In the suit, final arguments of the parties are to be reheard. The Company has also filed a claim against Telecard Limited for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001. In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing. The management and the Companys legal advisor are of the view that the outcome of the appeal is expected to be favourable. 13.3 The Employees OldAge Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of Employees OldAge Benefits (EOBI) Act, 1976 for payment of Companys and employees contribution amounting to Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition against the demand before the Honourable High Court, which is pending for hearing. However, the management and legal advisor are of the view that the case would be decided in the favour of the Company. In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the repealed Income Tax Ordinance, 1979 for the assessment years 1996 1997 to 1998 1999 on failure to withhold / deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT (Appeals). Pending final outcome of the appeal, no provision has been made in these financial statements for the demands aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Companys tax advisor are of the view that the outcome of the appeal is expected to be favourable. 13.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 1998 99 and 1999 2000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along with additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs 466,176 thousand on account of FED. It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate of Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate. During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by the Custom, Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof. Pending the final outcome, no provision has been made in these financial statements for the above demand, since the management and the Companys lawyer are of the view that the outcome of the appeal is expected to be favourable. 13.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the Companys income tax assessment on the grounds, that the Companys claim of a concessional rate of tax at 1% of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication
13.4
58

services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental view and presently Companys reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi Bench of the Honourable Lahore High Court. The management and the Companys lawyer consider that the litigation would eventually be settled in the Companys favour. 13.7 The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628 thousand by disallowing certain expenses citing nondeduction of respective withholding tax as the prime reason. The Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at present). No provision has been made in these financial statements pending outcome of the appeals which is expected to be in favour of the Company. Based on an audit of Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the Deputy Commissioner of Inland Revenue (DCIR) raised a demand of Rs 1,018,568 thousand on the premise that the Company has claimed total input tax without apportioning the same between allowable and exempt supplies and the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before Commissioner Inland RevenueAppeals (CIR Appeals) and has also challenged the same through a writ petition filed before Rawalpindi bench of the Honourable Lahore High Court. No provision on this account has been made in these financial statements as the management and the Companys tax advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the Companys favour. 13.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of filing of options before concerned commissioners in the light of related law. The Company has also filed a reference application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending. The management and the Companys tax advisor are of the view that the eventual outcome of the case is expected to be in favour of the Company and, as such, no provision has been made in the financial statements on this account.
13.8
13.10 Bank guarantees and bid bonds issued in favour of: Universal Service Fund (USF) against government grants Others 3,087,311 314,254 3,401,565 2,030,337 5,000 2,035,337
Commitments 13.11 Commitments in respect of contracts for capital expenditure amount to Rs 14,127,643 thousand (2009: Rs 12,352,378 thousand).

14.
Property, plant and equipment

Operating assets Capital workinprogress 14.1 14.4 73,960,689 14,258,596 88,219,285 77,730,763 9,836,588 87,567,351
14.1
Operating assets
Land Freehold Leasehold Buildings on Freehold land Leasehold land Lines and wires Apparatus, plant and equipment Office equipment Furniture and fittings Vehicles Submarine cables Total
As at July 01, 2008 Cost Accumulated depreciation Net book value Year ended June 30, 2009 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at July 01, 2009 Cost Accumulated depreciation Net book value Year ended June 30, 2010 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at June 30, 2010 Cost Accumulated depreciation Net book Value Annual rate of depreciation (%) 1,644,464 1,644,464 77,418 (24,276) 53,142 1 to 3.3 10,222,827 (3,199,750) 7,023,077 2.5 1,009,184 (401,844) 607,340 2.5 106,288,703 (80,166,213) 26,122,490 7 128,236,700 (93,415,295) 34,821,405 10 1,251,741 (732,452) 519,289 10 456,788 (333,330) 123,458 10 1,328,836 (1,131,843) 196,993 20 5,739,955 256,256,616 (2,890,924) (182,295,927) 2,849,031 6.67 to 8.33 73,960,689 1,644,464 (1,277) 53,142 (502) 328 (174) (251,659) 7,023,077 (25,225) 607,340 (144,353) 144,353 (4,355,835) 26,122,490 (1,314,549) 1,314,506 (43) (6,948,690) 34,821,405 (11,924) 11,503 (421) (122,984) 519,289 (7,355) 7,331 (24) (24,658) 123,458 (49,832) 47,071 (2,761) (102,208) 196,993 (382,546) 2,849,031 (1,528,515) 1,525,092 (3,423) (12,215,082) 73,960,689 1,643,781 683 54,419 7,099,900 175,010 632,565 28,618,677 1,859,648 35,483,525 6,286,613 568,954 73,740 139,342 8,798 282,571 19,391 3,207,029 24,548 77,730,763 8,448,431 1,643,781 1,643,781 77,418 (22,999) 54,419 10,048,319 (2,948,419) 7,099,900 1,009,184 (376,619) 632,565 104,573,408 (75,954,731) 28,618,677 123,264,636 (87,781,111) 35,483,525 1,189,925 (620,971) 568,954 455,345 (316,003) 139,342 1,359,277 (1,076,706) 282,571 5,715,407 249,336,700 (2,508,378) (171,605,937) 3,207,029 77,730,763 1,643,781 (1,178) 54,419 (247,328) 7,099,900 (25,230) 632,565 (4,630,990) 28,618,677 (6,995,979) 35,483,525 (1,968) 1,186 (782) (103,480) 568,954 (4,766) 4,766 (24,642) 139,342 (388,470) 373,819 (14,651) (114,854) 282,571 (422,063) 3,207,029 (395,204) 379,771 (15,433) (12,565,744) 77,730,763 1,643,226 555 52,330 3,267 7,137,163 210,065 657,795 31,572,244 1,677,423 37,239,354 5,240,150 489,641 183,575 148,183 15,801 231,150 180,926 3,629,092 82,800,178 7,511,762 1,643,226 1,643,226 74,151 (21,821) 52,330 9,838,254 (2,701,091) 7,137,163 1,009,184 (351,389) 657,795 102,895,985 (71,323,741) 31,572,244 118,024,486 (80,785,132) 37,239,354 1,008,318 (518,677) 489,641 444,310 (296,127) 148,183 1,566,821 (1,335,671) 231,150 5,715,407 242,220,142 (2,086,315) (159,419,964) 3,629,092 82,800,178
As explained in note 1.1, the property and rights in the above assets at January 01, 1996 were transferred to the Company from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Reorganization) Act, 1996. However, the title to such freehold land, was not formally transferred in the name of the Company in the land revenue records. The Company initiated the process of transfer of title of land in its name in the previous years, which is still ongoing and shall be completed in due course of time.
60

14.2
The depreciation charge for the year has been allocated as follows: Cost of services Administrative and general expenses Selling and marketing expenses 28 29 30 11,970,780 183,226 61,076 12,215,082 12,314,429 188,486 62,829 12,565,744
14.3
Disposal of property, plant and equipment: All items of property, plant and equipment disposed off during the year, individually have a book value of less than Rs 50,000.
14.4
Capital workinprogress Buildings Lines and wires Apparatus, plant and equipment Others Advances to suppliers 471,303 5,918,700 4,993,330 48,813 2,826,450 14,258,596 118,413 1,589,605 3,613,242 38,632 4,476,696 9,836,588
14.5
Movement during the year Balance as at July 01 Additions during the year Transfers during the year Balance as at June 30 9,836,588 12,866,755 (8,444,747) 14,258,596 7,892,823 9,454,327 (7,510,562) 9,836,588
Capital workinprogress includes an amount of Rs 337,985 thousand (2009: Rs 443,426 thousand) in respect of overheads relating to development regions.
14.6
Advances to suppliers include balances with the following related parties: Telecom Foundation Emirates Telecommunication Corporation 61,659 61,659 147,206 1,685,532 1,832,738

Licenses Sofware (Rupees in thousand) Total
15.
Intangible assets
As at July 01, 2008 Cost Accumulated amortization Net book value Year ended June 30, 2009 Opening net book value Additions Amortization Closing net book value As at July 01, 2009 Cost Accumulated amortization Net book value Year ended June 30, 2010 Opening net book value Amortization Closing net book value As at June 30, 2010 Cost Accumulated amortization Net book value note 15.1 4,015,397 (866,334) 3,149,063 4,015,397 (866,334) 3,149,063
3,149,063 (196,415) 2,952,648
397,979 (29,957) 368,022
3,149,063 397,979 (226,372) 3,320,670
4,015,397 (1,062,749) 2,952,648
397,979 (29,957) 368,022
4,413,376 (1,092,706) 3,320,670
2,952,648 (196,416) 2,756,232
368,022 (45,223) 322,799
3,320,670 (241,639) 3,079,031
4,015,397 (1,259,165) 2,756,232

Note
397,979 (75,180) 322,799

2010
4,413,376 (1,334,345) 3,079,031

2009
15.1
Breakup of net book value as at June 30 is as follows: Licenses Telecom WLL spectrum WLL and LDI License IPTV 15.2 15.2 15.3 15.4 104,722 2,550,695 98,340 2,475 2,756,232 Software Bill printing software Billing and automation of broadband Enterprise Resource Planning (ERP) SAP system 114,696 2,729,691 103,806 4,455 2,952,648
15.5 15.5 15.6
6,015 36,085 280,699 322,799 3,079,031
7,655 45,297 315,070 368,022 3,320,670
62

15.2 The Pakistan Telecommunication Authority (PTA) has issued a license to the Company to provide telecommunication services in Pakistan for a period of 25 years commencing January 01, 1996 for an agreed license fee of Rs 249,344 thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This license allows the Company to provide wireless local loop services in Pakistan over a period of 20 years commencing October 2004. The cost of the license is being amortized on a straightline basis over the period of the license. The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan Telecommunication (Reorganization) Act, 1996, the Northern Areas Telecommunication (Reorganization) Act, 2005 and the Northern Areas Telecommunication (Reorganization) (Adaptation and Enforcement) Order, 2006 to the Company. The purpose of the license is to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and GilgitBaltistan for a period of 20 years commencing May 28, 2008, for an agreed license fee of Rs 109,270 thousand. The cost of the license is being amortized on a straightline basis over the period of the license. PTCL acquired the IPTV license from PEMRA on October 01, 2006 for an agreed price of Rs 9,900 thousand. The cost of the license is being amortized on a straightline basis over a period of 5 years. The cost of the software is being amortized on a straightline basis over a period of 5 years. This represents cost of the SAP Enterprise Resource Planning (ERP) system with a useful life of 10 years.
15.3
15.4
15.5 15.6
16.
Long term investments at cost

Investments in related parties Other investments 16.1 16.2 6,598,065 83,900 6,681,965 5,523,539 83,900 5,607,439
16.1
Investments in related parties Subsidiaries unquoted Pak Telecom Mobile Limited 650,000,000 (2009: 350,000,000) ordinary shares of Rs 10 each Ordinary shares held 100% (2009: 100% ) Maskatiya Communications (Pvt) Limited (MAXCOM) 440,008 (2009: Nil) ordinary shares of Rs 100 each Ordinary shares held 100% (2009: Nil) Associate unquoted TF Pipes Limited 1,658,520 (2009: 1,658,520) ordinary shares of Rs 10 each Ordinary shares held 40% (2009: 40% ) Advance against purchase of shares of subsidiary company Pak Telecom Mobile Limited
6,500,000
3,500,000
16.3
74,526
23,539
23,539
6,598,065
2,000,000 5,523,539

16.2
Other investments Available for sale investments unquoted Thuraya Satellite Company 3,670,000 (2009: 3,670,000) ordinary shares of 1 Dirham each Alcatel Lucent Pakistan Limited 2,000,000 (2009: 2,000,000) ordinary shares of Rs 10 each New ICO Global Communications (Holdings) Limited 218,207 (2009: 218,207) ordinary shares of USD 0.01 per share (net of impairment loss of Rs 104,708 thousand; 2009: Rs 104,708 thousand) World Tel Assembly of Governors Participation fund investment of USD 100,000 (2009: USD 100,000) (net of impairment loss of Rs 6,390 thousand; 2009: Rs 6,390 thousand)
63,900
63,900
20,000
20,000
83,900
83,900
16.3
On March 01, 2010 the Company acquired 100% shareholding of MAXCOM. MAXCOM provides broadband services to customers in the cities of Karachi and Hyderabad. In terms of agreement between the Company and previous shareholders of MAXCOM, the purchase consideration will be paid to the previous shareholders on a revenue sharing basis commencing from March 2010 to August 2012. On basis of estimates prepared by management, the Company has recognized the present value of the consideration payable amounting to Rs 74,526 thousand.
17.
Long term loans considered good

Loans to subsidiary company Loans to employees secured Current portion shown under current assets Others 17.1 17.2 7,000,000 509,254 (172,244) 337,010 200 7,337,210 3,000,000 455,599 (123,421) 332,178 200 3,332,378
17.1
This represents unsecured loans of Rs 3,000,000 thousand, Rs 2,000,000 thousand and Rs 2,000,000 thousand (June 30, 2009: Rs 3,000,000 thousand) to PTML, a wholly owned subsidiary of the Company, under subordinated debt agreements. First two loans are recoverable in eight equal quarterly installments commencing after a grace period of four years in 2013 and 2014 respectively, and carry markup at the rate of three months KIBOR plus 82 basis points. Third loan is recoverable in eight equal quarterly installments commencing after a grace period of three years in 2014 and carry markup at the rate of three months KIBOR plus 180 basis points. The maximum amount of the loan to PTML outstanding at any time since the date of previous statement of financial position was Rs 7,000,000 thousand (2009: Rs 3,000,000 thousand).
64

17.2 These loans and advances are for house building and purchase of motor cars, motor cycles and bicycles. Loans to gazetted employees of the Company carry interest at the rate of 15% per annum (2009: 12.5% per annum), whereas, loans to other employees are interest free. The loans are recoverable in monthly installments spread over a period of 5 to 10 years. These loans are secured against future pension payments of employees. This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees against sale of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years. 17.3 Reconciliation of loans
As at July 01, 2009 Disbursements (Rupees in thousand) Repayments As at June 30, 2010
Executives Other employees
12,532 443,067 455,599

As at July 01, 2008
23 194,244 194,267
Disbursements (Rupees in thousand)
3,010 137,602 140,612

Repayments
9,545 499,709 509,254

As at June 30, 2009
15,641 508,915 524,556
3,109 65,848 68,957
12,532 443,067 455,599
Note
2009
18.
Stores, spares and loose tools

Stores, spares and loose tools Provision for obsolescence 18.2 4,704,186 (628,323) 4,075,863 5,851,582 (649,591) 5,201,991
18.1
Stores, spares and loose tools include items which may result in property, plant and equipment but are not distinguishable. Provision for obsolescence Balance as at July 01 Provision during the year Write off against provision Balance as at June 30 29
18.2
649,591 102,761 752,352 (124,029) 628,323
551,455 172,276 723,731 (74,140) 649,591

19.
Trade debts unsecured

Domestic Considered good Considered doubtful International Considered good Considered doubtful 19.2 2,935,276 953,959 3,889,235 Provision for doubtful debts 19.3 28,738,254 (18,566,724) 10,171,530 3,194,576 885,740 4,080,316 29,757,370 (18,996,396) 10,760,974 19.1 7,236,255 17,612,764 24,849,019 7,566,398 18,110,656 25,677,054
19.1
These include amounts due from the following related parties: PTML MAXCOM 443,808 18,250 462,058 412,309 412,309
19.2
These include amounts due from the following related parties: Etisalat Afghanistan Etisalat UAE Mobily Saudi Arabia 21,685 419,914 312,070 753,669 These amounts are interest free and accrued in the normal course of business. 100,502 657,771 528,119 1,286,392
19.3
Provision for doubtful debts Balance as at July 01 Provision for the year Trade debts written off against provision Balance as at June 30 29 18,996,396 1,885,211 20,881,607 (2,314,883) 18,566,724 17,206,069 2,907,395 20,113,464 (1,117,068) 18,996,396
20.
Loans and advances considered good

Current portion of loans to employees Advances to suppliers and contractors 17 20.1 172,244 426,787 599,031 123,421 466,640 590,061
20.1
This includes advance of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related party.
66

21.
Accrued interest income

Accrued profit on bank placements Interest receivable on long term loan considered good Interest receivable on loans / advances to executives 21.1 389,038 122,443 59,646 571,127 766,674 54,353 821,027
21.1
This represents markup on loan to PTML, a wholly owned subsidiary, as indicated in note 17.1
22.
Recoverable from tax authorities

Income tax Federal excise Sales tax 6,063,561 466,176 635,234 7,164,971 466,176 593,432 1,059,608
23.
Receivable from Government of Pakistan

This represents the balance amount receivable from Government of Pakistan on account of its agreed share in the voluntary separation scheme offered to the Companys employees during 2008.
24.
Other receivables
Considered good Due from related parties: Pakistan Telecommunication Employees Trust PTCL employees GPF Trust PTML against service charges of software maintenance Due from other parties: Others
86,708 286,757 8,359 405,809 787,633
69,009 147,767 481,494 698,270 185,239 (185,239) 698,270
Considered doubtful Provision for doubtful receivables
24.1
185,239 (185,239) 787,633
24.1
Provision for doubtful receivables Balance as at July 01 Provision for the year Balance as at June 30 29 185,239 185,239 26,559 158,680 185,239

25.
Short term investments

Term deposits at amortized cost maturity upto 3 months maturity between 3 and 6 months 25.1 Available for sale investment Units of mutual funds at market value 25.2 13,238,949 13,238,949 254,916 13,493,865 19,795,904 1,221,886 21,017,790 21,017,790
25.1
Term deposits
Term (months) Maturity Upto Profit rate % per annum 2010 (Rupees in thousand) 2009
Term deposits with: National Bank of Pakistan Bank Alfalah Limited The Bank of Punjab NIB Bank Limited Allied Bank of Pakistan Habib Metropolitan Bank limited Askari Bank Limited
3 6 3 3
30Jul10 01Sep10 30Sep10 30Sep10
12.25 12.35 12.50 12.60
2,687,973 3,551,458 2,491,873 4,507,645 13,238,949
11,893,245 1,000,000 1,066,302 1,500,000 2,558,243 1,000,000 2,000,000 21,017,790
25.2
Units of mutual funds Units of open end mutual funds: Pakistan Cash Management Fund 2,013,768 (2009: Nil) units NAFA Government Securities Liquid Fund 5,011,856 (2009: Nil) units BMA Empress Cash Fund 2,416,129 (2009: Nil) units Faysal Saving Growth Fund 489,285 (2009: Nil) units Askari Sovereign Cash Fund 232,801 (2009: Nil) units
102,059 51,493 25,691 50,455 25,218 254,916
26.
Cash and bank balances

Balances with banks Deposit accounts Current accounts Local currency Foreign currency (USD 3,430 thousand (2009: USD 10,751 thousand)) Cash in hand 26.1 4,796,454 1,331,971 293,686 6,422,111 33 6,422,144 10,304,147 730,292 871,981 11,906,420 28 11,906,448
68

26.1 The balances in deposit accounts bear markup which ranges from 5% to 13% per annum (2009: 5% to 19.5% per annum).
27.
Revenue
Domestic International 27.1 27.2 50,080,664 7,093,863 57,174,527 53,039,455 6,199,546 59,239,001
27.1 27.2
Revenue is exclusive of Federal Excise Duty amounting to Rs 6,703,713 thousand (2009: Rs 8,611,191 thousand). International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating to Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).
Note
2009
28.
Cost of services
Salaries, allowances and other benefits Call centre charges Interconnect cost Foreign operators cost and satellite charges Fuel and power Communication Stores, spares and loose tools consumed Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Depreciation of property, plant and equipment Amortization of intangible assets Annual license fee to PTA 28.1 8,827,775 199,061 3,166,881 6,473,865 3,380,201 9,522 1,012,453 636,143 1,802,417 281,432 12,653 11,970,780 241,639 243,889 38,258,711 7,995,033 187,165 4,103,667 6,053,657 3,109,948 7,421 1,160,754 502,709 1,475,724 255,198 16,308 12,314,429 226,372 323,897 37,732,282
14.2 15
28.1
This includes Rs 1,576,511 thousand (2009: Rs 1,140,964 thousand) in respect of employees retirement benefits.

29.
Administrative and general expenses

Salaries, allowances and other benefits Call centre charges Fuel and power Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Technical services fee Legal and professional services Depreciation of property, plant and equipment Research and development Provisions for: obsolete stores, spares and loose tools doubtful debts doubtful receivables Donations Receivables written off Other expenses 29.1 899,225 29,859 254,415 291,478 10,545 4,345 101,221 1,821,556 153,762 183,226 321,921 102,761 1,885,211 280 1,163,975 7,223,780 814,614 28,075 234,074 322,651 8,634 3,940 130,467 1,886,885 486,434 188,486 471,239 172,276 2,907,395 158,680 37,069 142,195 942,147 8,935,261
29.2 29.3 14.2 29.4 18.2 19.3 24.1 29.6
29.1 29.2
This includes Rs 161,062 thousand (2009: Rs 113,822 thousand) in respect of employees retirement benefits. This represents an amount of PTCLs share payable to Emirates Telecommunication Corporation (Etisalat), a related party, under a technical service agreement between the Company and Etisalat for a period of five years commencing October 1, 2006 at the rate of 3.5% of PTCL groups consolidated annual revenue. Auditors remuneration The expenses for legal and professional services include the following in respect of auditors services:
29.3
2009
A. F. Ferguson & Co. Statutory audit including half yearly review Tax services Out of pocket expenses Ernst & Young Ford Rhodes Sidat Hyder Statutory audit including half yearly review Out of pocket expenses
4,500 1,000 250
4,500 250
4,500 250 10,500
4,500 250 9,500
29.4
This represents the Companys contribution to the Information Communication Technology (ICT) Research and Development Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments and payments toward research and development activities in Pakistan, in accordance with the terms and conditions of its license to provide telecommunication services.
70

29.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009: Rs Nil) against receivable balances of customers in default. There were no donations during the year in which the directors or their spouses had any interest.
29.6
30.
Selling and marketing expenses

Salaries, allowances and other benefits Call centre charges Sales and distribution charges Fuel and power Printing and stationery Travelling and conveyance Advertisement and publicity Depreciation of property, plant and equipment 30.1 882,986 19,906 316,878 75,116 2,901 12,653 770,808 61,076 2,142,324 799,503 18,717 357,486 69,110 2,631 16,308 490,487 62,829 1,817,071
14.2
30.1
This includes Rs 157,273 thousand (2009: Rs 116,565 thousand) in respect of employees retirement benefits.
31.
Other operating income

Income from financial assets: Interest on loans 31.1 Dividend 31.2 Return on bank placements Late payment surcharge from subscribers on over due bills Gain on sale of units of open end mutual funds Income from nonfinancial assets: Gain on disposal of items of property, plant and equipment Others 610,105 695,239 3,087,442 162,465 4,916 270,436 2,986,598 213,268
137,155 437,324 5,134,646
190,606 606,264 4,267,172
31.1
Included in interest on long term loans is an amount of Rs 603,257 thousand (2009: Rs 263,333 thousand) accrued on the loan given to PTML, the wholly owned subsidiary, as shown in note 17.1. This includes dividend from PTML, the wholly owned subsidiary, amounting to Rs 673,239 thousand (2009: Rs Nil).
31.2
32.
Finance cost
Bank and other charges Foreign exchange loss net Imputed interest on payment for: WLL license fee for the year Purchase of MAXCOM 223,123 25,262 151,529 3,326 403,240 265,232 458,160 185,132 908,524

33.
Taxation
Current Deferred 8 4,416,196 570,770 4,986,966 3,080,732 1,789,000 4,869,732
33.1
Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:
Applicable tax rate Tax effect of amounts chargeable to tax at lower rates Tax effect of amounts that are not deductible for tax purposes and others
35.00 (1.22) 1.14 (0.08)
35.00 (0.76) 0.49 (0.27) 34.73
Average effective tax rate charged to statement of comprehensive income
34.92
34.
Remuneration of Directors, Chief Executive and Executives

The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chairman, Chief Executive and Executives of the Company is as follows:
Chairman 2010 2009 Chief Executive 2010 2009 2010 (Rupees in thousand) Executives 2009
Managerial remuneration Honorarium Bonus Retirement benefits Housing Utilities
300 300
300 300 1
78,074 78,074 1
59,128 59,128 1
555,866 2,965 6,148 50,270 183,489 40,486 839,224 453
548,632 7,113 45,700 181,272 40,189 822,906 430
Number of persons
The Company also provides free medical and limited residential telephone facility to all its Executives including the Chief Executive. The Chairman is entitled to free transport and limited residential telephone facility, whereas the Directors are provided with limited telephone facility. Certain executives are also provided with the Company maintained cars. The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs 11,682 thousand (2009: Rs 3,736 thousand) for attending Board of Directors and subcommittee meetings.
35.
Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100, while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to Rs 100.
72

36.
Cash generated from operations

Profit before tax Adjustments for non cash charges and other items: Depreciation and amortization Provision for doubtful trade debts VSS expense Provision for doubtful receivables Employees retirement benefits Receivables written off Imputed interest on payment to PTA against WLL license fee Imputed interest on consideration payable on acquisition of a subsidiary MAXCOM Interest on long term loans Gain on disposal of property, plant and equipment Dividend Return on bank placements Gain on sale of units of open end mutual funds Provision for obsolete stores, spares and loose tools Finance cost 14,281,118 12,456,721 1,885,211 1,894,846 151,529 3,326 (610,105) (137,155) (695,239) (3,087,442) (4,916) 102,761 248,385 26,489,040 Effect on cash flow due to working capital changes: (Increase) / decrease in current assets: Stores, spares and loose tools Trade debts Loans and advances Recoverable from tax authorities Other receivables 1,023,367 (1,295,767) 39,853 (41,802) (89,363) (363,712) Increase / (decrease) in current liabilities: Trade and other payables (1,226,150) 24,899,178 (420,182) (302,153) 292,056 324,158 784,667 678,546 4,539,897 34,337,391 14,020,917 12,792,116 2,907,390 92,118 158,680 1,372,372 142,195 185,132 (270,436) (190,606) (2,986,598) 172,276 723,392 29,118,948
37.
Cash and cash equivalents

Short term investments with maturity upto three months Cash and bank balances 25 26 13,493,865 6,422,144 19,916,009 19,795,904 11,906,448 31,702,352
38.
Capacity
Access Lines Installed (ALI) 2010 2009 (Number) Access Lines In Service (ALIS) 2010 2009
Number of lines
9,590,972
9,240,431
4,477,821
4,796,299

ALI represents switching lines. ALI include 232,786 (2009: 225,195 ) and ALIS include 107,477 (2009: 115,575) Primary Rate Interface (PRI) and Basic Rate Interface (BRI). ALI and ALIS also include 3,055,930 (2009: 2,656,000) and 1,236,932 (2009 : 1,305,675) WLL connections respectively. The difference between ALI and ALIS is due to pending and potential future demand.
2010 2009
39.
Earnings per share basic and diluted

Profit for the year Weighted average number of ordinary shares Earnings per share Rupees in thousand Numbers in thousand Rupees 9,294,152 5,100,000 1.82 9,151,185 5,100,000 1.79
40.
40.1
Financial risk management

Financial risk factors The Companys activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Companys overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance. Risk management is carried out by the Board of Directors (the Board). The Board has prepared a Risk Management Policy covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. All treasury related transactions are carried out within the parameters of this policy.
(a)
Market risk (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions, or receivables and payables that exist due to transactions in foreign currencies. The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Swiss Franc (CHF) and Australian Dollar (AUD). Currently, the Companys foreign exchange risk exposure is restricted to the amounts receivable from / payable to foreign entities. The Companys exposure to currency risk is as follows:
USD Trade and other payables Trade debts Cash and bank balances Net exposure CHF Trade and other payables AUD Loans and advances
(3,590,376) 4,042,311 293,608 745,543
(6,950,383) 3,995,351 874,131 (2,080,901)
(5,660)
(5,385)
1,850
1,673
74

The following significant exchange rates were applied during the year:
2010 2009
Rupees per USD Average rate Reporting date rate Rupees per CHF Average rate Reporting date rate Rupees per AUD Average rate Reporting date rate
83.92 85.60 79.07 79.10 74.00 72.96
79.92 81.30 64.98 75.26 53.97 65.98
If the functional currency, at reporting date, had fluctuated by 5% against the USD, CHF and AUD with all other variables held constant, the impact on profit after taxation for the year would have been Rs 24,106 thousand (2009: Rs 67,750 thousand) respectively lower / higher, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis. (ii) Other price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is exposed to equity securities price risk because of the investments held by the Company in money market mutual funds and classified on the statement of financial position as availableforsale. To manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio. The other financial assets includes availableforsale investments of Rs 254,916 thousand (2009: Rs Nil) which were subject to price risk. If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil) higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds. (iii) Interest rate risk Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

At the date of statement of financial position, the interest rate profile of the Companys interest bearing financial instruments is:
Financial assets Fixed rate instruments Staff loans Short term investments Floating rate instruments Long term loans loan to subsidiary Bank balances deposit accounts 7,000,000 4,796,454 25,544,657 Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change in interest rates at the date of statement of financial position would not affect the total comprehensive income of the Company. Cash flow sensitivity analysis for variable rate instruments If interest rates on long term loans to subsidiary and deposit bank balances, at the year end date, fluctuate by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs 64,797 thousand (2009: Rs 11,250 thousand) higher / lower, mainly as a result of higher / lower markup income on floating rate loans / investments. (b) Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk at the reporting date is as follows:
509,254 13,238,949
455,599 21,017,790
3,000,000 10,304,147 34,777,536
Long term loans Trade debts Loans and advances Accrued interest Other receivables Receivable from Government of Pakistan Short term investments Bank balances
7,337,210 10,171,530 599,031 571,127 787,633 2,164,072 13,493,865 6,422,111 41,546,579
3,332,178 10,760,974 590,061 821,027 698,270 2,164,072 21,017,790 11,906,420 51,290,792
The credit risk on liquid funds is limited, because the counter parties are banks with reasonably high credit ratings. In case of trade debts the Company believes that it is not exposed to major concentration of credit risk as its exposure is spread over a large number of counter parties and subscribers. Long term loan includes loan of Rs 7,000,000 thousand to a subsidiaryPTML.
76

The credit quality of cash and bank balances and short term investments that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rate:
Rating Short term Long term Rating Agency 2010 (Rupees in thousand) 2009
National Bank of Pakistan Bank Alfalah Limited MCB Bank Limited Habib Metropolitan Bank Limited The Bank of Punjab NIB Bank Limited Faysal Bank Limited * Royal Bank of Scotland * Askari Bank Limited Allied Bank Limited United Bank Limited Bank Al Habib Limited Dubai Islamic Bank Citibank, N.A. Silkbank Limited * SME Bank Limited Standard Chartered Bank (Pakistan) Limited Meezan Bank Ltd Mutual Fund Arif Habib Mutual Fund NAFA Mutual Fund BMA Mutual Fund Faysal Mutual Fund Askari
A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1 A1 A3 A3 A1+ A1 AM 2 + AM 2 AM 2 AM 2 AM3
AAA AA AA AA+ AA AA AA AA AA AA AA+ AA+ A A+ A BBB AA AA N/A N/A N/A N/A N/A
JCRVIS PACRA PACRA PACRA PACRA PACRA PACRA PACRA PACRA PACRA JCRVIS PACRA JCRVIS S&Ps JCRVIS JCRVIS PACRA JCRVIS PACRA PACRA JCRVIS JCRVIS PACRA
3,940,843 3,171,623 38,003 38,425 5,644,946 4,507,112 1,164 101,425 136,991 101,521 479,337 1,050,827 7,705 22,448 418,677 13 102,059 51,493 25,691 50,455 25,218 19,915,976
15,636,639 4,000,593 11,281 1,000,000 3,937,071 1,500,192 1,476 1,754,080 2,000,000 2,558,243 26 32,399,601
Due to the Companys long standing business relationships with these counter parties, and after giving due consideration to their strong financial standing, management does not expect nonperformance by these counter parties on their obligations to the Company. Accordingly, the credit risk is minimal.
*These banks have been placed on watchlist by the State Bank of Pakistan and the most recent rating of Royal Bank of
Scotland and Silkbank was carried out in September 2008 and June 2009 respectively.

(c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. The following are the contractual maturities of financial liabilities as at June 30, 2010:
Carrying amount Less than one year One to five years More than five years
Long term security deposits Employees retirement benefits Trade and other payables Payable to PTA against WLL license fee Dividend payable
720,964 15,512,803 22,537,541 1,894,950 3,375,631 44,041,889
22,537,541 1,894,950 3,375,631 27,808,122
720,964 720,964
15,512,803 15,512,803
The following are the contractual maturities of financial liabilities as at June 30, 2009:
Long term security deposits Employees retirement benefits Trade and other payables Payable to PTA against WLL license fee Dividend payable
990,055 14,142,099 23,758,462 1,953,971 7,650,000 48,494,587
23,758,462 1,953,971 7,650,000 33,362,433
990,055 990,055
14,142,099 14,142,099
40.2
Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date.
78

Available for sale 2010 2009 Loans and receivables 2010 2009 (Rupees in thousand) Total 2010 2009
40.3
Financial instruments by categories Financial assets as per statement of financial position

Long term loans Trade debts Loans and advances Accrued interest income Other receivables Receivable from Government of Pakistan Short term investments Cash and bank balances 254,916 254,916 7,337,210 10,171,530 599,031 571,127 787,633 2,164,072 13,238,949 6,422,144 41,291,696 3,332,378 10,760,974 590,061 821,027 698,270 2,164,072 21,017,790 11,906,448 51,291,020 7,337,210 10,171,530 599,031 571,127 787,633 2,164,072 13,493,865 6,422,144 41,546,612 3,332,378 10,760,974 590,061 821,027 698,270 2,164,072 21,017,790 11,906,448 51,291,020
Liabilities at fair value through profit and loss 2010 2009
Other financial liabilities 2010 2009 (Rupees in thousand)
Total 2010 2009
Financial liabilities as per statement of financial position

Long term security deposits Employees retirement benefits Trade and other payables Payable to PTA against WLL license fee Dividend payable 720,964 15,512,803 22,537,541 1,894,950 3,375,631 44,041,889 990,055 14,142,099 23,758,462 1,953,971 7,650,000 48,494,587 720,964 15,512,803 22,537,541 1,894,950 3,375,631 44,041,889 990,055 14,142,099 23,758,462 1,953,971 7,650,000 48,494,587
40.4
Capital risk management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Company defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Companys objectives when managing capital are: (i) to safeguard the entitys ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to provide an adequate return to shareholders.
(ii)
The Company manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt. For working capital requirements and capital expenditure, the Company primarily relies on internal cash generation and does not have any significant borrowings.

For the year ended June 30, 2010 41. Transactions with related parties
The Companys related parties comprise of subsidiaries, associated undertakings, employees retirement benefit plans and key management personnel. Amounts due from / (to) related parties are shown under receivables and payables. Remuneration of key management personnel is disclosed in note 34. The Company had transactions with following related parties during the year: Subsidiaries Pak Telecom Mobile Limited Maskatiya Communications (Pvt) Limited Associated undertakings TF Pipes Limited Etisalat International Pakistan Etisalat Afghanistan Emirates Telecommunication Corporation Mobily Saudi Arabia Thuraya Satellite Company Employees retirement benefit plans Pakistan Telecommunication Employees Trust PTCL Employees GPF Trust Disclosure of transactions between the Company and related parties other than those which have been disclosed elsewhere in these financial statements:
2009
Subsidiaries
Purchase of goods and services Consideration paid against adjustment of tax losses of PTML Sale of goods and services Markup on long term loans Equity contribution Disbursement of loan Consideration paid on acquisition of MAXCOM Purchase of goods and services Sale of goods and services Advances against capital expenditure
1,604,145 1,198,943 5,138,960 603,257 1,000,000 4,000,000 7,130 1,707,042 5,651,506 61,659
1,417,608 5,203,768 263,333 2,000,000 3,000,000 2,365,226 8,358,427 1,832,738
Associates
80

For the year ended June 30, 2010 42. Date of authorization for issue
These financial statements were authorized for issue on August 26, 2010 by the Board of Directors of the Company.
43.
General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.
Chairman
President & CEO
Consolidated Financial Statements

82
| Pakistan Telecommunication Group
Auditors Report to the Members on Consolidated Financial Statements

We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of Pakistan Telecommunication Company Limited (the holding company) and its subsidiaries (hereinafter referred as the Pakistan Telecommunication Group) as at June 30, 2010 and the related consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of Pakistan Telecommunication Company Limited. The financial statements of subsidiary companies, Pak Telecom Mobile Limited and Maskatiya Communications (Private) Limited were audited by one of the joint auditors, Ernst & Young Ford Rhodes Sidat Hyder and Rizwani Imtiaz & Co, respectively, whose reports have been furnished to us and our opinion in so far it relates to the amounts included for such companies, is based solely on the report of the said auditors. These financial statements are the responsibility of the holding companys management. Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary. In our opinion, the consolidated financial statements audited by us present fairly the financial position of Pakistan Telecommunication Group as at June 30, 2010 and the results of its operations for the year then ended.
A. F. Ferguson & Co. Chartered Accountants Islamabad
Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants Islamabad
Audit Engagement Partners Name: M. Imtiaz Aslam
Audit Engagement Partners Name: Sajjad Hussain Gill
Dated: August 26, 2010
84
Consolidated Statement of Financial Position

As at June 30, 2010
Equity and liabilities

Share capital and reserves Share capital Revenue reserves Insurance reserve General reserve Unappropriated profit 6 51,000,000 2,113,704 30,500,000 24,461,054 108,074,758 Non current liabilities Long term loans Payable to PTA against license fee Deferred taxation Employees retirement benefits Deferred government grants Long term security deposits Long term liabilities 7 8 9 10 11 12 13 13,000,000 169,847 10,633,651 15,676,877 1,632,701 1,295,008 10,459,040 52,867,124 Current liabilities Trade and other payables Interest and markup accrued Current portions of: Long term loans Payable to PTA against license fee Long term liabilities Unearned income Dividend payable 14 15 7 8 13 33,697,723 284,273 1,935,288 5,980,398 1,855,127 3,375,631 47,128,440 208,070,322 Contingencies and commitments 16 31,918,337 291,240 100,949 1,977,762 19,476,149 1,376,256 7,650,000 62,790,693 215,139,886 9,000,000 167,090 7,205,377 14,252,785 1,061,044 1,478,764 13,931,199 47,096,259 51,000,000 1,683,074 30,500,000 22,069,860 105,252,934
The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.
Chairman
Note
2009
Assets
Non current assets Fixed assets Property, plant and equipment Intangible assets
17 18
152,082,836 3,716,981 155,799,817
145,207,712 3,865,149 149,072,861 108,095 332,378 149,513,334
Long term investments Long term loans
19 20
108,910 337,210 156,245,937
Current assets Stores, spares and loose tools Stock in trade Trade debts Loans and advances Accrued interest income Recoverable from tax authorities Receivable from Government of Pakistan Other receivables Short term investments Cash and bank balances 21 22 23 24 25 26 27 28 29 30 4,075,863 385,199 10,385,233 718,211 456,523 7,747,957 2,164,072 2,324,902 13,493,865 10,072,560 51,824,385 5,201,991 470,673 10,875,750 963,418 795,435 1,118,703 2,164,072 1,833,154 21,017,790 21,185,566 65,626,552
208,070,322
215,139,886
President & CEO
86
Consolidated Statement of Comprehensive Income

Revenue Cost of services Gross profit Administrative and general expenses Selling and marketing expenses Other operating income Operating profit Voluntary separation scheme Finance cost
31 32
98,905,765 (62,212,774) 36,692,991
92,720,381 (55,154,403) 37,565,978 (13,488,954) (7,996,056) 5,223,655 21,304,623 (92,118) (4,473,429) 16,739,076 33 16,739,109
33 34 35
(12,617,632) (7,424,363) 5,277,011 21,928,007 (3,293,496) 18,634,511
36
Share of profit from an associate Profit before tax Taxation Group Associate 37 Profit after tax Other comprehensive income for the year Total comprehensive income for the year
1,254 18,635,765
(6,888,502) (439) (6,888,941) 11,746,824 11,746,824
(5,816,257) (337) (5,816,594) 10,922,515 10,922,515
Earnings per share basic and diluted (Rupees)
38
2.30
2.14
Chairman
President & CEO
Consolidated Statement of Cash Flows

Cash flows from operating activities

Cash generated from operations Long term security deposits Employees retirement benefits paid / contribution to funded plans Payment of other VSS components Finance cost paid Income tax paid Net cash inflow from operating activities 39 43,438,939 (183,756) (586,041) (5,323) (1,477,754) (10,036,557) 31,149,508 44,442,463 38,437 (1,510,085) (840,927) (1,302,595) (3,196,967) 37,630,326
Cash flows from investing activities

Capital expenditure Acquisition of a subsidiary net of cash acquired Intangible assets Proceeds from disposal of property, plant and equipment Short term investments Long term loans net PTA WLL License Fee Return on long term loans and short term investments Government grants received Dividend income Net cash outflow from investing activities 44 (28,113,075) 3,990 (316,645) 247,333 1,221,886 (53,655) (257,653) 4,366,926 571,657 22,000 (22,307,236) (17,663,529) (397,979) 236,807 (1,221,886) 62,565 3,966,774 966,044 (14,051,204)
Cash flows from financing activities

Long term liabilities Long term loan received Long term loan paid Lease rentals paid Dividend paid Net cash outflow from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 40 (16,967,910) 4,000,000 (100,949) (13,188,458) (26,257,317) (17,415,045) 40,981,470 23,566,425 (1,296,714) (2,231) (2,742) (1,301,687) 22,277,435 18,704,035 40,981,470
Chairman
President & CEO
88
Consolidated Statement of Changes in Equity

Issued, subscribed and paidup capital Class A Class B Insurance reserve Revenue reserves General reserve Unappropriated profit Total
Balance as at July 01, 2008 Total comprehensive income for the year Interim dividend for the year ended June 30, 2009 Rs. 1.5 per share Balance as at June 30, 2009 Total comprehensive income for the year Transfer to insurance reserve Interim dividend for the year ended June 30, 2010 Rs. 1.75 per share Balance as at June 30, 2010
37,740,000 37,740,000 37,740,000
13,260,000 13,260,000 13,260,000
1,683,074 1,683,074 430,630 2,113,704
30,500,000 30,500,000 30,500,000
18,797,345 10,922,515 (7,650,000)
101,980,419 10,922,515 (7,650,000)
22,069,860 105,252,934 11,746,824 (430,630) (8,925,000) 11,746,824 (8,925,000)
24,461,054 108,074,758
Chairman
President & CEO
Notes to and Forming Part of the Consolidated Financial Statements

1.1
Legal status and nature of business

Constitution and ownership The consolidated financial statements of the Pakistan Telecommunication Group (the Group) comprise of the financial statements of: Pakistan Telecommunication Company Limited (PTCL) Pakistan Telecommunication Company Limited (the holding Company) was incorporated in Pakistan on December 31, 1995 and commenced business on January 01, 1996. The Company is listed on Karachi, Lahore and Islamabad stock exchanges. The Company was established to undertake the telecommunication business formerly carried on by Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 01, 1996 under the Pakistan Telecommunication (Reorganization) Act, 1996 at which date the Company took over all the properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters, G8/4, Islamabad. As a consequence of PTCLs privatization during 2006, 26% of its shares were acquired by Etisalat International Pakistan (LLC), based in the U.A.E. Pak Telecom Mobile Limited (PTML) PTML was incorporated in Pakistan on July 18, 1998, as a public limited company, to provide cellular mobile telephony services in Pakistan. PTML commenced its commercial operations in phases, commencing on January 29, 2001, under the brand name of Ufone. It is a wholly owned subsidiary of PTCL. The registered office of PTML is situated at G8/4, Islamabad. Maskatiya Communications (Private) Limited (MAXCOM) On March 01, 2010 the holding Company acquired 100 % shares of MAXCOM. MAXCOM was incorporated in Pakistan on September 06, 2004 as a private limited company under the Companies Ordinance, 1984, to provide broadband services in the cities of Karachi and Hyderabad. The registered office of the Company is situated at PTCL, Southzone Office Clifton, Karachi.
1.2
Activities of the Group The Group provides telecommunication and broadband internet services in Pakistan. PTCL owns and operates telecommunication facilities and provides domestic and international telephone services throughout Pakistan. PTCL has also been licensed to provide such services to territories in Azad Jammu and Kashmir and GilgitBaltistan. PTML provides cellular mobile telephony services throughout Pakistan and Azad Jammu and Kashmir. MAXCOM provides broadband services in the cities of Karachi and Hyderabad.
2.
Statement of compliance
These consolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
2.1
Adoption of new and revised standards and interpretations Changes in accounting policies and disclosures
(i)
IAS 1 (Revised), Presentation of Financial Statements changes in accounting policies and disclosures (effective for annual periods beginning on or after January 01, 2009). The revised standard prohibits the presentation of items of income and expenses (that is nonowner changes in equity) in the statement of changes in equity, requiring nonowners
90

changes in equity to be presented separately from owners changes in equity. All nonowners changes in equity are required to be shown in a performance statement. Groups can choose whether to present one performance statement (the statement of comprehensive income) or two statements (statement of comprehensive income and statement of other comprehensive income). The Group has preferred to present one statement. (ii) IAS 7 (Amendments), Statement of Cash Flows (effective for annual periods beginning on or after January 01, 2009) requires the Group to disclose total consideration paid, the portion of consideration consisting of cash and cash equivalents and the amount of cash and cash equivalents in the subsidiary whose control is obtained during the year. Additional disclosures consequent to this amendment have been disclosed in note 44. IFRS 3 (Revised), Business Combinations (effective for annual periods beginning on or after July 01, 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisitionbyacquisition basis to measure the noncontrolling interest in the acquiree at fair value or at the noncontrolling interests proportionate share of the acquirees net assets. All acquisitionrelated costs should be expensed. The Groups acquisition during the year has been recorded in accordance with IFRS 3 (Revised). IFRS 8, Operating Segments (effective for annual periods beginning on or after January 01, 2009). IFRS 8 replaces IAS 14, Segment reporting. The new standard requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes, and introduces detailed disclosures regarding the reportable segments and products. Under IFRS 8, operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker. The management has determined that the Group has two reportable segments as the Board of Directors views the Groups operations as two reportable segments. The adoption of this standard has only resulted in certain additional disclosures to these financial statements of the Pakistan Telecommunication Group as disclosed in note 46. IAS 23 (Revised), Borrowing Costs (effective for annual periods beginning on or after January 01, 2009). The revised standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The Groups policy is in line with the revision and therefore the adoption of the revised IAS 23 and the consequent change in accounting policy had no impact on the earnings of the Group during the year ended June 30, 2010. IFRIC 18, Transfer of assets from customers (effective for annual periods beginning on or after July 01, 2009). The interpretation clarifies the accounting treatment of consideration received from customers to construct or acquire an item of property, plant and equipment for provision of services to customers. The interpretation requires recognition of property, plant and equipment in accordance with IAS 16 Property, plant and equipment and recognition of income as per IAS 18 Revenue. The Groups current accounting policy is in compliance with this interpretation and therefore there is no effect on the Groups financial statements. Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted by the Group:
Effective date (annual periods beginning on or after)
(iii)
(iv)
(v)
(vi)
2.2
IFRS 2 IFRS 5 IFRS 8 IAS 1 IAS 7 IAS 17 IAS 24 IAS 32 IAS 36 IAS 39 IFRIC 14 IFRIC 19
Share based payments (Amendments) Non current assets held for sale and discontinued operations (Amendments) Operating segments (Amendments) Presentation of financial statements (Amendments) Statement of cash flows (Amendment) Leases (Amendments) Related party disclosures (Revised) Financial instruments: Presentation (Amendments) Impairment of assets (Amendments) Financial instruments: Recognition and measurement (Amendments) IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction (Amendments) Extinguishing financial liabilities with equity Instruments
January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2010 January 01, 2011 February 01, 2010 January 01, 2010 January 01, 2010 January 01, 2011 July 01, 2010

The management anticipates that except for the effects on the financial statements, of IFRS 2 Share based payments (Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no material impact on the Groups financial statements except for additional disclosures. The management is currently considering the implications of IFRS 2 (Amendments).
3.
Basis of preparation
These consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments at fair value and the recognition of certain employees retirement benefits on the basis of actuarial assumptions.
4.
Significant accounting judgement and estimates

The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Groups accounting policies. Estimates and judgements are continually evaluated and are based on historic experience including expectation of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows:
(a)
Provision for employees retirement benefits Actuarial valuation of pension, gratuity, medical and compensated leave absence contributions (note 5.22) requires use of certain assumptions related to future periods including increase in remuneration / medical costs, expected long term return on plan assets and the discount rate used to convert future cash flows to current values.
(b)
Provision for income taxes The Group recognizes tax provisions using estimates based upon expert opinions of tax / legal advisors. Differences, if any, between the income tax provision and the tax liability is recorded on final determination of such liability. Deferred income tax (note 5.21) is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantially enacted by the date of statement of financial position.
(c)
Useful lives and residual values of fixed assets The Group reviews the useful lives and residual values of fixed assets (note 5.11) on a regular basis. Any change in estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible assets with a corresponding effect on the depreciation / amortization charge.
(d)
Provision for doubtful receivables Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook of the concerned receivable party. It is reviewed by the management on a regular basis.
5.
Summary of significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
5.1 (a)
Consolidation Subsidiary Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The consolidated financial statements include Pakistan Telecommunication Company Limited and all companies in which it directly or indirectly controls, beneficially owns or holds more than 50% of the voting securities or otherwise has power to elect and appoint more than 50% of its directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date control ceases to exist.
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From the current year, consequent to revision of IFRS 3 Business Combinations, the acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acqusition date fair value and amount of any non controlling interest in the acquiree. For each business combination, the acquirer measures the non controlling interest in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net assets. Acqusition costs incurred are expensed. If the business combination is acheived in stages, the acqusition date fair value of the acquirers previously held equity interest in the acquiree is remeasured to fair value as at the acqusition date through profit and loss. Any contingent consideration to be transferred by the acquirer are recognized at fair value at the acqusition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with IAS 39 either in profit or loss or charged to other comprehensive income. If the contingent consideration is classified as equity, it is remeasured untill it is finally settled within equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non controlling interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in income. Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses on assets transferred are also eliminated and considered an impairment indicator of such assets. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Previously, the purchase method of accounting was used and the cost of an acquisition was measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Business combination achieved in stages were accounted for as separate steps. Any additional acquired share of interest did not affect previously recognized goodwill. Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration used to affect goodwill. This change in method of accounting for acquisition of subsidiaries does not have any impact on these financial statements. (b) Associates Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Groups investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Groups share of its associates postacquisition profits or losses is recognized in the statement of comprehensive income, and its unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealized losses on the assets transferred are also eliminated to the extent of the Groups interest and considered an impairment indicator of such asset. Accounting policies of the associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognized in the statement of comprehensive income. 5.2 Functional and presentation currency Items included in the financial statements of the Group are measured and presented using the currency of the primary economic environment in which the entity operates (the functional currency), which is the Pakistan Rupee (Rs).

5.3 Foreign currency transactions and translation Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the statement of financial position. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items at year end exchange rates, are charged to income for the year. 5.4 Insurance reserve The assets of the holding Company are self insured. The holding Company has created an insurance reserve. Appropriation out of profits are made on the discretion of the Board of Directors. The reserve is to be utilized to meet any loss resulting from theft, fire or natural disasters. 5.5 Government grants Government grants are recognized at their fair value as deferred income, when there is reasonable assurance that the grant will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognized in income for the year on a systematic basis in the same period in which the related expenses are recognized. Grants that compensate the Group for cost of an asset are recognized in income for the year on a systematic basis over the expected useful life of the related asset, upon its capitalization. 5.6 Borrowings and borrowing costs Borrowings are recognized at the proceeds received. Any difference, between the proceeds (net of transaction costs) and the redemption value, is recognized in income for the year over the period of the borrowings, using the effective interest method. Borrowing costs which are directly attributable to the acquisition and construction of a qualifying asset are capitalized as part of the cost of that asset. All other borrowing costs are charged to income for the year. 5.7 Trade and other payables Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for the goods and / or services received, whether or not billed to the Group. 5.8 Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the reliable estimate of the amount can be made. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate. 5.9 Dividend distribution Final dividend distribution to the Groups shareholders is recognized as a liability in the financial statements, in the period in which the dividend is approved by the Groups shareholders; interim dividend distribution is recognized in the period in which it is declared by the Board of Directors. 5.10 Contingent liabilities A contingent liability is disclosed when the Group has a possible obligation as a result of past events, whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events, not wholly within the control of the Group; or the Group has a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
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5.11 (a) Fixed assets Property, plant and equipment Property, plant and equipment, except freehold land, is stated at cost less accumulated depreciation and any identified impairment loss; freehold land is stated at cost less identified impairment loss, if any. Cost includes expenditure, related overheads, mark up and borrowing costs referred to in note 5.6, that is directly attributable to the acquisition of the asset. Subsequent costs, if reliably measurable, are included in the assets carrying amount, or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to income for the year during the period in which they are incurred. Depreciation is calculated using the straightline method to allocate their cost over their estimated useful lives, at the rates mentioned in note 17, after taking into account their residual values. Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount less the residual value over its estimated useful life. The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying amount of the asset, is recognized in income for the year. (b) Intangible assets (i) Goodwill Goodwill is initially measured at cost being the excess of the consideration transferred over the fair value of subsidiarys identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cashgenerating unit and part of the operation within that unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative values of the operation disposed off and the portion of the cashgenerating unit retained. (ii) Licenses These are stated at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using the straightline method to allocate the cost of the license over its estimated useful life, as disclosed in note 18.1 and is charged to income for the year. The amortization on licenses acquired during the year, is charged from the month in which a license is acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license. (iii) Computer software These are carried at cost less accumulated amortization and any identified impairment losses. Amortization

is calculated using the straightline method to allocate the cost of the software over its estimated useful life, as disclosed in note 18.1 and is charged to income for the year. Costs associated with maintaining computer software, are recognized as an expense as and when incurred. Amortization on additions to computer software is charged from the month in which an intangible is acquired or capitalized, while no amortization is charged for the month in which the intangible is disposed off. 5.12 Impairment of nonfinancial assets Assets that have an indefinite useful life, for example land, are not subject to depreciation and are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment at each statement of financial position date, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount for which the assets carrying amount exceeds its recoverable amount. An assets recoverable amount is the higher of its fair value less cost to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels, for which there are separately identifiable cash flows. Nonfinancial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each statement of financial position date. Reversals of the impairment loss are restricted to the original cost of the asset. An impairment loss or reversal of impairment loss is recognized in income for the year. 5.13 Stores, spares and loose tools These are stated at lower of cost and net realizable value. Cost is determined using the moving average method. Items in transit are valued at cost comprising invoice value and other related charges incurred up to the date of statement of financial position. 5.14 Stock in trade These are stated at lower of cost and net realizable value. Cost comprises of purchase price, import duties, purchase taxes and other related costs. 5.15 Trade debts Trade debts are carried at their original invoice amount less any estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 5.16 Financial instruments Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument, and derecognized when the Group loses control of the contractual rights that comprise the financial assets and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These are subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year. 5.17 (a) Financial assets Classification The Group classifies its financial assets in four categories: held to maturity, loans and receivables, fair value through profit or loss and availableforsale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (i) Held to maturity A financial asset is classified in this category if it is acquired by the Group with the intention and ability to hold it till its maturity. (ii) Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted
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in an active market. The Groups loans and receivables comprise Trade debts, Loans and advances, Accrued interest income, Receivable from Government of Pakistan, Other receivables, Short term investments and Cash and bank balances. (iii) Fair value through profit or loss Financial assets at fair value through profit or loss, are financial assets held for trading. A financial asset is classified in this category, if acquired principally for the purpose of selling in the shortterm. Assets in this category are classified as current assets. (iv) Availableforsale Availableforsale financial assets are nonderivatives, that are either designated in this category or not classified in any of the other categories. These are included in noncurrent assets unless management intends to dispose off these assets within twelve months of the date of statement of financial position. (b) Recognition and measurement Regular purchases and sales of financial assets are recognized on the trade date the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and the related transaction costs are charged to income for the year. Investments classified as availableforsale are initially measured at cost being the fair value of the consideration given. At subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments in which a quoted market price is not available, are measured at cost if it is not possible to apply any other valuation methodology. Unrealised gains and losses arising from the changes in the fair value are included in income for the year in the period in which they arise. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held to maturity financial assets are carried at amortized cost using the effective interest method. Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have been transferred. Gains or losses arising from changes in the fair value of financial assets, at fair value through profit or loss category, are recognized in income in the period in which they arise. Dividend income, from availableforsale investments and financial assets at fair value through profit or loss, is recognized in income, when the Groups right to receive dividend is established. (c) Impairment The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as availableforsale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the security is impaired. If any such evidence exists for availableforsale financial assets, the impairment loss is reduced from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in income on equity instruments are not reversed. 5.18 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the statement of financial position if the Group has a legally enforceable right to set off the recognized amounts and the Group intends to settle on a net basis or realize the asset and settle the liability simultaneously. 5.19 Cash and cash equivalents Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash equivalents comprise cash in hand, other short term highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change

in value. Revenue recognition Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication, broadband and related services in the ordinary course of the Groups activities. Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Group, and the amount of revenue, and the associated cost incurred or to be incurred, can be measured reliably, and when specific criteria have been met for each of the Groups activities as described below: (i) Rendering of telecommunication services Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly line rent, line usage, cellular operations and provision of other telecommunication services (including data services). Revenue also includes the net income received and receivable from revenue sharing arrangements entered into with overseas and local telecommunication companies. Revenue is recognized based on the fair value received or receivable for the services rendered, net of services tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the air time, or the credit expires. Unutilized airtime is carried in the statement of financial position as unearned income. (ii) Income on bank deposits Return on bank deposits and investments is recognized using the effective interest method. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. 5.21 Taxation The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year, except to the extent that it relates to items recognized directly in the statement of other comprehensive income, where the related tax is also recognized in statement of other comprehensive income. (a) Current The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date. Management periodically evaluates positions taken in tax returns, with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. (b) Deferred Deferred income tax is accounted for using the balance sheet liability method, in respect of all temporary differences arising between the carrying amount of assets and liabilities in the financial statement and the corresponding tax base used in the computation of taxable profit. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantially enacted by the statement of financial position date. 5.20
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5.22 Employees retirement benefits The Group operates various retirement / post retirement benefit schemes. The plans are generally funded through payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001. The Group has constituted both defined contribution and defined benefit plans. The main features of the schemes operated by the Group in the PTCL and its subsidiaryPTML are as follows:
PTCL
(a) Defined contribution plan The Company operates an approved funded provident plan covering permanent employees. For the purposes of the plan, a separate trust titled the PTCL Employees GPF Trust (the Trust) has been established. Monthly contributions are deducted from the salaries of employees, and are paid to the Trust by the Company. Interest is paid at the rate announced by the Federal Government and this rate for the year was 14% (2009: 15%) per annum. The Company also contributes to the fund the differential, if any, of the interest paid / credited for the year and the income earned on the investments made by the Trust. (b) Defined benefit plans The Company operates the following defined benefit plans: (i) Pension plans The Company operates an approved funded pension plan through a separate trust called the Pakistan Telecommunication Employees Trust (PTET) for its employees recruited prior to January 01, 1996 when the Company took over the business from PTC. The Company also operates an unfunded pension scheme for employees recruited on a regular basis on or after January 01, 1996. (ii) Gratuity plan The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTC) / contractual employees. (iii) Medical benefits plan The Company provides post retirement medical facility to pensioners and their families. Under the unfunded plan, all such exemployees, their spouses and children up to the age of 21 except unmarried daughters which are not subject to 21 years age limit and parents residing with and dependent on the employee are entitled to this benefit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse. There are no annual limits to the cost of drugs, hospitalized treatment and consultation fees.
(iv)
Accumulating compensated absences The Company provides a facility to its employees for accumulating their annual earned leave. Under this plan, regular employees are entitled to four days of earned leaves per month. Unutilized leaves can be accumulated without limit and can be used at any time, subject to the Companys approval, up to 120 days in a year without providing medical certificate, 180 days with medical certificate and 365 days during the entire service of the employee. Up to 180 days of accumulated leave can be encashed on retirement, provided the employee has a minimum leave balance of 365 days. Leaves are encashed at latest emoluments applicable for monthly pension. New Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of service. Leaves can be accumulated after completion of the second year of service, to a maximum of 28 days. New Terms and Conditions (NTC) / contractual employees are entitled to three days earned leave per month. Unutilized leaves can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on departure at gross pay.

The liability recognized in the statement of financial position in respect of defined benefit plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any, together with adjustments for unrecognized actuarial gains / losses, if any. The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method. The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of highquality corporate bonds, that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, in excess of the corridor (10% of the higher of the fair value of the plan assets or the present value of the defined benefit obligation) at the beginning of the current reporting year, are recognized over the expected average remaining working lives of employees participating in the defined benefit plan. Actuarial gains and losses arising on compensated absences are recognized immediately.
PTML
(a) Defined contribution plan The Company operates an approved contributory provident fund for all its employees, and for which, contributions are charged to income for the year. (b) Defined benefit plans The Company operates the following defined benefit plans: (i) Gratuity plan The Company operates a funded gratuity scheme for all permanent employees. The liability is provided for on the basis of an actuarial valuation carried out as at June 30, 2010 using the Projected Unit Credit Method. The actuarial gains and losses are amortised over the expected remaining service of employees. (ii) Accumulating compensated absences The Company provides a facility to its employees for accumulating their annual earned leaves. The liability is provided for on the basis of an actuarial valuation, carried out as at June 30, 2010, using the Projected Unit Credit Method. The actuarial gains and losses are recognised in the statement of comprehensive income account. 5.23 Operating segments Operating segments are reported in a manner consistent with the internal reporting of the Group in note 46 to the financial statements.
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6.1
Share capital
Authorized share capital
11,100,000 3,900,000 15,000,000 6.2
11,100,000 3,900,000 15,000,000
A class ordinary shares of Rs 10 each Bclass ordinary shares of Rs 10 each
111,000,000 39,000,000 150,000,000
111,000,000 39,000,000 150,000,000
Issued, subscribed and paid up capital

3,774,000
3,774,000
A class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash note 6.3 B class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash note 6.3
37,740,000
37,740,000
1,326,000
1,326,000
13,260,000 51,000,000
13,260,000 51,000,000
5,100,000 6.3
5,100,000
These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities transferred from Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited (PTCL) under the Pakistan Telecommunication (Reorganization) Act, 1996 as referred to in note 1.1. Except for voting rights, the A and B class ordinary shares rank pari passu in all respects. A class ordinary shares carry one vote and B class ordinary shares carry four votes, save for the purposes of election of directors. A class ordinary shares cannot be converted into B class ordinary shares. However, B class ordinary shares may be converted into A class ordinary shares at the option, exercisable in writing, submitted to the Company by the holders of three fourths of the B class ordinary shares. In the event of termination of the license issued to the Company under the provisions of Pakistan Telecommunication (Reorganization) Act, 1996, the B class ordinary shares shall be automatically converted into A class ordinary shares. The Government of Pakistan through an Offer for Sale document, dated July 30, 1994 issued to its domestic investors a first tranche of vouchers exchangeable for A class ordinary shares of the Company; subsequently through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to the international investors, also exchangeable, at the option of voucher holders, for A class ordinary shares or Global Depository Receipts ( GDRs ) representing A class ordinary shares of the Company. Out of 3,774,000 thousand A class ordinary shares, vouchers against 601,084 thousand A class ordinary shares were issued to the general public. Till June 30, 2010, 599,506 thousand (2009: 599,500 thousand) A class ordinary shares had been exchanged for such vouchers. In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 08, 2005 for sale of B class ordinary shares of Rs 10 each, alongwith management control. Emirates Telecommunication Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
6.4
6.5
6.6

6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:
2010 (Number of shares) 2009
Etisalat International Pakistan (LLC) SE Etisalat International Pakistan (LLC)
(B class ordinary shares) (B class ordinary shares)
407,809,524 918,190,476 1,326,000,000
407,809,524 918,190,476 1,326,000,000
Note
2009
7.
Long term loans

SubsidiaryPTML Secured From banks From consortia of banks Current portion thereof
7.1 7.2
4,000,000 9,000,000 13,000,000 13,000,000
100,949 9,000,000 9,100,949 (100,949) 9,000,000
7.1
From banks This comprises loans from: Bank Al Habib Limited Faysal Bank Limited NIB Bank Limited Habib Bank Limited 7.1.1 7.1.2 7.1.3 1,000,000 2,000,000 1,000,000 4,000,000 100,949 100,949
7.1.1 The loan carries markup @ 3 Month KIBOR plus 1.80%, effectively resulting in a markup rate, ranging between 14.060% and 14.150% per annum during the current year. 7.1.2 This represents two loans carrying markup @ 3 Month KIBOR plus 1.80%, effectively resulting in a markup rate, ranging between 14.060% and 14.150% per annum during the current year. 7.1.3 The loan carries markup @ 3 Month KIBOR plus 1.75%, effectively resulting in a markup rate, ranging between 14.010% and 14.10% per annum during the current year. 7.1.4 The above loans are secured by way of first charge ranking pari passu by way of hypothecation over all present and future movable equipment and other assets of PTML. These loans were disbursed on March 29, 2010 and have a grace period of three years from the disbursement date and are repayable in eight equal quarterly installments, commencing June 29, 2013 till March 29, 2015.
7.2
From consortia of banks Syndicated term financing 1 Syndicated term financing 2 7.2.1 7.2.2 4,500,000 4,500,000 9,000,000 4,500,000 4,500,000 9,000,000
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7.2.1 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position. The loan carries markup rate of 0.69 % over a simple average of 3 months KIBOR prevailing on the last five working days prior to the date of first disbursement, and thereafter prior to each installment period, effectively resulting in a mark up rate, ranging between 13.020% and 13.450% (2009: 10.83% to 16.19%) per annum during the current year. The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future assets (excluding land) of PTML. The loan is repayable in July 2011. 7.2.2 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position. The loan carries a markup rate of 0.69 % over 3 months KIBOR, prevailing on the last working day prior to the date of the first disbursement, and thereafter prior to each installment period, effectively resulting in a markup rate, ranging between 12.910% and 13.440% (2009: 10.83% to 16.19%) per annum during the current year. The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future assets (excluding land) of PTML. The loan is repayable in July 2011.
8.
Payable to PTA against license fee

PTCL PTML MAXCOM Current portion of license fee payable 8.1 8.2 1,894,950 210,021 164 2,105,135 (1,935,288) 169,847 1,953,971 190,881 2,144,852 (1,977,762) 167,090
8.1
Payable to PTA against license fee PTCL Payable to PTA against WLL license fee Present value adjustment Present value of license fee payable Imputed interest charged to date Payment made during the year Current portion shown under current liabilities 2,105,500 (631,756) 1,473,744 631,756 2,105,500 (210,550) 1,894,950 (1,894,950) 2,105,500 (631,756) 1,473,744 480,227 1,953,971 1,953,971 (1,953,971)
8.2
Payable to PTA against license fee PTML Payable to PTA against AJK license fee Imputed interest charged Payment made during the year Current portion shown under current liabilities 8.2.1 298,600 (45,879) 252,721 (42,700) 210,021 (40,174) 169,847 325,725 (94,194) 231,531 (40,650) 190,881 (23,791) 167,090

8.2.1 This represents a license fee of USD 5,000 thousand, in respect of the PTMLs operations in AJK, payable to the PTA in ten equal annual installments without any interest. The license fee will be repaid over a period of ten years commencing June 2007 to 2016, in USD or equivalent Pak Rupees. Accordingly, at initial recognition, the amount payable was discounted to the present value of future cash flows at the rate of 6% per annum representing LIBOR.
9.
Deferred taxation
The liability / (assets) for deferred taxation comprises of timing differences relating to:
Accelerated tax depreciation / amortization Provision for doubtful trade debts Provision for doubtful advances and receivables Available tax losses Intangible assets Others
21,440,739 (6,790,902) (146,734) (3,909,262) 41,581 (1,771) 10,633,651
19,301,747 (6,284,901) (165,055) (5,692,523) 43,003 3,106 7,205,377
The gross movement in deferred taxation during the year is as follows: Balance as at July 01 Charge for the year Deferred taxation as at March 01, 2010 of subsidiary acquired Balance as at June 30 7,205,377 3,437,465 (9,191) 10,633,651 4,469,852 2,735,525 7,205,377
10.
Employees retirement benefits

Liabilities for pension obligations Funded Unfunded Gratuity Funded Unfunded Accumulating compensated absences Post retirement medical facility 10.1 10.1 10.1 10.1 71,314 498,256 569,570 1,019,098 7,718,647 15,676,877 51,460 391,609 443,069 1,084,390 7,333,246 14,252,785 10.1 10.1 5,283,449 1,086,113 6,369,562 4,550,208 841,872 5,392,080
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10.1 The latest actuarial valuations of the Groups defined benefit plans were conducted at June 30, 2010 using the projected unit credit method. Details of these defined benefit plans are as follows:
Pension Funded
2010 2009
Gratuity Unfunded
2010 2009
Accumulating Unfunded compensated absences

2009 2010 2009 2010
Post retirement medical facility

2010 2009
Total
2010 2009
Funded
2010 2009
(Rupees in thousand) (a) The amounts recognised in the statement of financial position: Present value of defined benefit obligations Fair value of plan assets note 10.3 Unrecognized actuarial gains / (losses) Liability as at June 30 (b) Changes in the present value of defined benefit obligation: Balance as at July 01 Current service cost Interest cost Past service cost Actuarial (gains) / losses Benefits paid Recognition of contractual liabilities Balance as at June 30 (c) Charge for the year: Current service cost Interest cost Past service cost Expected return on plan assets Actuarial (gains) / losses Contribution from deputationists Contractual liabilities 542,494 6,433,306 270,000 (6,512,558) (175) 733,067 (d) Significant actuarial assumptions at the date of statement of financial position: Expected rate of return on plan assets Discount rate Future salary / medical cost increase Future pension increase Average expected remaining working lives of participants Expected mortality rate Expected withdrawal rate 13% 12% 911% 8% 13 years 13% 12% 911% 8% 13 years 12% 911% 8% 16 years 12% 911% 8% 17 years 10% 12% 12% 12 years 10% 12% 12% 12 years 12% 911% 6 years 12% 911% 6 years EFU 6166* Based on experience 12% 911% 12% 911% 12% 11% 14 years 12% 11% 14 years 445,896 6,012,673 (6,297,387) 161,182 137,708 111,868 249,576 131,893 85,125 472 217,490 62,566 18,307 (9,849) 290 71,314 45,480 12,731 (7,680) 929 51,460 103,717 37,785 (7,541) 133,961 108,135 30,147 138,282 60,000 130,127 (188,994) 1,133 53,015 123,175 (21,756) 145,482 299,916 64,186 773,842 (17,121) 820,907 64,052 623,452 (100,396) 587,108 970,671 7,505,235 270,000 (6,522,407) (213,366) (175) 2,009,958 848,471 6,887,303 (6,305,067) (120,751) 145,482 1,455,438 53,610,885 542,494 6,433,306 270,000 6,098,147 (4,202,607) 62,752,225 50,105,610 445,896 6,012,673 953,077 (3,906,371) 53,610,885 932,231 137,708 111,868 (37,370) (5,335) 1,139,102 709,378 131,893 85,125 11,870 (6,035) 932,231 152,555 62,566 18,307 6,244 (30,226) 209,446 106,094 45,480 12,731 3,196 (14,946) 152,555 314,871 103,717 37,785 (5,358) (27,313) 423,702 251,226 108,135 30,147 (60,858) (13,779) 314,871 1,084,390 60,000 130,127 (188,994) (66,425) 1,019,098 880,970 53,015 123,175 (21,756) (96,496) 145,482 1,084,390 6,448,686 64,186 773,842 955,960 (435,507) 7,807,167 5,195,430 64,052 623,452 940,121 (374,369) 6,448,686 62,543,618 970,671 7,505,235 270,000 6,828,629 (4,767,413) 73,350,740 57,248,708 848,471 6,887,303 1,825,650 (4,411,996) 145,482 62,543,618 62,752,225 53,610,885 (53,521,666) (50,096,598) 9,230,559 (3,947,110) 5,283,449 3,514,287 1,035,921 4,550,208 1,139,102 1,139,102 (52,989) 1,086,113 932,231 932,231 (90,359) 841,872 209,446 (115,814) 93,632 (22,318) 71,314 152,555 (82,072) 70,483 (19,023) 51,460 423,702 423,702 74,554 498,256 314,871 314,871 76,738 391,609 1,019,098 1,019,098 1,019,098 1,084,390 1,084,390 1,084,390 7,807,167 7,807,167 (88,520) 7,718,647 6,448,686 6,448,686 884,560 7,333,246 73,350,740 62,543,618 (53,637,480) (50,178,670) 19,713,260 (4,036,383) 15,676,877 12,364,948 1,887,837 14,252,785
* Mortality table adjusted for Companys experience

10.2 Historical information
2010 2009 2008 2007 2006
Defined benefit pension plan funded Present value of defined benefit obligations as at June 30 Fair value of plan assets as at June 30 Deficit / (surplus) in the plan Experience adjustment on plan liabilities losses Experience adjustment on plan assets (losses) / gains Defined benefit pension plan unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit gratuity plan funded Present value of defined benefit obligations as at June 30 Fair value plan assets at year end Deficit in the plan Experience adjustment on plan liabilities losses Experience adjustment on plan assets gains Defined benefit gratuity plan unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Accumulating compensated absences Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit post retirement medical facility Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities losses / (gains) 7,807,167 955,960 6,448,686 940,121 5,195,430 (51,761) 4,798,947 (274,176) 4,583,853 (673,407) 1,019,098 (188,994) 1,084,390 45,308 880,970 18,328 1,910,834 30,993 1,762,043 (238,728) 423,702 (5,358) 314,871 (51,220) 251,226 41,126 111,444 (77,172) 136,265 10,089 209,446 (115,814) 93,632 6,244 2,659 152,555 (82,072) 70,483 3,196 5,930 106,094 (64,002) 42,092 4,645 1,464 71,363 71,363 2,326 48,293 48,293 4,616 1,139,102 (37,370) 932,231 83,101 709,378 1,764 1,180,770 (96,454) 1,050,561 47,981 62,752,225 (53,521,666) 9,230,559 6,098,147 1,115,117 53,610,885 (50,096,598) 3,514,287 953,077 (1,735,854) 50,105,610 (48,441,436) 1,664,174 778,679 (522,664) 36,529,541 (45,158,318) (8,628,777) 2,581,597 3,776,675 31,413,488 (39,243,528) (7,830,040) 603,337 2,611,253
10.3
Changes in the fair value of plan assets

Pension funded 2010 2009 (Rupees in thousand) Gratuity funded 2010 2009
Balance as at July 01 Expected return on plan assets Contributions during the year Benefits paid Actuarial gains / (losses) on plan assets Balance as at June 30 Actual return on plan assets
50,096,598 6,512,558 (4,202,607) 1,115,117 53,521,666 7,627,675
48,441,436 6,297,387 1,000,000 (3,906,371) (1,735,854) 50,096,598 4,561,533
82,072 9,849 51,460 (30,226) 2,659 115,814 12,507
64,002 7,680 19,406 (14,946) 5,930 82,072 13,610
106

10.4 Major categories of plan assets as a percentage of total plan assets are as follows:
Pension funded 2010 2009 (Percentage) Gratuity funded 2010 2009
Defence saving certificates Special saving certificates Pakistan investment bonds Fixed and other assets Bank balances Balance as at June 30 10.5
84 6 10 100
43 47 6 4 100
100 100
100 100
Effect of increase / decrease in medical cost trend rates The effect of 1% increase in the medical cost trend rate in current service cost and interest cost is Rs 22,523 thousand (2009: Rs 18,181 thousand) and the effect of 1% decrease the medical cost trend rate in current service cost and interest cost is Rs 18,691 thousand (2009: Rs 15,063 thousand). The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand) and the effect of 1% decrease in the medical cost trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs 1,563,113 thousand). In the next financial year, the expected contribution to be paid to the funded pension plan and funded gratuity plan by the Group is Rs 1,623,346 thousand (2009: Rs 463,242 thousand) and Rs 80,071 thousand (2009: Rs 60,131 thousand) respectively.
11.
Deferred government grants

Balance as at July 01 Received during the year Balance as at June 30 11.1 1,061,044 571,657 1,632,701 95,000 966,044 1,061,044
11.1
This represents the grant from the Universal Service Fund (a Government formed agency) received as assistance towards development of telecommunication infrastructure in rural areas comprising of telecom infrastructure projects for basic telecom access, transmission and broad band services spread over the country.
12.
Long term security deposits

These represent security deposits received from distributors, franchisees and customers. These are interest free and refundable on termination of relationship with the Group. The holding Company adjusted Rs 222,751 thousand (2009: Rs Nil) during the year against balances of customers in default.

For the year ended June 30, 2010 13. Long term liabilities
This represents amount payable to a supplier of network equipment and comprises of:
Obligation under acceptance of bills of exchange Other accrued liabilities Current portion thereof 13.1 13.1
12,629,543 3,809,895 16,439,438 (5,980,398) 10,459,040
23,193,983 10,213,365 33,407,348 (19,476,149) 13,931,199
These include liabilities aggregating to Rs 10,000,000 thousands which are due within twelve months of the date of statement of financial position. However, PTML has entered into financial agreements with banks and PTCL for repayment of the above liabilities, therefore the liabilities have been classified as long term.
14.
Trade and other payables

Trade creditors Accrued liabilities Receipts against third party works Taxes payable Income tax collected from subscribers Income tax deducted at source Sales tax payable Advances from customers Technical services fee payable to related party Retention money payable to contractors / suppliers 14.1 14.2 9,244,826 6,264,269 678,439 709,964 4,734 714,698 1,650,608 1,612,761 874,721 5,407,995 2,773,454 3,523,508 6,542 131,253 55,734 67,396 691,519 33,697,723 7,300,336 4,241,213 499,556 507,988 13,017 521,005 1,496,997 1,576,153 864,059 5,924,366 2,397,144 6,122,799 34,542 120,342 61,057 758,768 31,918,337
33.2
Payable to Research and Development Fund Universal Service Fund 14.3 Pakistan Telecommunication Authority Unclaimed dividend VSS benefit payable Consideration payable on acquisition of a subsidiary MAXCOM Others
14.1
These include following balances payable to related parties: TF Pipes Limited Telecom Foundation Emirates Telecommunication Corporation Thuraya Satellite Company 2,621 49,365 210,251 1,124 263,361 2,232 65,050 8,929 76,211
These relate to the normal business of the Group and are interest free.
108

14.2 This includes Rs 640,711 thousand (2009: Rs 573,155 thousand) representing a provision against EOBI contribution payable under the EOBI Act 1976, for employees hired subsequent to PTCLs incorporation. The holding Company has withheld payment to EOBI, pending the settlement of the court case, as discussed in note 16.3. The provision made during the year is Rs 67,556 thousand (2009: Rs 53,304 thousand). This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to December 31, 2008 in fifteen equal monthly installment.
14.3
15.
Interest and markup accrued

Interest payable on long term loans Interest payable on short term borrowings 284,273 284,273 288,459 2,781 291,240
16.
Contingencies and commitments

Contingencies PTCL
16.1
1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees. Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact at present. However, the management and the Companys legal advisor are of the view that the outcome of these cases is expected to be favorable and a liability, if any, arising on the settlement of these cases is not likely to be material. In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi. Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for an amount of Rs 110,033 thousand against the Company. On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs 349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In the suit, final arguments of the parties are to be reheard. The Company has also filed claims against Telecard Limited for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001. In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing. The management and the Companys legal advisor are of the view that the outcome of the appeal is expected to be favourable.
16.2
16.3
The Employees OldAge Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of Employees OldAge Benefits (EOBI) Act, 1976 for payment of Companys and employees contribution amounting to Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition against the demand before the Honourable High Court, which is pending for hearing. However, the management and legal advisor are of the view that the case would be decided in the favour of the Company. In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the repealed Income Tax Ordinance 1979 for the assessment years 1996 1997 to 1998 1999 on failure to withhold /
16.4

deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT (Appeals). Pending final outcome of the appeal, no provision has been made in these financial statements for the demands aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Companys tax advisor are of the view that the outcome of the appeal is expected to be favourable. 16.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 199899 and 19992000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along with additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs 466,176 thousand on account of FED. It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate of Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate. During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by the Custom, Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof. Pending the final outcome, no provision has been made in these financial statements for the above demand, since the management and the Companys lawyer are of the view that the outcome of the appeal is expected to be favourable. 16.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the Companys income tax assessment on the grounds, that the Companys claim of a concessional rate of tax at 1% of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental view and presently Companys reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi Bench of the Honourable Lahore High Court. The management and the Companys lawyer consider that the litigation would eventually be settled in the Companys favour. The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628 thousand by disallowing certain expenses citing nondeduction of respective withholding tax as the prime reason. The Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at present). No provision has been made in these financial statements pending outcome of the appeals which is expected to be in favour of the Company. Based on an audit of Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the Deputy Commissioner of Inland Revenue (DCIR) raised a demand of Rs 1,018,568 thousand on the premise that the Company has claimed total input tax without apportioning the same between allowable and exempt supplies and the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before Commissioner Inland Revenue Appeals (CIR Appeals) and has also challenged the same through a writ petition filed before Rawalpindi bench of the Honourable Lahore High Court. No provision on this account has been made in these financial statements as the management and the Companys tax advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the Companys favour.
16.7
16.8
110

16.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of filing of options before concerned commissioners in the light of related law. The Company has also filed a reference application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending. The management and the Companys tax advisor are of the view that the eventual outcome of the case is expected to be in favour of the Company and, as such, no provision has been made in the financial statements on this account.
16.10 Bank guarantees and bid bonds issued in favour of: Universal Service Fund (USF) against government grants Others 3,087,311 314,254 3,401,565 Subsidiary Company PTML 16.11 Letter of guarantee issued to PTA in compliance with license terms 2,030,337 5,000 2,035,337
60,600
60,600
16.12 Letter of guarantees issued to Custom Authorities
46,859
16.13 The company is in appeal against various claims made by the Income Tax and Sales Tax authorities before the Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal and Sales Tax Appellate Tribunal, AJK. However, no provision has been made there against in the financial statements, as these cases are pending adjudication before the authorities, and the management believes that the company has a prima facie valid claim.
16.14 Commitments Group a) Letter of credit for purchase of stock 437,727 63,111
b)
Commitments for capital expenditure for network equipment for others 18,746,346 221,093 18,967,439 24,907,069 348,536 25,255,605
17.
Property, plant and equipment

Operating assets Capital workinprogress 17.1 17.4 134,123,749 17,959,087 152,082,836 131,909,917 13,297,795 145,207,712

17.1 Operating assets
Land Freehold Leasehold Buildings on Freehold land Leasehold land Lines and wires Apparatus, plant and equipment Office equipment Furniture and fittings Vehicles Computer & elec Submarine trical equipment cables Total
As at July 01, 2008 Cost Accumulated depreciation Net book value Year ended June 30, 2009 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at July 01, 2009 Cost Accumulated depreciation Net book value Year ended June 30, 2010 Opening net book value Assets of subsidiary acquired Cost Accumulated depreciation Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at June 30, 2010 Cost Accumulated depreciation Net book Value Annual rate of depreciation (%) 1,661,168 1,661,168 909,070 (410,570) 498,500 1 to 10 10,222,827 (3,199,750) 7,023,077 2.5 1,009,184 106,288,703 204,081,778 (401,844) (80,166,213) (111,013,778) 607,340 2.5 26,122,490 7 93,068,000 10 to 30 1,254,253 (733,125) 521,128 10 to 30 487,000 (345,789) 141,211 10 1,596,424 (1,303,749) 292,675 20 2,560,508 (1,221,379) 1,339,129 20 to 33 5,739,955 335,810,870 (2,890,924) (201,687,121) 2,849,031 134,123,749 6.67 to 8.33 1,661,168 (18,587) 5,713 (12,874) (151,890) 498,500 (502) 328 (174) (251,659) 7,023,077 (25,225) 607,340 (144,353) (15,930,696) 144,353 8,647,595 (7,283,101) (4,355,835) (15,256,596) 26,122,490 93,068,000 (11,924) 11,503 (421) (123,050) 521,128 (7,546) 7,485 (61) (27,312) 141,211 (62,174) 53,431 (8,743) (146,638) 292,675 (144,628) 76,609 (68,019) (441,499) 1,339,129 (16,320,410) 8,947,017 683 124,495 175,010 1,859,648 64,390 (38,381) 26,009 27,410,469 2,404 (607) 1,797 73,848 3,587 (1,145) 2,442 10,127 57,986 4,014 (2,356) 1,658 980,755 24,548 74,395 (42,489) 31,906 30,717,569 1,660,485 538,769 7,099,900 632,565 28,618,677 88,171,219 568,954 156,015 390,070 866,234 3,207,029 131,909,917 1,660,485 1,660,485 803,162 (264,393) 538,769 10,048,319 (2,948,419) 7,099,900 1,009,184 104,573,408 192,537,615 (376,619) (75,954,731) (104,366,396) 632,565 28,618,677 88,171,219 1,189,925 (620,971) 568,954 480,832 (324,817) 156,015 1,600,612 (1,210,542) 390,070 1,720,367 (854,133) 866,234 5,715,407 321,339,316 (2,508,378) (189,429,399) 3,207,029 131,909,917 1,660,485 (587) 439 (148) (134,186) 538,769 (247,328) 7,099,900 (25,230) 632,565 (105,537) 4,426 (1,968) 1,186 (782) (103,480) 568,954 (5,076) 4,919 (157) (27,175) 156,015 (423,814) 407,328 (16,486) (162,162) 390,070 (1,253) 644 (609) (406,928) 866,234 (538,235) 418,942 1,643,950 16,535 497,434 175,669 7,137,163 210,065 657,795 31,572,244 1,677,423 79,763,600 21,355,864 489,641 183,575 165,954 17,393 371,488 197,230 633,658 640,113 3,629,092 126,562,019 24,473,867 1,643,950 1,643,950 628,080 (130,646) 497,434 9,838,254 (2,701,091) 7,137,163 1,009,184 102,895,985 171,287,288 (351,389) (71,323,741) (91,523,688) 657,795 31,572,244 79,763,600 1,008,318 (518,677) 489,641 468,515 (302,561) 165,954 1,827,196 (1,455,708) 371,488 1,081,507 (447,849) 633,658 5,715,407 297,403,684 (2,086,315) (170,841,665) 3,629,092 126,562,019
(101,111) (4,630,990) (12,847,134) 28,618,677 88,171,219
(119,293) (422,063) (19,006,676) 3,207,029 131,909,917
(7,373,393) (382,546) (21,162,250) 2,849,031 134,123,749
As explained in note 1.1, the property and rights in the above assets at January 01, 1996 were transferred to the holding Company from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Reorganization) Act, 1996. However, the title to freehold land, was not formally transferred in the name of the holding Company in the land revenue records. The holding Company initiated the process of transfer of title of land in its name in the previous years, which is still ongoing and shall be completed in due course of time. 17.2 Apparatus, plant and equipment include borrowing costs aggregating to Rs 378,248 thousand (2009: Rs 362,019 thousand) capitalized during the year at the average capitalization rate of 1.79% (2009: 1.28%) per annum.
112

17.3
The depreciation charge for the year has been allocated as follows: Cost of services Administrative and general expenses Selling and marketing expenses 32 33 34 20,279,048 822,126 61,076 21,162,250 18,165,584 778,263 62,829 19,006,676
17.4
Details of property, plant and equipment disposals are as follows:

Description Cost Accumulated Depreciation Net Book Value Sale Proceeds Mode of Disposal Particulars of Buyer
Computers and accessories
Electrical equipment Leasehold improvements
54,886 22,617 1,436 112 112 92 86 86 86 85 85 7,065 8,684 1,448 1,545 3,017 2,321 1,405 1,140 794 739 674 579 147 14,550,148
16,993 997 53 56 10 10 17 24 17 17 2,587 3,257 715 515 1,207 1,315 187 323 794 739 674 328 24 7,288,449
37,892 22,617 439 59 56 82 76 69 62 68 68 4,478 5,428 733 1,030 1,810 1,006 1,218 817 251 122 7,261,698
37,892 22,617 439 59 56 82 76 69 62 68 68 4,478 5,428 150 1,030 1,810 1,006 1,218 817 198 185 251 122 7,263,813
Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Sale Insurance Insurance Insurance Insurance Insurance Sale to Employee Sale Insurance Insurance Claim Exchange of assets
Motor vehicles
NA NA NA NA NA NA NA NA NA NA NA NA NA Sania Shahid/ Sana Kamran, Islamabad NA NA NA NA NA Farid Alvi, Islamabad Tahir Hussain, Islamabad NA NA Pasban Security, Islamabad Huawei Technologies Pakistan (Pvt) Limited, Pakistan and Huawei Technologies Company Limited, Singapore NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA Pasban Security, Islamabad Pasban Security, Islamabad
Network and allied systems
28,854 6,465 1,680 1,688 810 810 704 568 568 512 490 271 229 229 253 253 216 155 66 64 14,704,274
19,018 3,042 686 689 304 304 422 507 507 192 176 154 173 173 192 192 122 52 3 11 7,346,227
9,836 3,423 994 999 506 506 281 62 62 320 314 117 55 55 61 61 93 103 63 54 7,358,044
9,836 3,423 994 999 506 506 281 62 62 320 314 117 55 55 61 61 93 103 63 54 7,359,959
Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Insurance Claim Claim

17.5
Capital workinprogress Buildings Lines and wires Apparatus, plant and equipment Others Advances to suppliers 471,303 5,918,700 8,253,267 489,367 2,826,450 17,959,087 118,413 1,589,605 6,933,793 179,288 4,476,696 13,297,795
17.5.2
Capital workinprogress (CWIP) includes an amount of Rs 337,985 thousand (2009: Rs 443,426 thousand) in respect of overheads relating to development regions.
17.5.1 Movement during the year Balance as at July 01 Additions during the year Transfers during the year CWIP of subsidiary acquired Balance as at June 30 17.5.2 Advances to suppliers include balances with the following related parties: Telecom Foundation Emirates Telecommunication Corporation 61,659 61,659 147,206 1,685,532 1,832,738 13,297,795 35,773,723 (31,114,404) 1,973 17,959,087 12,106,394 25,858,141 (24,666,740) 13,297,795
18.
Intangible assets
Goodwill Other intangible assets 18.1 26,424 3,690,557 3,716,981 3,865,149 3,865,149
18.1
Other intangible assets

Licenses Software Frequency vacation charges Total
As at July 01, 2008 Cost Accumulated amortization Net book value Year ended June 30, 2009 Opening net book value Additions at cost Amortization for the year Closing net book value
4,588,988 (967,331) 3,621,657
342,000 (209,000) 133,000
4,930,988 (1,176,331) 3,754,657
3,621,657 (234,730) 3,386,927
397,979 (29,957) 368,022
133,000 (22,800) 110,200
3,754,657 397,979 (287,487) 3,865,149
114

Licenses Software Frequency vacation charges Total (Rupees in thousand)
As at July 01, 2009 Cost Accumulated amortization Net book value Year ended June 30, 2010 Opening net book value Additions at cost Amortization for the year Closing net book value As at June 30, 2010 Cost Accumulated amortization Net book value
4,588,988 (1,202,061) 3,386,927
397,979 (29,957) 368,022
342,000 (231,800) 110,200
5,328,967 (1,463,818) 3,865,149
3,386,927 (234,942) 3,151,985
368,022 316,645 (233,425) 451,242
110,200 (22,870) 87,330
3,865,149 316,645 (491,237) 3,690,557
4,588,988 (1,437,003) 3,151,985
714,624 (263,382) 451,242
342,000 (254,670) 87,330
5,645,612 (1,955,055) 3,690,557
Note
2009
18.2
Breakup of net book value as at June 30 is as follows: Licenses PTCL Telecom WLL spectrum WLL and LDI License IPTV Licenses PTML 18.3 18.3 18.4 18.5 18.5 104,722 2,550,695 98,340 2,475 395,753 3,151,985 Software PTCL Bill printing software Billing and automation of broadband Enterprise Resource Planning (ERP) SAP system Software PTML Frequency vacation charges 114,696 2,729,691 103,806 4,455 434,279 3,386,927
18.7 18.7 18.8 18.9 18.10
6,015 36,085 280,699 128,443 451,242 87,330 3,690,557
7,655 45,297 315,070 368,022 110,200 3,865,149
18.3
The Pakistan Telecommunication Authority (PTA) has issued a license to the holding Company to provide telecommunication services in Pakistan for a period of 25 years commencing January 01, 1996 for an agreed license fee of Rs 249,344 thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This license allowed the holding Company to provide the wireless local loop services in Pakistan over a period of 20 years commencing October 2004. The cost of the license is being amortized on straightline basis over the period of the license.

18.4 PTA has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan Telecommunication (Reorganization) Act, 1996, Northern Areas Telecommunication (Reorganization) Act, 2005 and Northern Areas Telecommunication (Reorganization) (Adaptation and Enforcement) Order, 2006 to the holding Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and Gilgit Baltistan for a period of 20 years commencing May 28, 2008 for an agreed license fee of Rs. 109,270 thousand. The cost of the license is being amortized on straightline basis over the period of the license. PTCL acquired the IPTV license from PEMRA on October 01, 2006 for the agreed price of Rs 9,900 thousand. The cost of license is being amortized on straightline basis over the period of 5 years. PTA has issued two licenses to the subsidiary company to establish, maintain and operate cellular services in Pakistan and AJK for a period of 15 years commencing May 1999 and June 2006 respectively. The cost of the software is being amortized on a straightline basis over a period of 5 years. This represents cost of the SAP Enterprise Resource Planning (ERP) system with a useful life of 10 years. Software comprise machine independent IT software purchased as a separate asset. Useful life of software is 3 years.
18.5
18.6
18.7 18.8 18.9
18.10 Vacancy charges comprise the amount paid in year 2000 to Special Communication Organization on initial vacation of their equipment and releasing the spectrum in favour of PTML. It has a useful life of 15 years. 18.11 The amortization charge for the year has been allocated as follows:
Cost of services Administrative and general expenses
32 33
303,035 188,202 491,237
287,487 287,487
19.
Long term investments

Investments in related parties Other investments 19.1 19.2 25,010 83,900 108,910 24,195 83,900 108,095
19.1
Investment in related parties Associate unquoted TF Pipes Limited 1,658,520 (2009: 1,658,520) ordinary shares of Rs 10 each Ordinary shares held 40% (2009: 40%) Cost Post acquisition profits
23,539 1,471 25,010
23,539 656 24,195
116

19.1.1 The Groups share in the net assets of the associate TF Pipes Limited is:
Total assets Total liabilities Revenue Expenses Profit / (loss) 19.2 Other investments at cost Available for sale Unquoted Thuraya Satellite Company 3,670,000 (2009: 3,670,000) ordinary shares of 1 Dirham each Alcatel Lucent Pakistan Limited 2,000,000 (2009: 2,000,000) ordinary shares of Rs 10 each New ICO Global Communications (Holdings) Limited 218,207 (2009: 218,207) ordinary shares of USD 0.01 per share (net of impairment loss of Rs 104,708 thousand; 2009: Rs 104,708 thousand) World Tel Assembly of Governors Participation fund investment of USD 100,000 (2009: USD 100,000) (net of impairment loss of Rs 6,390 thousand; 2009: Rs 6,390 thousand)
95,006 49,863 145,146 143,108 2,038
91,840 48,735 148,254 149,014 (760)
63,900
63,900
20,000
20,000
83,900
83,900
20.
Long term loans

Secured considered good Loans to employees Current portion shown under current assets Others 20.1 24 509,254 (172,244) 337,010 200 337,210 455,599 (123,421) 332,178 200 332,378
20.1
These loans and advances by PTCL are for house building and purchase of motor cars, motor cycles and bicycles. Loans to gazetted employees of the Company carry interest at the rate of 15% per annum (2009: 12.5% per annum), whereas, loans to other employees are interest free. The loans are recoverable in monthly installments spread over a period of 5 to 10 years. These loans are secured against future pension payments of employees. This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees of the PTCL against sale of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years.

20.2 Reconciliation of loans
As at July 01, 2009 Disbursements (Rupees in thousand) Repayments As at June 30, 2010
12,532 443,067 455,599

As at July 01, 2008
23 194,244 194,267
Disbursements (Rupees in thousand)
3,010 137,602 140,612

Repayments
9,545 499,709 509,254

As at June 30, 2009
15,641 508,915 524,556
3,109 65,848 68,957
12,532 443,067 455,599
Note
2009
21.
Stores, spares and loose tools

Stores, spares and loose tools Provision for obsolescence 21.1 21.2 4,704,186 (628,323) 4,075,863 5,851,582 (649,591) 5,201,991
21.1
Stores, spares and loose tools include items which may result in property, plant and equipment but are not distinguishable.
21.2
Provision for obsolescence Balance as at July 01 Provision during the year Write off against provision Balance as at June 30 33 649,591 102,761 752,352 (124,029) 628,323 551,455 172,276 723,731 (74,140) 649,591
22.
Stock in trade
PTML SIM cards Scratch cards Mobile phones Stock in transit 181,970 17,381 185,848 385,199 170,624 39,116 255,281 5,652 470,673
118

23.
Trade debts
PTCL unsecured Domestic Considered good Considered doubtful
6,774,197 17,612,764 24,386,961
6,873,129 18,110,656 24,983,785 3,194,576 885,740 4,080,316 195,948 612,097 193,200 1,001,245 30,065,346 (19,189,596) 10,875,750
International Considered good Considered doubtful
23.1
2,935,276 953,959 3,889,235
PTML Considered good secured Considered good unsecured Considered doubtful unsecured
23.2
294,270 365,594 233,715 893,579
MAXCOM unsecured Considered good Considered doubtful
15,897 5,744 21,641 29,191,416
Provision for doubtful debts
23.3
(18,806,183) 10,385,233
23.1
These include amounts due from the following related parties: Etisalat Afghanistan Etisalat UAE Mobily Saudi Arabia 21,685 433,405 312,070 767,160 These amounts are interest free and accrued in the normal course of business. 100,502 770,594 528,119 1,399,215
23.2
These are secured against customer deposits, aggregating to Rs 351,928 thousand (2009: Rs 338,166 thousand). This also include unbilled revenue related to postpaid subscribers, aggregating to Rs 163,315 thousand (2009: Rs 153,910 thousand).
23.3
Provision for doubtful debts Balance as at July 01 Provision for the year Provision related to acquisition of a subsidiary Trade debts written off against provision Balance as at June 30 33 19,189,596 1,925,726 5,744 21,121,066 (2,314,883) 18,806,183 17,350,471 2,956,193 20,306,664 (1,117,068) 19,189,596

24.
Loans and advances

Loans considered good Short term loans Current portion of long term loans to employees Advances considered good Advances to employees Advances to suppliers and contractors 24.2 24.3 27,933 508,070 718,211 20,280 809,753 963,418 24.1 20 9,964 172,244 9,964 123,421
24.1
This represents loan to Pakistan MNP Database (Guarantee) Limited for working capital purposes, carrying interest @ 13% (2009: 13%) per annum on prior disbursements and 17% per annum on disbursements made during the current year. These include advances to Executives, amounting to Rs 19,569 thousand (2009: Rs 5,541 thousand). These include advances of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related party.
24.2 24.3
2009
25.
Accrued interest income

Accrued profit on bank placements Interest receivable on loans / advances to executives 396,877 59,646 456,523 795,435 795,435
26.
Recoverable from tax authorities

Income tax Federal excise Sales tax 6,646,547 466,176 635,234 7,747,957 59,095 466,176 593,432 1,118,703
27.
Receivable from Government of Pakistan

This represents the balance amount receivable from Government of Pakistan on account of its share in the voluntary separation scheme offered to the holding Companys employees during 2008.
120

28.
Other receivables
Considered good Due from related parties: Pakistan Telecommunication Employees Trust PTCL employees GPF Trust Security deposits Site rentals Maintenance Margin against letter of credit Other receivables from: Vendors Others
86,708 286,757 58,471 702,872 272,426 160,123 184,902 572,643 2,324,902
69,009 147,767 53,630 604,139 127,173 97,663 101,172 632,601 1,833,154 185,239 (185,239) 1,833,154
Considered doubtful Others Provision for doubtful receivables
28.1
185,239 (185,239) 2,324,902
28.1
Provision for doubtful receivables Balance as at July 01 Provision for the year Balance as at June 30 33 185,239 185,239 26,559 158,680 185,239
29.
Short term investments

Term deposits at amortized cost maturity upto 3 months maturity between 3 and 6 months 29.1 Availableforsale investment Units of mutual funds at market value 29.2 254,916 13,493,865 21,017,790 13,238,949 13,238,949 19,795,904 1,221,886 21,017,790
29.1
Term deposits
Term (months) Maturity Upto Profit rate % per annum 2010 (Rupees in thousand) 2009
Term deposits with: National Bank of Pakistan Bank Alfalah Limited The Bank of Punjab NIB Bank Limited Allied Bank of Pakistan Habib Metropolitan Bank limited Askari Bank Limited
3 6 3 3
30Jul10 01Sep10 30Sep10 30Sep10
12.25 12.35 12.50 12.60
2,687,973 3,551,458 2,491,873 4,507,645 13,238,949
11,893,245 1,000,000 1,066,302 1,500,000 2,558,243 1,000,000 2,000,000 21,017,790

29.2
Units of mutual funds Units of open end mutual funds: Pakistan Cash Management Fund 2,013,768 (2009: Nil) units NAFA Government Securities Liquid Fund 5,011,856 (2009: Nil) units BMA Empress Cash Fund 2,416,129 (2009: Nil) units Faysal Saving Growth Fund 489,285 (2009: Nil) units Askari Sovereign Cash Fund 232,801 (2009: Nil) units
102,059 51,493 25,691 50,455 25,218 254,916
30.
Cash and bank balances

Balances with banks Deposit accounts Saving accounts Current accounts Local currency Foreign currency (USD 3,430 thousand (2009: USD 10,751 thousand)) Cash in hand 30.1 30.2 6,346,454 2,048,195 1,358,156 293,686 10,046,491 26,069 10,072,560 18,104,147 1,456,536 1,602,273 21,162,956 22,610 21,185,566
30.1 30.2
The balances in deposit accounts bear markup which ranges from 5 % to 13.8 % per annum (2009: 5 % to 19.7 % per annum). This includes foreign currency balances of USD 192 thousand (2009: USD 108 thousand) and Euro 39 thousand (2009: Euro 22 thousand). The effective interest / markup rate on saving accounts ranged from 4% to 12.65% (2009: 5% to 17%) per annum. As at June 30, 2010, PTML had undrawn running finance facilities aggregating to Rs 1,960,000 thousand (2009: Rs 1,960,000 thousand).
30.3
31.
Revenue
Domestic International 31.1 31.2 91,958,760 6,947,005 98,905,765 86,613,483 6,106,898 92,720,381
31.1 31.2
Revenue is exclusive of Federal Excise Duty amounting to Rs 14,593,713 thousand (2009: Rs 15,501,191 thousand). International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating to Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).
122

32.
Cost of services
Salaries, allowances and other benefits Call centre charges Interconnect cost Foreign operators cost and satellite charges Network operating cost Fuel and power Communication Cost of SIMs Mobile number portability fee Cost of prepaid cards Discount on prepaid cards Stores and spares consumed Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Depreciation of property, plant and equipment Amortization of intangible assets Annual license fee to PTA Others 32.1 9,188,049 199,061 10,797,066 7,293,971 3,309,326 3,380,357 9,522 625,376 319,790 134,702 1,749,481 1,014,250 636,335 1,802,766 281,604 12,656 20,279,048 303,035 873,163 3,216 62,212,774 8,330,902 187,165 10,911,246 6,605,202 1,380,411 3,109,948 7,421 364,850 103,025 180,187 1,280,186 1,160,754 502,709 1,475,724 255,198 16,308 18,165,584 287,487 827,651 2,445 55,154,403
17.2 18.11
32.1
This includes Rs 1,617,133 thousand (2009: 1,162,633 thousand) in respect of employees retirement benefits.
33.
Administrative and general expenses

Salaries, allowances and other benefits Call centre charges Fuel and power Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Technical services fee Legal and professional services Depreciation of property, plant and equipment Amortization of intangible assets Research and development Provisions for: obsolete stores doubtful debts doubtful receivables Donations Receivables written off Other expenses 33.1 1,953,737 29,859 254,427 104,340 443,261 4,345 273,492 3,412,554 207,064 822,126 188,202 321,921 102,761 1,925,726 280 2,573,537 12,617,632 1,635,601 28,075 234,074 442,421 407,121 3,940 215,413 3,194,301 552,750 778,263 471,239 172,276 2,956,193 158,680 37,069 142,195 2,059,343 13,488,954
33.2 33.3 17.2 18.11 33.4 21.2 23.3 and 33.5 28.1 33.6
33.1
This includes Rs 251,121 thousand (2009: Rs 156,284 thousand) in respect of employees retirement benefits.

33.2 This represents an amount payable to the Emirates Telecommunication Corporation (Etisalat), a related party, under a technical service agreement between the Group and Etisalat for a period of five years commencing October 1, 2006, at the rate of 3.5% of the Groups consolidated annual revenue.
33. 3 Auditors remuneration The expenses for the legal and professional services include the following in respect of auditors services for:
A. F. Ferguson & Co. Statutory audit including half yearly review Tax services Others Ernst & Young Ford Rhodes Sidat Hyder Statutory audit including half yearly review Others
4,500 3,026 250
4,500 250
5,350 925 14,051
5,350 500 10,600
33.4 This represents the Groups contribution to the Information Communication Technology (ICT) Research and Development Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments and payments toward research and development activities in Pakistan, in accordance with the terms and conditions of its license to provide telecommunication services. 33.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009: Rs Nil), against receivable balances of customers in default. There were no donations during the year in which the directors or their spouses had any interest.
33.6
34.
Selling and marketing expenses

Salaries, allowances and other benefits Call centre charges Sales commission Fuel and power Printing and stationery Travelling and conveyance Cost of handsets Advertisement and publicity GoP activation tax Depreciation of property, plant and equipment Others 34.1 1,425,015 19,906 1,614,841 75,116 2,901 12,653 80,233 3,300,709 472,341 61,076 359,572 7,424,363 1,248,706 18,717 1,491,296 69,110 2,631 16,308 190,614 2,733,401 1,877,738 62,829 284,706 7,996,056
17.2
34.1
This includes Rs 206,077 thousand (2009: 139,796 thousand) in respect of employees retirement benefits.
124

35.
Other operating income

Income from financial assets: Interest on loans Dividend Return on bank placements Late payment surcharge from subscribers on over due bills Gain on sale of units of open end mutual funds Income from nonfinancial assets: Gain on disposal of items of property, plant and equipment Others 4,909 22,000 4,018,189 162,465 4,916 137,753 926,779 5,277,011 7,103 4,202,766 213,268
206,437 594,081 5,223,655
36.
Finance cost
Interest on: Long term loans and other borrowings Long term liability Short term running finances Bank and other charges Foreign exchange loss net Imputed interest on payment for: WLL license fee for the year AJK license fee Purchase of MAXCOM 151,529 66,407 3,326 221,262 3,293,496 185,132 185,132 4,473,429 955,472 638,446 8,212 390,955 1,079,149 1,039,317 274,873 5,076 367,096 2,601,935
37.
Taxation
Group Current Deferred Share of tax of an associate 3,451,037 3,437,465 6,888,502 439 6,888,941 3,080,732 2,735,525 5,816,257 337 5,816,594
37.1
Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:
Applicable tax rate Tax effect of amounts chargeable to tax at lower rates Tax effect of amounts that are not deductible for tax purposes and others Average effective tax rate charged to statement of comprehensive income
35.00 1.97 36.97
35.00 (0.65) 0.40 34.75

2010 2009
38.
Earnings per share basic and diluted

Profit for the year Weighted average number of ordinary shares Earnings per share Rupees in thousand 11,746,824 5,100,000 2.30 (Rupees in thousand) 10,922,515
Numbers in thousand Rupees
5,100,000 2.14
39.
Cash generated from operations

18,635,765 21,653,487 1,925,726 102,761 2,009,958 221,262 (4,909) (4,916) (137,753) (4,018,189) (1,254) (22,000) 1,478,316 41,838,254 16,739,109 19,294,163 2,956,188 158,680 172,276 1,455,438 92,118 142,195 185,132 (7,103) (206,437) (4,202,766) 1,604,417 38,383,410
Profit before tax Adjustments for non cash charges and other items: Depreciation and amortization Provision for doubtful trade debts Provision for doubtful receivables Provision for obsolete stores, spares and lose tools Employees retirement benefits VSS expense Bad debts written off Imputed interest Interest on long term loans Gain on sale of units of open ended mutual funds Gain on disposal of property, plant and equipment Return on bank placements Share of profit from associate Dividend income Finance cost
Effect on cash flows due to working capital changes (Increase) / decrease in current assets: Stores, spares and loose tools Stock in trade Trade debts Loans and advances Recoverable from tax authorities Other receivables Increase in current liabilities: Trade and other payables Unearned income 1,676,081 478,871 2,154,952 43,438,939 4,612,821 350,032 4,962,853 44,442,463 1,023,367 85,474 (1,424,356) 294,338 (41,802) (491,288) (554,267) (700,439) (560,029) 196,660 324,158 1,835,850 1,096,200
126

40.
Cash and cash equivalents

Short term investments with maturity upto three months Cash and bank balances 29 30 13,493,865 10,072,560 23,566,425 19,795,904 21,185,566 40,981,470
41.
Remuneration of Directors, Chief Executive and Executives

The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chairman, Chief Executive and Executives of the Group is as follows:
Chairman 2010 2009 Chief Executive 2010 2009 2010 (Rupees in thousand) Executives 2009
Managerial remuneration Honorarium Bonus Retirement benefits Housing Utilities
300 300
300 300 1
78,074 78,074 1
59,128 59,128 1
1,092,355 2,965 79,220 245,387 406,078 72,501 1,898,506 780
948,681 51,885 175,594 341,835 63,454 1,581,449 665
Number of persons
The Group also provides free medical and limited residential telephone facility to all its Executives including the Chief Executive. The Chairman is entitled to free transport and limited residential telephone facility, whereas the Directors are provided with limited telephone facility. Certain executives are also provided with Company maintained cars. The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs 11,682 thousand (2009: Rs. 4,236 thousand) for attending Board of Directors and subcommittee meetings.
42.
Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100, while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to Rs 100.
43.
43.1
Financial risk management

Financial risk factors The Groups activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Groups overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance. Risk management is carried out by the Board of Directors (the Board). The Board has provided Risk Management Policy covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. All treasury related transactions are carried out within the parameters of this policy.

(a) Market risk (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies. The Group is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Australian Dollar (AUD), Euros and Swiss Franc (CHF). Currently, the Groups foreign exchange risk exposure is restricted to the amounts receivable from / payable to the foreign entities. The Groups exposure to currency risk is as follows:
USD Trade and other payables Long term liabilities Trade debts Cash and bank balances Net exposure EURO Trade and other payables Trade debts Cash and bank balances Net exposure CHF Trade and other payables AUD Loans and advances The following significant exchange rates were applied during the year:
(3,687,435) (10,676,940) 4,042,311 294,493 (10,027,571)
(7,496,354) (22,194,711) 4,197,014 882,907 (24,611,144)
(53,683) 30,459 4,131 (19,093)
(19,621) 69,560 2,477 52,416
(5,660)
(5,385)
1,850
1,673
2010
2009
Rupees per USD Average rate Reporting date rate Rupees per EURO Average rate Reporting date rate Rupees per CHF Average rate Reporting date rate Rupees per AUD Average rate Reporting date rate
83.92 85.60
79.92 81.30
116.45 104.62
103.59 114.54
79.07 79.10
64.98 75.26
74.00 72.96
53.97 65.98
128

If the functional currency, at reporting date, had fluctuated by 5% against the USD, EURO, CHF and AUD with all other variables held constant, the impact on profit after taxation for the year would have been Rs 327,000 thousand (2009: Rs 798,000 thousand) respectively lower / higher, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis. (ii) Other price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group is exposed to equity securities price risk because of the investments held by the Group in money market mutual funds and classified on the statement of financial position as available for sale. To manage its price risk arising from investments in mutual funds, the Group diversifies its portfolio. The short term investments includes available for sale investments of Rs 254,916 thousand (2009: Rs Nil) which were subject to price risk. If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil) higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds. (iii) Interest rate risk Interest rate risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At the date of statement of financial position, the interest rate profile of the Groups interest bearing financial instruments is:
Financial assets Fixed rate instruments Staff loans Short term investments Loan to Pakistan MNP Database (Guarantee) Limited Bank balances deposit accounts Floating rate instruments Bank balances deposit accounts Bank balances saving accounts 4,796,454 2,048,195 22,152,816 Floating rate instruments Long term loans 10,304,147 1,456,536 41,044,036 509,254 13,238,949 9,964 1,550,000 455,599 21,017,790 9,964 7,800,000
13,000,000
9,100,949

Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change in interest rates at the date of statement of financial position would not affect the total comprehensive income of the Group. Cash flow sensitivity analysis for variable rate instruments If interest rates on variable rate instruments of the Group, at the year end date, fluctuate by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs 111,713 thousand (2009: Rs 316,700 thousand) higher / lower, mainly as a result of higher / lower markup income on floating rate loans / investments. (b) Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk at the reporting date is as follows:
Long term loans Trade debts Loans and advances Accrued interest income Receivable from Government of Pakistan Other receivables Short term investments Cash and bank balances
337,210 10,385,233 718,211 456,523 2,164,072 2,324,902 13,493,865 10,072,560 39,952,576
332,378 10,875,750 963,418 795,435 2,164,072 1,833,154 21,017,790 21,185,566 59,167,563
The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. In case of trade debts the Group believes that it is not exposed to a major concentration of credit risk as its exposure is spread over a large number of counter parties and subscribers.
130

The credit quality of cash and bank balances and short term investments that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rate:
Rating Short term Long term Rating Agency 2010 (Rupees in thousand) 2009
Samba Bank Limited Meezan Bank Limited National Bank of Pakistan Bank Alfalah Limited MCB Bank Limited Standard Chartered Bank (Pakistan) Limited Citibank Bank Al Habib Limited Dubai Islamic Bank Hongkong and Shanghai Banking Corporation Ltd. Barclays Bank PLC Arif Habib Bank Limited KASB Bank Limited Emirates Global Islamic Bank Limited Soneri Bank Limited Silkbank Limited * SME Bank Limited Habib Metropolitan Bank Limited The Bank of Punjab NIB Bank Limited Faysal Bank Limited * Habib Bank Limited Royal Bank of Scotland * Askari Bank Limited Allied Bank Limited United Bank Limited Mutual Fund Arif Habib Mutual Fund NAFA Mutual Fund BMA Mutual Fund Faysal Mutual Fund Askari
A1 A1 A1+ A1+ A1+ A1+ A1+ A1+ A2 F1+ A1+ A2 A1 A2 A1+ A3 A3 A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ AM 2 + AM 2 AM 2 AM 2 AM3
A AA AAA AA AA+ AAA AA AA+ A AA AA A A A AA A BBB AA+ AA AA AA AA+ AA AA AA AA+ N/A N/A N/A N/A N/A
JCRVIS JCRVIS JCRVIS PACRA PACRA PACRA S&P PACRA JCRVIS Fitch S&P JCRVIS PACRA PACRA PACRA JCRVIS JCRVIS PACRA PACRA PACRA PACRA JCRVIS PACRA PACRA PACRA JCRVIS PACRA PACRA JCRVIS JCRVIS PACRA
100,000 13 3,940,843 3,228,919 125,136 453,384 1,110,883 318,504 480,974 67 3,955 1,122,490 803 3,701 7,705 22,498 38,425 5,646,366 5,033,791 240,630 68,437 42,814 302,183 154,345 864,643 102,059 51,493 25,691 50,455 25,218 23,566,425
15,648,141 7,219,590 157,203 33,879 203,904 1,447,823 114,719 1,068 172,834 1,506,166 21,838 6,968 3,434 1,000,000 3,943,140 1,508,690 9,244 2,082,628 1,818,864 2,088,748 2,570,069 94,869 41,653,819
Due to the Groups long standing business relationships with these counter parties and after giving due consideration to their strong financial standing, management does not expect nonperformance by these counter parties on their obligations to the Group. Accordingly, the credit risk is minimal. * These banks have been placed on a watch list by the State Bank of Pakistan and the most recent rating of Royal Bank of Scotland and Silkbank was carried out in September 2008 and June 2009 respectively.

(c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. The following are the contractual maturities of financial liabilities as at June 30, 2010:
Long term loans Payable to PTA against license fee Employees retirement benefits Long term security deposits Long term liabilities Trade and other payables Interest and markup accrued Dividend payable
13,000,000 2,105,135 15,676,877 1,295,008 16,439,438 32,084,962 284,273 3,375,631 84,261,324
1,935,288 5,980,398 32,084,962 284,273 3,375,631 43,660,552
12,500,000 139,756 1,295,008 10,459,040 24,393,804
500,000 30,091 15,676,877 16,206,968
The following are the contractual maturities of financial liabilities as at June 30, 2009:
Long term loans Payable to PTA against license fee Employees retirement benefits Long term security deposits Long term liabilities Trade and other payables Interest and markup accrued Dividend payable
9,100,949 2,144,852 14,252,785 1,478,764 33,407,348 31,918,337 291,240 7,650,000 100,244,275
100,949 1,977,762 19,476,149 31,918,337 291,240 7,650,000 61,414,437
9,000,000 120,244 1,478,764 13,931,199 24,530,207
46,846 14,252,785 14,299,631
132

43.2 Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date.
Available for sale 2010 2009 Loans and receivables 2010 2009 (Rupees in thousand) Total 2010 2009
43.3
Financial instruments by categories Financial assets as per statement of financial position

Long term investments Long term loans Trade debts Loans and advances Accrued interest income Receivable from Government of Pakistan Other receivables Short term investments Cash and bank balances 83,900 254,916 338,816 83,900 83,900 337,210 10,385,233 718,211 456,523 2,164,072 2,324,902 13,238,949 10,072,560 39,697,660 332,378 10,875,750 963,418 795,435 2,164,072 1,833,154 21,017,790 21,185,566 59,167,563 83,900 337,210 10,385,233 718,211 456,523 2,164,072 2,324,902 13,493,865 10,072,560 40,036,476 83,900 332,378 10,875,750 963,418 795,435 2,164,072 1,833,154 21,017,790 21,185,566 59,251,463
Liabilities at fair value through profit and loss 2010 2009
Other financial liabilities 2010 2009 (Rupees in thousand)
Total 2010 2009
Financial liabilities as per statement of financial position

Long term loans Payable to PTA against license fee Employees retirement benefits Long term security deposits Long term liabilities Trade and other payables Interest and markup accrued Dividend payable 13,000,000 2,105,135 15,676,877 1,295,008 16,439,438 32,084,962 284,273 3,375,631 84,261,324 9,100,949 2,144,852 14,252,785 1,478,764 33,407,348 31,918,337 291,240 7,650,000 100,244,275 13,000,000 2,105,135 15,676,877 1,295,008 16,439,438 32,084,962 284,273 3,375,631 84,261,324 9,100,949 2,144,852 14,252,785 1,478,764 33,407,348 31,918,337 291,240 7,650,000 100,244,275
43.4
Capital risk management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Group defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Groups objectives when managing capital are: (a) to safeguard the entitys ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

(b) to provide an adequate return to shareholders
The Group manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce the debt. For working capital requirements and capital expenditure, the Group relies on internal cash generation and bank borrowings.
44.
Business combination
On March 01, 2010 the holding Company acquired 100% shares of Maskatiya Communications (Pvt) Limited (MAXCOM). MAXCOM provides broadband services to customers in the cities of Karachi and Hyderabad. In terms of agreement between the holding Company and previous shareholders of MAXCOM, the purchase consideration will be paid to the previous shareholders on a revenue sharing basis commencing from March 2010 to August 2012. On basis of estimates prepared by management, the holding Company has recognised the present value of the consideration payable amounting to Rs 74,526 thousand as of the acquisition date of MAXCOM. The present value has been discounted on weighted average cost of capital of the holding Company. The undiscounted purchase consideration payable ranges between Rs 79,071 thousand to Rs 96,643 thousand. Details of net assets acquired and goodwill are as follows:
Assets Property, plant and equipment Long term deposits Deferred taxation Trade debts Provision for doubtful debts Loans and advances Receivable from tax authorities Other receivables Cash and bank balances Less: Liabilities Trade and other payables Net assets acquired Goodwill Total purchase consideration payable 44.1 Purchase consideration settled in cash during the period Cash and cash equivalents in subsidiary acquired Cash inflow on acquisition
33,879 7,354 9,191 16,597 (5,744) 10,853 308 1,932 460 11,120 (26,995) 48,102 26,424 74,526 (7,130) 11,120 3,990
134

44.2 The goodwill is attributable to the acquired customer base and economies of scale expected from combining the operations of the Group and MAXCOM.
Profit of subsidiary since acquisition Revenue of the Group if acquisition had occurred at the beginning of the year Profit of the Group if acquisition had occurred at the beginning of the year
9,429
99,485,217
11,729,717
45.
Transactions with related parties

The Groups related parties comprise of associated undertakings, employees retirement benefit plans and key management personnel. Amounts due from / (to) related parties are shown under receivables and payables. Remuneration of key management personnel is disclosed in note 41. Associates TF Pipes Limited Etisalat International Pakistan Etisalat Afghanistan Emirates Telecommunication Corporation Mobily Saudi Arabia Thuraya Satellite Company Employee benefit plans Pakistan Telecommunication Employee Trust PTCL Employees GPF Trust Pak Telecom Mobile Limited Employees Provident Fund Pak Telecom Mobile Limited Employees Gratuity Fund Disclosure of transactions between the Group and related parties other than those which have been disclosed elsewhere in these financial statements:
Associates Purchase of goods and services Sale of goods and services Advances against capital expenditure
1,763,280 5,699,037
2,393,250 8,410,141 1,685,532
46.
46.1
Operating segment Information

Management has determined the operating segments based on the information that is presented to the Groups Board of Directors for allocation of resources and assessment of performance. The Group is organised into two operating segments i.e fixed line communications (Fixed line) and wireless communications (Wireless). The reportable operating segments derive their revenue primarily from voice, data and other services. The Groups Board of Directors monitor the results of the above mentioned segments for the purpose of making decisions about the resources to be allocated and for assessing performance based on total comprehensive income for the year.
46.2

46.3 The segment information for the reportable segments is as follows:
Fixed line Wireless (Rupees in thousand) Total
Year ended June 30, 2010 Segment revenue Inter segment revenue Revenue from external customers Segment results Year ended June 30, 2009 Segment revenue Inter segment revenue Revenue from external customers Segment results
54,854,619 (4,843,955) 50,010,664 8,740,244
50,856,228 (1,961,127) 48,895,101 3,006,580
105,710,847 (6,805,082) 98,905,765 11,746,824
57,277,619 (5,396,715) 51,880,904 8,908,444
42,257,085 (1,417,608) 40,839,477 2,014,071
99,534,704 (6,814,323) 92,720,381 10,922,515
Information on assets and liabilities of the segments is as follows:

Fixed line Wireless (Rupees in thousand) Total
As at June 30, 2010 Segment assets Segment liabilities As at June 30, 2009 Segment assets Segment liabilities 46.4 Other segment information is as follows:
128,703,930 56,627,659
79,366,392 43,367,905
208,070,322 99,995,564
136,413,292 50,071,131
78,726,594 59,815,821
215,139,886 109,886,952
Fixed line
Wireless (Rupees in thousand)
Total
Year ended June 30, 2010 Depreciation Amortization Finance cost Interest income Income tax expense Share of profit from associates Year ended June 30, 2009 Depreciation Amortization Finance cost Interest income Income tax expense Share of profit from associates
11,264,313 45,223 387,111 3,549,645 4,443,419 1,254
9,897,937 446,014 2,906,385 473,453 2,081,356
21,162,250 491,237 3,293,496 4,023,098 6,524,775 1,254
11,808,896 29,957 881,269 3,159,323 4,723,966 33
7,197,780 257,530 3,592,160 1,050,546 1,092,628
19,006,676 287,487 4,473,429 4,209,869 5,816,594 33
136

46.5 46.6 The Groups customer base is diverse with no single customer accounting for more than 10% of net revenues. The amount of revenue from external parties, total segment assets and segment liabilities is measured in a manner consistent with that of the financial information reported to the Groups Board of Directors. Breakdown of the revenue from all services by category is as follows:
46.7
Voice Data Other services
84,558,457 8,699,697 5,647,611 98,905,765
84,563,232 4,949,324 3,207,826 92,720,382
47.
Corresponding figures
The following major corresponding figures have been reclassified for the purposes of better presentation:
From To (Rupees in thousand)
Operating assets Cost of services
Intangible assets Selling and marketing expenses
300,494 190,614
48.
Date of authorization for issue

These financial statements were authorized for issue on August 26, 2010 by the Board of Directors of the holding Company.
49.
General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.
Chairman
President & CEO
Annexes
138
Pattern of Shareholding
As at June 30, 2010
HAVING SHARES FROM TO NUMBER OF SHAREHOLDERS NUMBER OF SHARES HELD
1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 45,001 50,001 55,001 60,001 65,001 70,001 75,001 80,001 85,001 90,001 95,001 100,001 105,001 110,001 115,001 120,001 125,001 130,001 135,001 140,001 145,001 150,001 155,001 160,001 165,001 170,001 175,001 180,001 185,001 190,001 195,001 200,001 205,001 210,001 215,001 220,001 225,001 230,001 235,001 240,001 245,001 250,001 255,001 265,001 270,001 285,001 295,001
100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 80,000 85,000 90,000 95,000 100,000 105,000 110,000 115,000 120,000 125,000 130,000 135,000 140,000 145,000 150,000 155,000 160,000 165,000 170,000 175,000 180,000 185,000 190,000 195,000 200,000 205,000 210,000 215,000 220,000 225,000 230,000 235,000 240,000 245,000 250,000 255,000 260,000 270,000 275,000 290,000 300,000
25,861 9,731 3,221 3,400 780 266 176 114 86 46 47 22 72 17 21 15 9 19 11 3 14 5 46 7 4 6 2 8 1 2 6 1 13 4 5 3 3 6 4 4 3 1 13 3 2 1 1 2 4 1 3 1 4 3 1 1 3 2 2
2,564,729 3,016,706 2,841,993 9,042,063 6,385,674 3,415,276 3,308,169 2,705,111 2,491,400 1,547,047 1,822,414 945,906 3,569,400 889,402 1,239,275 939,599 619,975 1,412,200 864,300 245,466 1,241,689 468,600 4,595,500 719,778 437,300 672,407 237,000 991,000 129,500 270,000 833,000 142,000 1,941,200 608,400 793,668 488,850 506,600 1,044,975 717,000 732,268 566,300 193,000 2,600,000 606,550 420,000 215,000 218,600 450,000 912,832 234,953 711,500 245,000 999,986 762,000 256,540 267,790 824,000 575,769 600,000
As at June 30, 2010
300,001 305,001 310,001 320,001 345,001 350,001 370,001 380,001 385,001 390,001 395,001 400,001 405,001 415,001 430,001 435,001 450,001 470,001 475,001 485,001 495,001 505,001 525,001 570,001 585,001 595,001 600,001 625,001 645,001 650,001 660,001 690,001 695,001 710,001 730,001 745,001 785,001 795,001 810,001 870,001 875,001 895,001 900,001 940,001 965,001 970,001 985,001 995,001 1,095,001 1,155,001 1,175,001 1,210,001 1,225,001 1,295,001 1,300,001 1,305,001 1,320,001 1,370,001 1,435,001
305,000 310,000 315,000 325,000 350,000 355,000 375,000 385,000 390,000 395,000 400,000 405,000 410,000 420,000 435,000 440,000 455,000 475,000 480,000 490,000 500,000 510,000 530,000 575,000 590,000 600,000 605,000 630,000 650,000 655,000 665,000 695,000 700,000 715,000 735,000 750,000 790,000 800,000 815,000 875,000 880,000 900,000 905,000 945,000 970,000 975,000 990,000 1,000,000 1,100,000 1,160,000 1,180,000 1,215,000 1,230,000 1,300,000 1,305,000 1,310,000 1,325,000 1,375,000 1,440,000
2 1 2 2 3 1 1 1 1 1 2 1 2 2 1 1 1 2 1 1 2 1 1 2 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 5 2 1 1 1 1 1 1 1 1 1 1
607,500 308,972 625,600 649,235 1,049,500 353,900 371,000 384,498 390,000 395,000 800,000 401,645 816,000 830,700 434,300 440,000 453,089 950,000 479,328 487,000 1,000,000 506,000 526,000 1,146,765 585,600 600,000 601,500 626,400 649,000 650,600 665,000 690,400 700,000 1,425,100 730,900 750,000 786,800 800,000 815,000 873,000 878,845 900,000 901,720 943,396 970,000 971,500 986,300 5,000,000 2,200,000 1,156,980 1,179,500 1,215,000 1,227,800 1,300,000 1,304,329 1,307,700 1,322,400 1,370,701 1,439,600
140
As at June 30, 2010
1,545,001 1,575,001 1,580,001 1,635,001 1,670,001 1,680,001 1,700,001 1,745,001 1,995,001 2,015,001 2,045,001 2,080,001 2,220,001 2,490,001 2,550,001 2,695,001 2,705,001 2,715,001 2,895,001 3,080,001 3,140,001 3,325,001 3,345,001 3,370,001 3,690,001 3,695,001 3,780,001 3,830,001 3,895,001 3,995,001 4,025,001 4,160,001 4,500,001 4,845,001 5,545,001 5,890,001 5,985,001 6,200,001 6,410,001 7,220,001 8,145,001 9,060,001 9,075,001 9,210,001 9,400,001 9,505,001 10,220,001 11,140,001 12,115,001 15,775,001 24,600,001 44,200,001 54,315,001 54,625,001 55,890,001 196,385,001 407,805,001 918,190,001 2,974,680,000
1,550,000 1,580,000 1,585,000 1,640,000 1,675,000 1,685,000 1,705,000 1,750,000 2,000,000 2,020,000 2,050,000 2,085,000 2,225,000 2,495,000 2,555,000 2,700,000 2,710,000 2,720,000 2,900,000 3,085,000 3,145,000 3,330,000 3,350,000 3,375,000 3,695,000 3,700,000 3,785,000 3,835,000 3,900,000 4,000,000 4,030,000 4,165,000 4,505,000 4,850,000 5,550,000 5,895,000 5,990,000 6,205,000 6,415,000 7,225,000 8,150,000 9,065,000 9,080,000 9,215,000 9,405,000 9,510,000 10,225,000 11,145,000 12,120,000 15,780,000 24,605,000 44,205,000 54,320,000 54,630,000 55,895,000 196,390,000 407,810,000 918,195,000 2,974,685,000
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1,550,000 1,577,400 1,580,500 1,640,000 1,671,452 1,681,800 1,705,000 1,750,000 2,000,000 2,016,843 2,050,000 2,083,269 2,223,000 2,493,372 2,551,100 2,700,000 2,709,500 2,719,935 2,900,000 3,084,050 3,141,800 3,326,631 3,347,600 3,372,938 3,693,857 3,696,200 3,784,181 3,831,265 3,900,000 3,998,329 4,030,000 4,164,951 4,502,535 4,847,500 5,547,705 5,893,731 5,985,639 6,202,091 6,413,500 7,221,600 8,145,568 9,062,734 9,077,804 9,215,000 9,403,557 9,506,653 10,225,000 11,143,500 12,115,800 15,775,577 24,600,953 44,204,009 54,316,633 54,628,382 55,893,800 196,387,991 407,809,524 918,190,476 2,974,680,002
Categories of Shareholders
As at June 30, 2010
Trades in PTCL Shares The Directors, CEO, CFO, Company Secretary and their spouses and minor children have not traded in PTCL shares during the financial year 20092010.
142
Details of categories of shareholders

As at June 30, 2010
S.NO. FOLIO NAME HOLDING
DIRECTORS, CEO & CHILDREN 1 82713 MR. ABDULRAHIM A. AL NOORYANI 2 82714 MR. ABDULAZIZ A. AL SAWALEH 3 82715 MR. FADHIL AL ANSARI 4 82716 MR. ABDULAZIZ H. TARYAM 5 83215 MR. NAGUIBULLAH MALIK 6 83216 MR. MUSHTAQ AHMAD BHATTI 7 83217 MR. KHURSHED AHMED JUNEJO 8 83218 MR. SALMAN SIDDIQUE 9 83219 DR. AHMED AL JARWAN Total NIT & ICP 1 0215427 2 1135322 3 26869 4 33312 5 4702 6 67726 7 71094 8 79615 Total BANKS, DFI & NBFI 1 0144631 2 0186722 3 0199027 4 0239429 5 0265934 6 0283232 7 0298035 8 0311146 9 0333557 10 0379852 11 0387152 12 0387186 13 0388928 14 0388944 15 0394720 16 0412728 17 0460629 18 0483822 19 0513226 20 0518121 21 0623923 22 06247519 23 0739324 24 0933228 25 119404410 26 43305 27 57252 28 57664 29 67159 30 75124 31 78786 Total
1 1 1 1 1 1 1 1 1 9
NATIONAL BANK OF PAKISTAN TRUSTEE DEPARTMENT NI(U)T FUND NATIONAL INVESTMENT TRUST LIMITED INVESTMENT CORPORATION OF PAKISTAN NATIONAL BANK OF PAKISTAN TRUSTEE WING NATIONAL BANK OF PAKISTAN TRUSTEE WING INVESTMENT CORPORTION OF PAKISTAN NATIONAL INVESTMENT TRUST LIMITED INVESTMENT CORPORATION OF PAKISTAN
8,145,568 4,847,500 3,400 1,000 2,000 100 400 800 13,000,768
MCB BANK LIMITED PAKISTAN KUWAIT INVESTMENT CO. (PVT) LIMITED INVEST CAPITAL INVESTMENT BANK LIMITED NIB BANK LIMITED PAK LIBYA HOLDING COMPANY (PVT) LIMITED MEEZAN BANK LIMITED IGI INVESTMENT BANK LIMITED UNITED BANK LIMITED TRADING PORTFOLIO BANK ALFALAH LIMITED THE BANK OF KHYBER THE BANK OF PUNJAB THE BANK OF PUNJAB NATIONAL BANK OF PAKISTAN NATIONAL BANK OF PAKISTAN SECURITY INVESTMENT BANK LIMITED MCB BANK LIMITED TREASURY SILKBANK LIMITED INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN ASKARI BANK LIMITED SME BANK LIMITED FIRST DAWOOD INVESTMENT BANK LIMITED SAUDI PAK INV. CO. ARIF HABIB BANK LIMITED FIRST CREDIT & INVESTMENT BANK LIMITED ESCORTS INVESTMENT BANK LIMITED UNITED BANK LIMITED. CRESCENT INVESTMENT BANK LIMITED CRESCENT INVESTMENT BANK LIMITED CRESECENT INVESTMENT BANK LIMITED MUSLIM COMMERCIAL BANK LIMITED THE BANK OF PUNJAB
50,000 5,547,705 3,693,857 50,000 1,000,000 2,551,100 100,000 300,000 2,000,000 103,278 50,000 2,493,372 3,372,938 15,775,577 649,000 5,893,731 1,000,000 30,597 3,141,800 8,600 25,000 3,900,000 873,000 2,500 5,900 600 1,000 1,000 200 690,400 100 53,311,255

As at June 30, 2010
INSURANCE COMPANIES 1 0213929 2 0245121 3 0327710526 4 0327715009 5 0327717338 6 032772538 7 032773711 8 032774064 9 032774255 10 0327748501 11 0327757588 12 032776454 13 032777330 14 032779371 15 032779404 16 03459996 17 56890 18 73493 Total
PREMIER INSURANCE LIMITED NEW JUBILEE INSURANCE COMPANY LIMITED HABIB INSURANCE CO. LIMITED CENTURY INSURANCE COMPANY LIMITED EAST WEST LIFE ASSURANCE COMPANY LIMITED EFU LIFE ASSURANCE LIMITED ADAMJEE INSURANCE COMPANY LIMITED NATIONAL INSURANCE COMPANY LIMITED PAKISTAN REINSURANCE COMPANY LIMITED TAKAFUL PAKISTAN LIMITED ATLAS INSURANCE LIMITED ALPHA INSURANCE CO. LIMITED RELIANCE INSURANCE COMPANY LIMITED NEW JUBILEE LIFE INSURANCE CO. LIMITED ALLIANZ EFU HEALTH INSURANCE LIMITED ASKARI GENERAL INSURANCE CO. LIMITED PAKISTAN GUARANTEE INSURANCE CO. LIMITED GULF INSURANCE CO. LIMITED
90,000 1,322,400 250,000 33,500 50,000 6,413,500 175,000 350,000 440,000 5,500 121,500 20,000 90,000 1,705,000 100,000 38,322 100 100 11,204,922
MODARABAS & MUTUAL FUNDS 1 006464138 FIRST PRUDENTIAL MODARABA 2 0211321 FIRST EQUITY MODARABA 3 0266725 TRUST MODARABA 4 032771149 B.F .MODARABA 5 032771651 FIRST UDL MODARABA 6 032774962 FIRST ALNOOR MODARABA 7 032777525 FIRST PAK MODARABA 8 0352552268 FIRST ELITE CAPITAL MODARABA 9 0407725 FIRST FIDELITY LEASING MODARABA 10 0545428 JS VALUE FUND LIMITED 11 0552028 GOLDEN ARROW SELECTED STOCKS FUND LIMITED 12 0565223 CDC TRUSTEE JS LARGE CAP FUND . 13 0595927 CDC TRUSTEE ATLAS STOCK MARKET FUND 14 0599123 CDC TRUSTEE MEEZAN BALANCED FUND 15 0607223 CDC TRUSTEE FIRST DAWOOD MUTUAL FUND 16 0617121 CDC TRUSTEE FAYSAL BALANCED GROWTH FUND 17 0619729 CDC TRUSTEE ALFALAH GHP VALUE FUND 18 0621325 CDC TRUSTEE UNIT TRUST OF PAKISTAN 19 0622124 CDC TRUSTEE JS AGGRESSIVE ASSET ALLOCATION FUND 20 0639525 ASIAN STOCK FUND LIMITED 21 0640322 CDC TRUSTEE FAYSAL INCOME & GROWTH FUND 22 0641121 CDC TRUSTEE AKD INDEX TRACKER FUND 23 0648624 SAFEWAY MUTUAL FUND LIMITED 24 0661926 CDC TRUSTEE AKD OPPORTUNITY FUND 25 0672623 CDC TRUSTEE PAKISTAN INTERNATIONAL ELEMENT ISLAMIC FUND 26 0682521 MCFSL TRUSTEE JS KSE 30 INDEX FUND 27 0706223 AL MEEZAN MUTUAL FUND LIMITED 28 0707022 CDC TRUSTEE MEEZAN ISLAMIC FUND 29 0709620 FDIBL TRUSTEE NAMCO BALANCED FUND 30 0725220 CDC TRUSTEE FAYSAL ASSET ALLOCATION FUND 31 0944925 CDC TRUSTEE ATLAS ISLAMIC STOCK FUND 32 0948021 CDC TRUSTEE NAFA STOCK FUND 33 0950626 CDC TRUSTEE NAFA MULTI ASSET FUND 34 0973829 CDC TRUSTEE MCB DYNAMIC STOCK FUND 35 1010822 CDC TRUSTEE ASKARI ASSET ALLOCATION FUND
10,000 75,000 155,000 57,000 75,000 147,500 5,000 52,000 4,000 1,750,000 100,000 6,202,091 1,100,000 1,580,500 401,645 2,050,000 200,050 9,403,557 390,000 800,000 500,000 234,953 700,000 111,339 1,000,000 89,275 3,696,200 9,506,653 710,100 1,000,000 900,000 2,223,000 1,156,980 574,765 250,000
144

As at June 30, 2010
36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 Total
1039729 104479718 1052021 1060321 1066025 1071028 1072827 1080127 1085022 1090025 1104929 1105628 1132025 1140325 1142923 1157725 1180926 1192422 1202120 1204728 1205427 1212028 1227821 1231025 1233623 1243521 37257
CDC TRUSTEE MEEZAN TAHAFFUZ PENSION FUND EQUITY SUB FUND FIRST PRUDENTIAL MODARABA TRUSTEE PPF EQUITY (SUBFUND) CDC TRUSTEE APF EQUITY SUB FUND CDC TRUSTEE JS PENSION SAVINGS FUND EQUITY ACCOUNT CDC TRUSTEE ALFALAH GHP ISLAMIC FUND CDC TRUSTEE HBL STOCK FUND CDC TRUSTEE NAFA ISLAMIC MULTI ASSET FUND TRUSTEE PIPF EQUITY SUB FUND CDC TRUSTEE APIF EQUITY SUB FUND MC FSL TRUSTEE JS GROWTH FUND CDC TRUSTEE HBL MULTI ASSET FUND B.R.R. GUARDIAN MODARABA FIRST CAPITAL MUTUAL FUND LIMITED MC FSL TRUSTEE JS CAPITAL PROTECTED FUND IV CDC TRUSTEE MEEZAN CAPITAL PROTECTED FUND I CDC TRUSTEE IGI STOCK FUND CDC TRUSTEE ALFALAH GHP ALPHA FUND CDC TRUSTEE NIT STATE ENTERPRISE FUND CDC TRUSTEE PAK OMAN ADVANTAGE ISLAMIC FUND CDC TRUSTEE PAK OMAN ADVANTAGE STOCK FUND CDC TRUSTEE NIT EQUITY MARKET OPPORTUNITY FUND MCFSLTRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND CDC TRUSTEE FIRST HABIB STOCK FUND CDC TRUSTEE LAKSON EQUITY FUND MCFSL TRUSTEE JS PRINCIPAL SECURE FUND II L.T.V. CAPITAL MODARABA
229,500 10,000 100,000 90,000 61,000 150,000 1,550,000 626,400 48,800 190,000 9,077,804 80,000 50,000 150,000 453,089 100,000 1,215,000 256,540 54,628,382 200,000 125,000 5,985,639 35,000 182,600 162,850 475,000 100 123,444,312
PUBLIC SECTOR COMPANIES & CORPORATIONS 1 0268315 STATE LIFE INSURANCE CORP OF PAKISTAN . 2 0268323 STATE LIFE INSURANCE CORP OF PAKISTAN . Total OTHERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 55,260,029
943,396 54,316,633
0030746 0030756279 003079500 0036410155 0036413688 0036455242 0036483467 0041435 0053914700 0053930 005476424 005476432 005476457 0062018650 0062021 006533683 0069510049 0069510684 0069510692 0069510700 0069510759
IGI FINEX SECURITIES LIMITED CAPITAL VISION SECURITIES (PVT) LIMITED Y.S. SECURITIES & SERVICES (PVT) LIMITED TRUSTEE EAPCL MPT EMP PENSION FUND . TRUSTEES KUEHNE & NAGEL PAKISTAN SPF CRAFTSMAN (PVT) LIMITED (8095) AMIR FINE EXPORTS (PVT) LIMITED MOOSA, NOOR MOHAMMAD, SHAHZADA & CO. (PVT) LIMITED TECNO PACK TELECOM (PVT) LIMITED WE FINANCIAL SERVICES LIMITED TRUSTEE IBM ITALIA S.P PAKISTAN EMPLOYEES PENSION FUND .A. TRUSTEE IBM ITALIA S.P PAKISTAN EMPLOYEES GRATUITY FUND .A. TRUSTEE IBM SEMEA EMPLOYEES PROVIDENT FUND PANTHER EXPORTS (PVT) LIMITED TAURUS SECURITIES LIMITED TRUSTEE NISHAT (CHUNIAN) LIMITED EMPLOYEES PROVIDENT FUND TRUSTEE UNILEVER PENSION PLAN (11453) TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (13862) TRUSTEE PAKISTAN TOBACCO COMPANY LI MITED (13855) TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (13834) TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED [13902]
1 5,100 32,900 20,000 20,000 100,000 37,500 43,500 10,000 2,100 20,000 20,000 20,000 63,000 2,900 10,000 600,000 36,610 20,700 40,000 52,000

As at June 30, 2010
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78
0093511450 0105711449 011647584 0141214092 0141215727 0141216410 0141216618 0141221576 0142017 01446866 0155245 0155252 0166926 0182642036 0191733 0191741 0199019373 0199025545 0199027301 02832743 0305336 0310310053 0313736 0321028 0322843 0327710621 0327710726 0327711151 0327711821 0327711924 0327712220 032771225 0327712636 0327712637 0327713122 0327713154 032771339 032771340 0327714005 0327714731 0327714768 0327714818 0327715138 0327715506 0327716576 0327717628 0327718963 0327719048 0327719908 032772102 0327723841 032772404 0327724198 0327725504 0327731790 0327732070 0327734161
G. R. SECURITIES ( SMC PVT ) LIMITED SARDAR MOHAMMAD ASHRAF D BALUCH (PVT) LIMITED TRUSTEES D.G. KHAN CEMENT CO. LIMITED EMPLOYEES PROVIDENT FUND TRUSTEE, H.J. BEHRANA PARSI FIRE TEMPLE T TRUSTEES, SETH H.M. KHAJURINA TECH.TR. FN M.C. MAMA PARSI GIRL`S SEC. SCHOOL ZOROASTRIAN COOP HOUSING SOCIETY LIMITED . TRUSTEES, EDULJEE DINSHAW LIMITED PROV FUND STANDARD BEARER SECURITIES LIMITED TRUSTEE MCB EMPLOYEES PENSION FUND FIRST CAPITAL EQUITIES LIMITED FIRST CAPITAL EQUITIES LIMITED SHAFFI SECURITIES (PVT) LIMITED MUHAMMAD SHAFI TANNERIES (PVT) LIMITED PRUDENTIAL SECURITIES LIMITED PRUDENTIAL SECURITIES LIMITED FAIR DEAL SECURITIES (PVT) LIMITED MONEY LINE SECURITIES (PVT) LIMITED INVEST FORUM (SMCPVT) LIMITED MEEZAN BANK LIMITED STAFF PROVIDENT FUND AZIZ FIDAHUSEIN & COMPANY (PVT) LIMITED TRUSTEE CRESCENT LEASING GRATUITY FUND MOOSANI SECURITIES (PVT) LIMITED Y.S. SECURITIES & SERVICES (PVT) LIMITED ABBASI & COMPANY (PVT) LIMITED TRUSTEES ARTAL RESTAURANTS INTL EMP P .F TRUSTEES WORLD MEMON FND. COMM. CEN. TRUST BANDENAWAZ (PVT) LIMITED TRUSTEES OF DHORAJI HOUSING & RELIEF TRUST AMIR FINE EXPORTS (PVT) LIMITED TRUSTEES CHEVRON PAKISTAN LIMITED MNGT. STAFF PROVIDENT FUND HASHOO HOLDINGS (PVT) LIMITED TRUSTEES PAKISTAN PTA MNGT STAFF PEN. F TRUSTEES PAKISTAN PTA MNGT STAFF G. FUND MANG.COM.KARACHI ZARTHOSTI BANU MANDAL TRUSTEES HOMMIE & JAMSHED NUSSERWANJEE C.T PREMIER FASHIONS (PVT) LIMITED SIZA (PVT) LIMITED TRUSTEES PAKISTAN PTA MNG STAFF PF TRUSTEES AKHTAR & HASAN (PVT) LIMITED EMP P F . . AL NOOR MODARABA MANAGEMENT (PVT) LIMITED TRUSTEES ADAMJEE ENTERPRISES STAFF P F . TRUSTEES ENGRO CHEMICAL PAK LIMITED P F . TRUSTEES PERAC MNG & SUPERVISORY S. PEN FND TRUSTEES DUKE OF EDINBURGHS AWARD F PAK . TRUSTEES QAMARUNNISA SHARIF WEL. TRUST TRUSTEES OF HAJI MOHAMMED WELFARE TRUST TRUSTEES PAK PTA MNG STAFF DEF CONT. SF . PMC INTERNATIONAL (PVT) LIMITED THE AGA KHAN UNIVERSITY FOUNDATION TRUSTEES MCB EMPLOYEES FOUNDATION MOHAMAD AMIN BROS (PVT) LIMITED PAKISTAN SERVICES LIMITED PRINTEK (PVT) LIMITED RELIANCE MERCHANDISING CORP (PVT) LIMITED TRUSTEES ENGRO CHEM PAK LIMITED, MPT EMP G. F TRUSTEES NRL EXEC STAFF POST RTD MBF
1,000 5,500 240,000 25,000 2,000 40,000 7,500 70,000 1,100 200,000 300 34,000 12,700 158,291 20,400 200 5,300 22,000 9,000 5,000 13,645 15,000 125,000 8,735 100 7,000 50,000 19,000 165,000 415,200 100,000 200,000 13,300 34,200 17,000 236,000 10,000 395,000 43,000 1,900 10,000 2,000 730,900 2,310 5,000 20,000 150,000 37,400 10,000 475,000 100,000 13,000 350,000 3,000 20,000 305,000 29,500
146

As at June 30, 2010
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135
0327734872 0327735326 0327735867 032773785 0327738250 032773893 032774070 032774230 032774275 032774841 032774865 0327748792 032775006 03277543 0327755465 0327757693 032776081 0327761129 0327761348 0327763669 0327764919 0327764984 0327765957 0327767482 0327770845 032777421 032777633 032777652 032777702 03277894 03277895 032779217 032779219 032779284 032779351 032779352 032779353 032779372 03277973 032779981 0329312 0331926 0335022 0347528 035251895 0352548472 0352563817 035256645 0352566811 0352566812 0352566813 0352568468 0357425 0371527 0385521 0386320 0393912703
TRUSTEES ENGRO CHEMICAL PAK LIMITED MPT EMP DEF CONT P FUND . . 715,000 ASLAM SONS (PVT) LIMITED 286,569 TRUSTEE GUL AHMED TEXTILE MILLS LIMITED EMP P F . 2,500 TRUSTEE CHERAT CEMENT CO. LIMITED EMP PRO. FND . 20,000 TRUSTEES OF STATE OIL COMPANY LIMITED. EMPLOYEES P F . 25,000 SITARA CHEMICAL INDUSTRIES LIMITED 50,000 EMPLOYEES OLDAGE BENEFITS INSTITUTION 55,893,800 CRESCENT STEEL AND ALLIED PRODUCTS LIMITED 302,500 TRUSTEES NRL OFFICERS PROVIDENT FUND 14,000 BULK MANAGEMENT PAKISTAN (PVT) LIMITED 415,500 SHAKOO (PVT) LIMITED 50,000 TRUSTEES OF GREAVES PAKISTAN (PVT) LIMITED EMP PROVIDENT FUND 10,000 PAK GREASE MFG. (PVT) LIMITED 70,500 SIDDIQSONS DENIM MILLS LIMITED 215,000 MARIAM ALI MUHAMMAD TABBA FOUNDATION 150,000 MAGNUS INVESTMENT ADVISORS LIMITED 100 TRUSTEES ALOO & MINOCHER DINSHAW CHR. TRUST 40,000 TRUSTEE NATIONAL REFINERY LIMITED MANAGEMENT STAFF PENSION FUND 42,890 POLYPROPYLENE PRODUCTS LIMITED 229,400 TRUSTEE OF HAJI MOHAMMED BENEVOLENT TRUST 200,000 FIRHAJ FOOTWEAR (PVT) LIMITED 20,000 SAUDI PAK REAL ESTATE LIMITED 100,000 AMANAH INVESTMENTS LIMITED 10,000 TRUSTEES OF ENGRO CHEMICAL PAK LIMITED NONMPT EMP GRATUITY FUND 88,063 NOMAN ABID HOLDINGS LIMITED 16 TRUSTEES SAEEDA AMIN WAKF 125,000 TRUSTEES MOHAMAD AMIN WAKF ESTATE 150,000 ISMAILIA YOUTH SERVICES 70,000 TRUSTEES JAMIA MASJID REHMANIA TRUST 6,000 M/S S. FAZALILAHI & SONS (PVT) LIMITED 100,500 M/S IHSAN INDUSTRIES (PVT) LIMITED 3,000 JUPITER TEXTILE MILLS (PVT) LIMITED 50,000 TRUSTEES ALMAL GROUP STAFF PROVIDENT FN 5,000 PAKISTAN HOUSE INTERNATIONAL LIMITED 142,000 TRUSTEES CRESCENT STEEL & ALLIED PROD G. F . 61,500 TRUSTEES CRESCENT STEEL & ALLIED PROD PN. F 150,500 TRUSTEES CRESCENT STEEL & ALLIED PROD SPF 42,500 TRUSTEES ASIATIC P NETWORK (PVT) EMP PF .R. 2,000 LUCKY ENERGY (PVT) LIMITED 50,000 TRUSTEES OF FAROUKH & ROSHEN KARANI TRUST 20,000 S.H. BUKHARI SECURITIES (PVT) LIMITED 200 KHALID JAVED SECURITIES (PVT) LIMITED 13,000 ZAHID LATIF KHAN SECURITIES (PVT) LIMITED 200 REPUBLIC SECURITIES LIMITED 1,500 VOHRAH ENGINEERING (PVT) LIMITED 2,500 MANAGING COMMITTEE CRESCENT FOUNDATION 129,500 NH SECURITIES (PVT) LIMITED 10,000 TRUSTEES PACKAGES LIMITED MGT. STAFF PEN. FUND 10,000 TRUSTEES NESTLE PAKISTAN LIMITED MANAGERIAL STAFF PENSION FUND 30,000 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES PROVIDENT FUND 30,000 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES GRATUITY FUND 20,000 TRUSTEES GHANI GLASS LIMITED EMPLOYEES PROVIDENT FUND 10,000 PROGRESSIVE INVESTMENT MANAGEMENT (PVT) LIMITED 1,500 EXCEL SECURITIES (PVT) LIMITED 12,300 DARSON SECURITIES (PVT) LIMITED 300 ACE SECURITIES (PVT) LIMITED 80,600 EXCEL SECURITIES (PVT) LIMITED 2,450

As at June 30, 2010
136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192
0393921 039398891 0399630634 0401021 0404436 0408524 0415015346 0415025 0423410768 0423410859 042345651 0427521 042912611 0434122 043582092 0435821 0441623 0442422 044321292 0445745 0445778 0447319 0448126 0458023 0470510416 0470548962 0470550687 047055941 047055942 047056004 047056327 0470568853 0470568854 0470568903 0470569173 0470570711 0480410917 0480421559 0480425 0482023 0487928 0489526 0490323 0497812930 0497842 0511628 0526421 0526429343 0527220 0530625 0531424 0540510923 0540523 054627709 0547026 0554626 0558753476
PEARL SECURITIES LIMITED TRUSTEE NWFP PENSION FUND PASHA SECURITIES (PVT) LIMITED (015006) FAWAD YUSUF SECURITIES (PVT) LIMITED TOTAL SECURITIES LIMITED M.R.A. SECURITIES (PVT) LIMITED ATLAS TEXTILE (PVT) LIMITED FRIENDLY SECURITIES (PVT) LIMITED SHAFFI SECURITIES (PVT) LIMITED TRUSTEE GHANI GLASS EMPLOYEE PROVIDENT FUND FAIR EDGE SECURITIES (PVT) LIMITED MOTIWALA SECURITIES (PVT) LIMITED HK SECURITIES (PVT) LIMITED ORIENTAL SECURITIES (PVT) LIMITED TURSTEEFAZAL REHMAN FOUNDATION MAZHAR HUSSAIN SECURITIES (PVT) LIMITED A.H.K.D. SECURITES (PVT) LIMITED SAKARWALA CAPITAL SECURITIES (PVT) LIMITED GENERAL INVESTMENT & SECURITIE (PVT) LIMITED FDM CAPITAL SECURITIES (PVT) LIMITED FDM CAPITAL SECURITIES (PVT) LIMITED THE KARACHI STOCK EXC (G) LIMITED FUTURE CONT. DOSSLANIS SECURITIES (PVT) LIMITED CAPITAL VISION SECURITIES (PVT) LIMITED NATIONAL LOGISTIC CELL SHAKIL EXPRESS (PVT) LIMITED TRUSTEES OF GENERAL RAHIM KHAN TRUST (GRK TRUST) TRUSTEE OF PTC EMPLOYEES GRATUITY FUND TRUSTEE OF PTC MANAGEMENT PROVIDENT FUND TRUSTEE OF PTC STAFF PENSION FUND TRUSTEE OF PTC EMPLOYEES PROVIDEND FUND TRUSTEES OF ARL GENRAL STAFF PROVIDENT FUND TRUSTEES OF ARL STAFF PROVIDENT FUND TRUSTEES OF OVERSEAS PAKISTANI PENSION TRUST TRUSTEES OF ARL MANAGEMENT STAFF PENSION FUND PAKISTAN OILFIELDS LIMITED AMCAP SECURITIES (PVT) LIMITED MAXIMUS SECURITIES (PVT) LIMITED INVEST AND FINANCE SECURITIES LIMITED STOCK VISION (PVT) LIMITED AKHAI SECURITIES (PVT) LIMITED DJM SECURITIES (PVT) LIMITED AMPLE SECURITIES (PVT) LIMITED EXCEL SECURITIES (PVT) LIMITED LIVE SECURITIES LIMITED TIME SECURITIES (PVT) LIMITED JS GLOBAL CAPITAL LIMITED MICRO INNOVATIONS & TECHNOLOGIES (PVT) LIMITED H.S.Z. SECURITIES (PVT) LIMITED FAIR EDGE SECURITIES (PVT) LIMITED INVESTFORUM (PVT) LIMITED SMC UNIFIED JUNCTIONS SERVICES (PVT) LIMITED GENERAL INVEST. & SECURITIES (PVT) LIMITED NOMAN ABID SECURITIES (PVT) LIMITED B & B SECURITIES (PVT) LIMITED STOCK MASTER SECURITIES (PVT) LIMITED SAT SECURITIES (PVT) LIMITED
100,000 180,000 25,000 50,000 1,000 406,000 300 5,000 500 10,000 500 585,600 10,000 300 25,000 23,500 1,000 73,000 1,600 50,000 100,000 2,000 11,000 26,100 500,000 1,000 200 51,000 51,000 193,000 101,000 95,000 30,000 15,000 100,000 250,000 19,500 5,000 59,328 8,500 29,000 665,000 1,200 500 228,432 3,700 55,000 95,000 9,900 200 3,000 5,500 1,400 1,370 22,000 10,357 6,000
148

As at June 30, 2010
193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249
0558755 056604677 0572824 057699351 0578528 0580124 0585029 0588426 0590022 0594228 060077959 061228946 0626220 0628828 0636128 0644526189 0644528 064459870 0645212790 0645217120 064523112 0660127 066763388 066763396 066766753 0668417684 0668422999 0668429 067002740 0673422 0675912 0680923 068743731 0688225 0691620 0692429 0694027 0699922 0700529 0715322 0716121 0717920 0722923 0724521 0726029 0727828 0728627 0729426 0738525 0741920 074196944 0745026 0884727 0956320 0962110187 0963913 0978724
FIRST NATIONAL EQUITIES LIMITED THE JINNAH SOCIETY STOCK STREET (PVT) LIMITED ELITE STOCK SERVICE (PVT) LIMITED ABM SECURITIES (PVT) LIMITED ADEEL & NADEEM SECURITIES (PVT) LIMITED PACE INVESTMENT & SECURITIES (PVT) LIMITED ISMAIL IQBAL SECURITIES (PVT) LIMITED AFIC SECURITIES (PVT) LIMITED AAA SECURITIES (PVT) LIMITED GENERAL INVESTMENT & SECURITIES (PVT) LIMITED TRUSTEE OVERSEAS PAKISTANIS PENSION TRUST HUM SECURITIES LIMITED UNITED CAPITAL SECURITIES (PVT) LIMITED A. H. M. SECURITIES (PVT) LIMITED NOMAN ABID SECURITIES (PVT) LIMITED DARSON SECURITIES (PVT) LIMITED STOCK STREET (PVT) LIMITED SIDDIQSONS TIN PLATE LIMITED MUHAMMAD SHAFI TANNERIES (PVT) LIMITED SIDDIQSONS DENIM MILLS LIMITED STAFF PROVIDENT FUND KAI SECURITIES (PVT) LIMITED TRUSTEES INDUS MOTOR EMPLOYEES PROV. FUND TRUSTEES INDUS MOTOR EMPLOYEES PEN. FUND SINDH GAS (PVT) LIMITED AMER SECURITIES (PVT) LIMITED PROGRESIVE SECURITIES (PVT) LIMITED MOHAMMAD MUNIR MOHAMMAD AHMED KHANANI SECURITIES (PVT) LIMITED SHALIMAR ESTATES COOPERATIVE HOUSING SOCIETY LIMITED GAZIPURA SECURITIES & SERVICES (PRIVATE) LIMITED ATLAS CAPITAL MARKETS (PVT) LIMITED LHR GHORYS SECURITIES (PVT) LIMITED RYK MILLS LIMITED AWJ SECURITIES (SMC PVT) LIMITED PASHA SECURITIES (PVT) LIMITED HK SECURITIES (PVT) LIMITED SIS SECURITIES (PVT) LIMITED MUHAMMAD AHMED NADEEM SECURITIES (SMC PVT) LIMITED MAM SECURITIES (PVT) LIMITED MAHA SECURITIES (PVT) LIMITED ZHV SECURITIES (PVT) LIMITED MUHAMMAD SALIM KASMANI SECURITIES (PVT) LIMITED ALTAF ADAM SECURITIES (PVT) LIMITED 128 SECURITIES (PVT) LIMITED M.R. SECURITIES (SMC PVT) LIMITED WASI SECURITIES (SMC PVT) LIMITED DR. ARSLAN RAZAQUE SECURITIES (SMC PVT) LIMITED ALHAQ SECURITIES (PVT) LIMITED ISMAIL ABDUL SHAKOOR SECURITIES (PVT) LIMITED TOPLINE SECURITIES (PVT) LIMITED FALKI CAPITAL (PVT) LIMITED DAWOOD EQUITIES LIMITED FAIRWAY SECURITIES (PVT) LIMITED VALUE STOCK SECURITIES (PVT) LIMITED FAIRDEAL SECURITIES (PVT) LIMITED KSR STOCK BROKERAGE (PVT) LIMITED SNM SECURITIES (PVT) LIMITED
56,400 25,000 200 14,900 800 40,400 12,000 50,000 300 400 2,000 1 86,000 58,257 15,001 13,380 249,986 4,000 225,000 95,000 10,000 487,000 50,000 50,000 45,500 2,000 10,600 20,000 10,000 4,500 100 5,000 11,000 800 3,400 200 2,000 4 2,600 158,900 76,500 1,000 29,000 1,500 950 100 114,900 200 600 2,500 23,000 5,500 11,650 35,500 3,200 100 1,500

As at June 30, 2010
250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306
1023127 1044722 1047029 1061133567 1062929 1093422 110721271 1147828 1169221 119406423 11965754 1200522 1216124 122031372 122031398 122031752 122031919 123691143 1239319 20795 20800 25329 25330 39143 48919 56640 61251 62420 62470 62529 62586 63174 63570 68500 68502 73578 74270 75253 75761 76780 77695 77819 78341 78343 78345 78350 78388 78401 79171 79172 79173 80012 80014 80021 80642 80715 80717
MSMANIAR FINANCIALS (PVT) LIMITED PEARL CAPITAL MANAGEMENT (PVT) LIMITED GPH SECURITIES (PVT) LIMITED TRUSTEE PAK GUMS & CHEMICAL LIMITED EXCUTIVE STAFF PENSION FUND AKD SECURITIES LIMITED CAPITAL DEVELOPMENT AUTHORITY ALHAQ SECURITIES (PVT) LIMITED CMA SECURITIES (PVT) LIMITED ABA ALI HABIB SECURITIES (PVT) LIMITED JAMSHAID & HASAN SECURITIES (PVT) LIMITED DCD FACTORS (PVT) LIMITED GUL DHAMI SECURITIES (PVT) LTD HAJI ABDUL SATTAR SECURITIES (PVT) LIMITED FALKI CAPITAL (PVT) LIMITED M/S SHAFFI SECURITIES (PVT) LIMITED FAIR DEAL SECURITIES (PVT) LIMITED NOMAN ABID SECURITIES (PVT) LIMITED TRUSTEES LEINER PAK GELATINE LIMITED EMPLOYEES PROVIDENT FUND PINE SECURITIES (PVT) LIMITED SIR.E.HAROON JAFFER & SONS (PVT) LIMITED JAFFER BROTHERS (PVT) LIMITED GRAND LEISURE CORP (PVT) LIMITED AREEN INTERNATION (PVT) LIMITED CAPITOL TRAVELS (PVT) LIMITED YUNAS METAL WORKS (PVT) LIMITED SIDCO CONSTRUCTION LIMITED ARSHAD CORPORATION (PVT) LIMITED UNIVERSAL BRUSHWARES (PVT) LIMITED ENVICRETE LIMITED TAURUS SECURITIES LIMITED WORLD TRADE CENTRE (PVT) LIMITED M/S YUNAS ELECTRONICS AJK, (PVT) LIMITED YUNAS ELECTRONICS PAK (PVT) LIMITED EVERGREEN TRADERS SHADAB ENTER PRISES KHAQAN NAJEEB (PVT) SERVICE FIRST CAPITAL SECURITIES CORPORATION LIMITED NAZIR, SINDH HIGH COURT, REF 1674/1997 . IHSAN SONS (PVT) LIMITED Y. S. SECURITIES AND SERVICES (PVT) LIMITED AQEEL KARIM DHEDHI SECURITIES (PVT) LIMITED Y. S. SECURITIES & SREVICES (PVT) LIMITED PRUDENTIAL SECURITIES LIMITED PRUDENTIALL SECURITIES LIMITED AL MAL SECURITIES & SERVICES LIMITED SAKHAWAT HUSSAIN BUKHARI (PVT) LIMITED FINEX SECURITIES LIMITED PRUDENTIAL SECURITIES LIMITED KHADIM ALI SHAH BUKHARI & CO. LIMITED INDOSUES W.I. CARR SECURITIES (PVT) LIMITED PREMIER CAPITAL MANAGEMENT (PVT) LIMITED FAWAD YOUSUF SECURITIES (PVT) LIMITED ACE SECURTIES (PVT) LIMITED MARS SECURITIES (PVT) LIMITED ADAMJEE AUTOMOTIVE (PVT) LIMITED RAHAT SECURITIES LIMITED ZAHID LATIF KHAN SECURITIES (PVT) LIMITED
51,000 21,050 63,000 10,500 1,370,701 353,900 11,000 10,000 434,300 7,000 80,000 16,500 10,600 31,500 1,000 1,060 500 24,500 74,900 100 16,700 500 1,000 2,000 500 200 300 100 500 600 500 400 400 100 100 200 100 11,500 500 100 300 700 100 100 100 100 100 100 100 300 300 100 100 1,000 2,000 300 100
150

As at June 30, 2010
307 308 309 310 Total
80721 80723 80725 80728
KHADIM ALI SHAH BUKHARI & CO. LIMITED ZILLION CAPITAL SECURITIES (PVT) LIMITED M.S. SECURITIES (PVT) LIMITED ZAFAR SECURITIES (PVT) LIMITED
100 100 200 200 75,481,407
GOVERNMENT OF PAKISTAN 1 1 PRESIDENT OF PAKISTAN 2 1000001 PRESIDENT OF PAKISTAN 3 2000001 PRESIDENT OF PAKISTAN 4 2000004 PRESIDENT OF PAKISTAN 5 2050000 PRESIDENT OF PAKISTAN Total FOREIGN COMPANIES 1 0036411161 2 0036418430 3 005211179 4 005212185 5 005212300 6 005212342 7 005212631 8 005212839 9 00521502 10 00521528 11 00521700 12 005471938 13 005472068 14 005472282 15 005472316 16 005472399 17 005472407 18 005472712 19 005472753 20 005472779 21 005473306 22 005473421 23 005473595 24 005473793 25 005473843 26 005474023 27 005474064 28 005474429 29 005474841 30 005474932 31 005474940 32 005474981 33 005476150 34 005476267 35 005476622 36 005476697 37 00547716 38 0069510122 39 0069510783 40 0069510817 41 006951089
5,600 3,900 2,974,680,002 1,577,400 196,387,991 3,172,654,893
RO LIMITED (032985) ARAB EMIRATES INVESTMENT BANK P .J.S.C. DEUTSCHE BANK SECURITIES INC. THE BANK OF NEW YORK MELLON SA/NV THE BANK OF NEW YORK MELLON SA/NV THE BANK OF NEW YORK MELLON SA/NV THE BANK OF NEW YORK MELLON SA/NV THE BANK OF NEW YORK MELLON SA/NV STATE STREET BANK AND TRUST CO. THE BANK OF NEW YORK MELLON DEUTSCHE BANK LONDON GLOBAL EQUITIES CLSA SINGAPORE PTE LIMITED CLIENT ACCOUNT MERRILL LYNCH INTERNATIONAL EMIRATES NATIONAL INVESTMENT CO. LLC DUBAI ISLAMIC BANK PJSC HSBC FUND SERVICES A/C. 006606669431 LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED THE ROYAL BANK OF SCOTLAND N.V. J.P .MORGAN WHITEFRIARS INC. THE NORTHERN TRUST CO. A/C IBM DIVERSIFIELD GLOBAL EQUITY FD WILMINGTON INTERNATIONAL EQUITY FUND SELECT, L.P FM 2 CFSIL RE COMMONWEALTH EMERGING MARKETS FUND 2 THE DEPARTMENT OF THE STATE TREASURER OF MASSACHUSETTS ADVANCE SERIES TRUST AST PARAMETRIC EMERGING MARKETS EQUITY OLD WESTBURY FUNDS INC A/C OLD WESTBURY GLOBAL OPPORTUNITY WILMINGTON MULTIMANAGER INTERNATIONAL FUND THE NORTHERN TRUST CO, MELBOURNE BRANCH FUTURE FUND CLIENTS FNIL A/C J.P MORGAN SECURITIES (ASIA PACIFIC) LIMITED CLIENT A/C . THE NORTHERN TRUST COMPANY THE NORTHERN TRUST COMPANY THE NORTHERN TRUST COMPANY THE NORTHERN TRUST COMPANY THE NORTHERN TRUST COMPANY THE NORTHERN TRUST COMPANY BNP PARIBAS ARBITRAGE JP MORGAN WHITEFRIARS INC THE NORTHERN TRUST COMPANY THE NAMURA TRUST AND BANKING CO. LIMITED (11535) SEI INSTITUTIONAL INVESTMENT TRUST [13951] GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LIMITED [13993] GOLDMAN SACHS & CO. [1489]
200,000 26,400 100 110,000 3,326,631 110,000 601,500 12,544 24,600,953 44,204,009 2,016,843 2,500 1,671,452 3,084,050 3,347,600 1,000,000 1,227,800 4,164,951 11,143,500 3,831,265 80,366 526,000 1,900 1,307,700 901,720 135,000 201,500 2,000 4,502,535 384,498 3,998,329 84,500 174,975 88,183 479,328 650,600 1,100 324,735 1,439,600 308,972 253,000

As at June 30, 2010
42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 Total
006951105 006951535 006952764 006953036 006955148 006958340 006958480 006959058 006959512 006959603 006959694 006959892 0327747575 03533698 03533706 03533722 0526412505 052647240 059181185 06502755 1000002 1000007 1000015 1000040 1000082 1000213 1000251 1000373 1000530 1000711 1000898 1000957 1000963 1001143 1001181 25341 71121
GOLDMAN SACHS INTERNATIONAL [1780] CREDIT SUISSE (HK) LIMITED (3686) UNION BANK OF CALIFORNIA GLOBAL (4601) JPMORGAN CHASE BANK (4842) MORGAN STANLEY & CO INTL PLC [6441] BROWN BROTHERS HARRIMAN & CO. [9646] FRANKLIN TEMPLETON INVESTMENT AUSTRALIA LIMITED AS (9784) WORLD INVESTMENT OPPORTUNITIES FUND. [10451] TEMPLETON GLOBAL INVESTMENT TRST TEMP FRONT. MKTS. FND (10910) . CACEIS BANK LUXEMBOURG (11006) MS ASST. MGT. S.A. ACTING ON BEHALF OF MS GALAXY FND (11090) MORGAN STANLEY MAURITIUS COMPANY LIMITED (11301) TRUSTEES OF DIAMOND INVESTMENT & RETIREMENT PLAN TRUST HABIB BANK AG ZURICH, ZURICH, SWITZERLAND HABIB BANK AG ZURICH, LONDON HABIB BANK AG ZURICH, DEIRA DUBAI MONTAGUE INTERNATIONAL TRADING LIMITED KAYMO TRADING (FZE) ABT HOLDING LIMITED HABIBSONS BANK LIMITED CLIENT ACCOUNT CITIBANK N.A., NEW YORK SOMERS NOMINEES (FAR EAST) LIMITED STATE STREET BANK & TRUST CO. SOMERS NOMINEES (FAR EAST) LIMITED BARING (GUERNSEY) LIMITED ROYAL BANK OF SCOTLAND PLC U.K. NOMURA BANK (LUXEMBOURG) S.A. FLEDGELING NOMINEES INTERNATIONAL LIMITED ASIAN CAPITAL HOLDINGS FUND CREDIT LYONNAIS SECRITIES(SINGAPORE) PTE FIDUCIARY TRUST COMPANY INTERNATIONAL TEMPLETON DEVELOPING MARKETS TRUST MORGAN STANLEY BANK LUXEMBOURG CITIBANK N.A., NEW YORK UBL EXPORT PROCESSING ZONE BRANCH GATES LIMITED BOSTON SAFE DEPOSIT & TRUST CO.
2,719,935 124,000 3,784,181 12,115,800 1,304,329 971,500 34,500 786,800 1,681,800 2,700,000 9,215,000 114,068 16,500 506,000 1,179,500 9,062,734 10,000 49,000 50,000 10,225,000 7,221,600 500 600 100 1,000 100 100 100 500 300 5,000 1,100 800 3,000 150,000 1,500 100 184,565,686
HOLDING MORE THEN 10% 1 0470544589 ETISALAT INTERNATIONAL PAKISTAN (LLC) FIRST CDC ACCOUNT 2 0470544676 ETISALAT INTERNATIONAL PAKISTAN (LLC) SECOND CDC ACCOUNT Total
918,190,476 407,809,524 1,326,000,000
152
Notice of 15th Annual General Meeting

Notice is hereby given that the Fifteenth Annual General Meeting of Pakistan Telecommunication Company Limited will be held on Thursday, 28th October, 2010 at 10:30 a.m. at the Islamabad Serena Hotel, Sheesh Mahal Hall, Opposite Convention Center, Sector G5, KhayabaneSuhrwardy, Islamabad, to transact the following business: 1. 2. To confirm the minutes of the last AGM held on 31st October, 2009. To receive, consider and adopt the Audited Accounts for the year ended 30th June, 2010, together with the Auditors and Directors reports. To approve and declare the interim cash dividend of 17.5% (Rs. 1.75 per share) already announced and paid for the year ended June 30, 2010. To appoint Auditors for the financial year ending 30th June, 2011 and to fix their remuneration. The retiring Auditors M/s A. F Ferguson & Co., Chartered Accountants and M/s Ernst & Young Ford Rhodes Sidat Hyder, Chartered . Accountants, being eligible, offer themselves for reappointment. To transact any other business with the permission of the Chair.
3.
4.
5.
By order of the Board
Dated: August 26, 2010. Islamabad
(Farah Qamar) Company Secretary
Notes:
1. Any member of the Company entitled to attend and vote at this meeting may appoint any person as his/her proxy to attend and vote instead of him/her. Proxies in order to be effective must be received by the Company at the Registered Office not less than 48 hours before the time fixed for holding the meeting. The Share Transfer Books of the Company will remain closed from 18th October, 2010 to 28th October, 2010 (both days inclusive). Members are requested to notify any change in address immediately to our Share Registrar, M/s FAMCO Associates (Pvt.) Limited at Ground Floor, State Life Building No. 1A, I.I. Chundrigar Road, Karachi. Any individual Beneficial Owner of CDC, entitled to vote at this meeting, must bring his/her original NIC with him/ her to prove his/her identity, and in case of proxy, a copy of shareholders attested NIC must be attached with the proxy form. Representatives of corporate members should bring the usual documents required for such purpose.
2.
3.
4.
Form of Proxy
Pakistan Telecommunication Company Limited
I/We Of being a member of Pakistan Telecommunication Company Limited, and a holder of Ordinary Shares as per Share Register Folio No. I.D. No. of hereby appoint Mr. / Mrs. /Miss as my/our proxy to vote for me/us and on my/our behalf at and / or CDC Participant
the Fifteenth Annual General Meeting of the Company to be held on Thursday, October 28, 2010 at 10:30 a.m. and at any adjournment thereof.
Signed this
day of
2010.
For beneficial owners as per CDC List
Signature on Rs. 5/Revenue Stamp
1. Witness Signature: Name: Address: CNIC No.
2. Witness Signature: Name: Address: CNIC No.
or Passport No.
or Passport No.
Notes
(i) (ii) The proxy need not be a member of the Company. The instrument appointing a proxy must be duly stamped, signed and deposited at the office of the Company Secretary PTCL, Headquarters, Sector G8/4, Islamabad, not less than 48 hours before the time fixed for holding the meeting. Signature of the appointing member should match with his/her specimen signature registered with the Company. If a proxy is granted by a member who has deposited his / her shares into Central Depository Company of Pakistan Limited, the proxy must be accompanied with participants ID number and account/sub-account number along with attested copies of the Computerized National Identity Card (CNIC) or the Passport of the beneficial owner. Representatives of corporate members should bring the usual documents required for such purpose.
(iii) (iv)
AFFIX CORRECT POSTAGE
To
The Company Secretary

Pakistan Telecommunication Company Limited PTCL Headquarters, Sector G8/4, Islamabad44000

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Financial Statements

For the year ended June 30, 2010

| Pakistan Telecommunication Company Limited

Annual Report 2010 | 37

Auditors Report to the Members

A. F. Ferguson & Co. Chartered Accountants Islamabad.

Audit Engagement Partners Name: M. Imtiaz Aslam

Audit Engagement Partners Name: Sajjad Hussain Gill

Dated: August 26, 2010

| Pakistan Telecommunication Company Limited

Statement of Financial Position

Equity and liabilities

150,767,727 Contingencies and commitments 13

Annual Report 2010 | 39

2010 (Rupees in thousand)

88,219,285 3,079,031 91,298,316

87,567,351 3,320,670 90,888,021 5,607,439 3,332,378 99,827,838

Long term investments Long term loans

6,681,965 7,337,210 105,317,491

President & CEO

| Pakistan Telecommunication Company Limited

Statement of Comprehensive Income

57,174,527 (38,258,711) 18,915,816

(7,223,780) (2,142,324) 5,134,646 14,684,358 (403,240) 14,281,118

(4,986,966) 9,294,152 9,294,152

Earnings per share basic and diluted (Rupees)

President & CEO

Annual Report 2010 | 41

Statement of Cash Flows

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

President & CEO

| Pakistan Telecommunication Company Limited

Statement of Changes in Equity

37,740,000 37,740,000 37,740,000

13,260,000 13,260,000 13,260,000

1,683,074 1,683,074 430,630 2,113,704

30,500,000 30,500,000 30,500,000

14,705,300 9,151,185 (7,650,000) 16,206,485 9,294,152 (430,630) (8,925,000) 16,145,007

97,888,374 9,151,185 (7,650,000) 99,389,559 9,294,152 (8,925,000) 99,758,711

President & CEO

Annual Report 2010 | 43

Notes to and Forming Part of the Financial Statements

Legal status and nature of business

| Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements

Significant accounting judgement and estimates

Annual Report 2010 | 45

Notes to and Forming Part of the Financial Statements

Summary of significant accounting policies

| Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements

Annual Report 2010 | 47

Notes to and Forming Part of the Financial Statements

| Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements

Annual Report 2010 | 49

Notes to and Forming Part of the Financial Statements

| Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements

Annual Report 2010 | 51

Notes to and Forming Part of the Financial Statements