moving pakistan forward -...

ANNUAL REPORT 2013

MovingPakistanForward

02 Profile

03 Mission Statement

04 Executive Committee 2013

05 Executive Committee 2014

06 Past Presidents

07 List of Members

08 Members’ Contributions to Pakistan’s Economy

09 Executive Committee’s Report

10 Highlights of the year

19 Programs & Events Photo Gallery

33 Reports of Sub-Committees

34 Finance & Taxation

36 HR & CSR

38 Industry & Trade

39 IPR & Legal

40 Media, PR & Programs

42 Pharmaceutical & Agricultural Chemicals

44 Membership & Admin

45 North Members

46 Security

48 US Relations

50 ABC Representation Annexures

54 ABC Suggestions For The Federal Budget 2013-14 “A”

66 Summary of the ABC Suggestions for the Trade Policy 2013-14 “B”

69 Financial Statements

96 Appreciation

Contents

The American Business Council of PakistanF-30, Block 7, KDA Scheme # 5, Kehkashan, Clifton, Karachi, Pakistan. G.P.O. Box 1322

T: (92-21) 35877351-52, 35877390 F: (92-21) 35877391 E-mail: [email protected]

Website: www.abcpk.org.pk

ProfileThe American Business Council of Pakistan (ABC) was formed in 1984 and has completed 30 years of service to Pakistan, playing a major role in bridging investments from the United States.

The ABC is one of the largest investors group in Pakistan – currently, we have 65 members and most of them are Fortune 500 companies. They operate in various sectors i.e. healthcare, financial services, information technology, chemicals & fertilizers, energy, FMCG, food & beverage, oil & gas and others. ABC members have cumulative revenues of US$ 4.0 billion and an investment of over US$ 770 million. Our members contribute a sizable amount to the national exchequer every year as direct and indirect taxes – last year they contributed Rs. 87 billion. The ABC members also employ over 42,000 people directly who support 170,000 dependents and indirectly employ nearly one million people with agents, distributors, contractors, etc.

The Council is managed by an Executive Committee that is elected every year by its members and meets monthly to review various aspects of its ongoing initiatives. Depending on the economic cycle the initiatives may vary from year to year. Sub-Committees are formed, which meet regularly, to ensure that adequate focus is given to important issues affecting majority of Council membership.

The ABC is an effective channel for dialogue with the Government of Pakistan. Regular suggestions and input for improvement are provided to the relevant bodies like ministries, regulatory and tax authorities, etc., throughout the year. The focus of the Executive Committee is to ensure that the ABC’s suggestions are incorporated in the annual Federal Budget and Trade Policy. The Council also facilitates direct interaction with the Federal and Provincial governments through its guest speakers’ program, seminars and events all of which are aimed at sustaining an ongoing dialogue.

The ABC is affiliated with the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) and is a member of the U.S. Chamber of Commerce (USCC), Washington D.C., and Asia-Pacific Council of American Chambers of Commerce (APCAC). ABC also has a close working relationship with the U.S.-Pakistan Business Council, Washington which is a component of the USCC.

Key ABC’s Objectives are:

• To raise the profile of the ABC so as to ensure it is seen not only as a progressive body but also results in the greater participation and engagement of members.

• Increase the inclusivity of the North-Based membership • Play an active role and engage with Govt. bodies, including IPOP, FBR, BoI and relevant Govt.

Ministries. • Lobby the Govt. on taxation issues effecting ABC member Companies • Address the issues posed by the power sector and engage with the Govt. to try and find solutions • Seek ways of working around the law & order and security threats effecting the smooth running of

business in Pakistan • To recognize the contribution of ABC members towards their commitment to continuously upgrade

processes, systems, products and services, and create value for their employees, existing and potential customers and the local communities they operate in.

02

Mission Statement

To Protect and promote the interests of U.S.

Investors in Pakistan; to encourage and

stimulate new investments; to introduce

and inculcate best practices; To strive to

establish a level playing field in the country

in order to promote the development of

commerce between the USA and

Pakistan.

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ANNUAL REPORT 2013

Mr. Mohammad Iqbal ShekhaniChief Executive OfficerJohan (Pvt.) Ltd. (Culligan)

Mr. Saad Amanullah KhanChief Executive OfficerGillette Pakistan Ltd.

Mr. Tasleemuddin Ahmed BatlayDirectorColgate-Palmolive (Pakistan) Ltd.

Mr. Akram Wali MohammadChief ExecutiveGerry’s International (Pvt.) Ltd. (FedEx)

Mr. Irshad Ali KassimChairmanKaram Ceramics Limited

Mr. Arshad Saeed HusainManaging DirectorAbbott Laboratories Pakistan (Pvt.) Ltd.

Executive Committee 2013

PRESIDENTMr. Farrokh K. CaptainChairman & Managing DirectorCaptain-PQ Chemical Industries (Pvt.) Ltd.

Mr. Tauqir AhmedChief ExecutiveDuPont Pakistan Operations (Pvt.) Ltd.

Mr. Nadeem Arshad ElahiManaging Director & Country HeadTRG (Pvt.) Ltd.

Mr. Ahmed Jamal MirManaging Director& CEOPrestige Communications (Pvt.) Ltd. (GREY)

Ms. Zehra NaqviChief ExecutiveACE InsuranceLimited

Mr. Muhammad Navid QaziCountry General ManagerCisco Systems Pakistan (Pvt.) Ltd.

Mr. Faisal Hamid SabzwariCountry ManagerProcter & Gamble Pakistan (Pvt.) Ltd.

VICE PRESIDENTMr. Osman Asghar KhanChief Executive OfficerEMC Information Systems (Pvt.) Ltd.

MEMBERS

SUB-COMMITTEE CHAIRMENSECRETARY GENERAL

Ms. Aisha Kirmani

04

AUDITORSKPMG Taseer Hadi & Company

BANKERSCitibank, N.A.

Tax AdvisorsPlus Consultants

Executive Committee 2014

Dr. Farid KhanManaging DirectorPfizer Pakistan Ltd.


Mr. Arshad Saeed HusainManaging DirectorAbbott Laboratories (Pakistan) Ltd.

Mr. Amin Mohammad KhowajaExecutive Director & General ManagerJ.P. Morgan Pakistan (Pvt.) Ltd.

MEMBERS

Mr. Faisal Hamid SabzwariCountry ManagerProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Nadeem LodhiManaging Director & Citi Country OfficerCitibank, N.A.

Mr. Ahmed Jamal MirManaging Director& CEOPrestige Communications (Pvt.) Ltd. (GREY)

Ms. Zehra NaqviChief ExecutiveACE Insurance Limited

VICE PRESIDENTMr. Akram Wali MohammadGroup Managing DirectorGerry’s International (Pvt.) Ltd. (FedEx)

SENIOR VICE PRESIDENTMr. Tauqir AhmedChief ExecutiveDuPont Pakistan Operations(Pvt.) Ltd.

PRESIDENTMr. Saad Amanullah KhanChief Executive OfficerGillette Pakistan Ltd.

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Ms. Aisha Kirmani

SECRETARY GENERAL

AUDITORSKPMG Taseer Hadi & Company

BANKERSCitibank, N.A.

Tax AdvisorsPlus Consultants

Mr. Aamir M. MirzaPakistan Country Lead Monsanto Pakistan (Pvt.) Ltd.

SUB COMMITTEE CHAIRMAN

ANNUAL REPORT 2013

Past Presidents1984-85 MR. HASAN I. KAZMI President Exxon Chemical Pakistan Ltd. 1985-86 MR. NAWAB ASGHER Chairman & Managing Director Pfizer Laboratories Ltd. 1986-87 MR. RUDOLF J. GEBERT Vice President & Country Manager Bank of America, NT & SA 1987-88 MR. RUDOLF J. GEBERT Vice President & Country Manager Bank of America, NT & SA 1988-89 MR. NAWAB ASGHER Chairman & Managing Director Pfizer Laboratories Ltd. 1989-90 MR. KAMRAN Y. MIRZA Managing Director Abbott Laboratories (Pakistan) Ltd. 1990-91 MR. ROBERT F. McCUSKER General Manager Interpak Shaving Products Ltd. 1991-92 MR. NISAR A. MEMON Country General Manager IBM World Trade Corporation 1992-93 MR. SUBHI W. JARUDI Managing Director Cyanamid (Pakistan) Ltd. 1993-94 MR. S. ALI RAZA Senior Vice President & Country Manager Bank of America, NT & SA 1994-95 MR. AIJAZ K. KHAN Chairman Wyeth Laboratories (Pakistan) Ltd. 1995-96 MR. SHAUKAT TARIN(Jun – Nov 95) Country General Manager Citibank N.A.

(Dec 95 – Jun 96) MR. FAROOQ HADI Managing Director Cyanamid (Pakistan) Ltd. 1996-97 MR. SHAMSHAD ALI Managing Director Johnson & Johnson Pakistan (Pvt.) Ltd. 1997-98 MR. S. SAJJAD RAZVI(Jun – Dec 97) Country General Manager Citibank, N.A. (Jan – Jun 98) MR. ASIF IKRAM Country Manager DuPont Far East Inc.

1998-99 MR. FAROOQ HADI(Jun – Dec 98) Chairman, Managing Director (CEO) Cyanamid (Pakistan) Ltd.

(Jan – Sep 99) MR. KAMRAN Y. MIRZA Chairman & Managing Director Abbott Laboratories (Pakistan) Ltd. 1999-00 MR. PHILIPPE A. BOVAY Vice President & General Manager Procter & Gamble Pakistan (Pvt.) Ltd. (Jul 00 – Sep 00) MR. IRSHAD ALI KASSIM President & CEO Karam Ceramics Ltd. 2000-01 MR. TAWFIQ A. HUSAIN(Oct 00 – Jun 01) Senior Director & Country Manager American Express Bank Ltd. (Jul 01 – Sep 01) MR. ANJUM FASIH Managing Director Bristol-Myers Squibb Pakistan (Pvt.) Ltd. 2001-02 MR. ZUBYR SOOMRO Chief Executive & Country Corporate Officer Citibank, N.A. 2002-03 MR. ARSHAD NASAR Managing Director Caltex Oil (Pakistan) Ltd.

2003-04 MR. ANJUM FASIH(Oct 03 – Jun 04) Managing Director Bristol-Myers Squibb Pakistan (Pvt.) Ltd. 2003-04 MR. HUMAYUN BASHIR(Jul 04 – Sep 05) Country General Manager IBM Pakistan 2004-05 MR. NADEEM KARAMAT Senior Director & Senior Country Executive American Express Bank Ltd. 2005-06 MR. ZUBYR SOOMRO Managing Director Citibank, N.A. 2006-07 MR. IQBAL BENGALI Managing Director Pfizer Laboratories Ltd. 2007-08 MR. TASLEEMUDDIN AHMED BATLAY Director Colgate-Palmolive (Pakistan) Ltd. 2008-09 MR. ASIF JOOMA Managing Director Abbott Laboratories (Pakistan) Ltd. 2009-10 MR. ARIF USMANI Managing Director & Citi Country Officer Citibank, N.A. 2010-11 MR. HUMAYUN BASHIR Country General Manager IBM 2011-12 MR. SAAD AMANULLAH KHAN Chief Executive Officer Gillette Pakistan Ltd.

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List of ABC MembersCORPORATE MEMBERS

1. Abbott Laboratories (Pakistan) Ltd.2. ACE Insurance Limited3. ACNielsen Pakistan (Pvt.) Ltd.4. American Life Insurance Company (Pakistan) Limited5. Becton Dickinson Pakistan (Pvt.) Ltd.6. Captain-PQ Chemical Industries (Pvt.) Ltd.7. Chevron Pakistan Ltd.8. Cisco Systems Pakistan (Pvt.) Ltd.9. Citibank, N.A.10. Coca-Cola Beverages Pakistan Ltd.11. Colgate-Palmolive (Pakistan) Ltd.12. Continental Biscuits Ltd.13. Crescent Bahuman Limited14. Cresox (Pvt.) Limited15. DuPont Pakistan Operations (Pvt.) Ltd.16. Eli Lilly Pakistan (Pvt.) Ltd.17. El Paso Technology Pakistan (Pvt.) Ltd.18. EMC Information Systems (Pvt.) Ltd.19. F.C.I. International (Pvt.) Ltd.20. FMC United (Pvt.) Ltd.21. Gerry’s International (Pvt.) Ltd. (FedEx)22. Gillette Pakistan Limited23. IBM24. Intel Pakistan Corporation25. International Franchises (Pvt.) Ltd. (Dunkin Donuts)26. International Learning Center (Pvt.) Ltd. (Berlitz)27. Johan (Pvt.) Ltd. (Culligan)28. Johnson & Johnson Pakistan (Pvt.) Ltd.29. J.P. Morgan Pakistan (Pvt.) Limited30. Karam Ceramics Limited31. LMK Resources Pakistan (Pvt.) Ltd.32. Levi Strauss Pakistan (Pvt.) Limited33. MCR (Pvt.) Ltd. (Pizza Hut)34. Microsoft Corporation Pakistan Liaison Office35. Monsanto Pakistan (Pvt.) Ltd.36. Muller & Phipps Pakistan (Pvt.) Ltd.37. NCR Corporation38. New Hampshire Insurance Company

39. OBS Pakistan (Pvt.) Ltd.40. Ogilvy & Mather Pakistan (Pvt.) Ltd.41. Optimus Ltd. (Hertz)42. Oracle Corporation43. Pepsi-Cola International (Pvt.) Ltd.44. Pfizer Pakistan Ltd.45. Philip Morris (Pakistan) ltd.46. Prestige Communications (Pvt.) Ltd. (GREY)47. Primatics Financial (Pvt.) Ltd.48. Procter & Gamble Pakistan (Pvt.) Ltd.49. Rafhan Maize Products Co. Ltd.50. Riaz Bottlers (Pvt.) Ltd. (PepsiCo)51. Sakonent (SMC-Pvt.) Ltd.52. S.C. Johnson & Son of Pakistan (Pvt.) Ltd.53. Sheraton Middle East Management Corporation54. Singer Pakistan Limited55. Siza Foods (Pvt.) Ltd. (McDonald’s)56. Teradata Global Consulting Pakistan (Pvt.) Ltd.57. Teradata Pakistan (Pvt.) Ltd.58. The Coca-Cola Export Corporation59. TRG (Pvt.) Ltd.60. 3M Pakistan (Pvt.) Ltd.61. Unisys Pakistan (Pvt.) Limited62. Universal Logistics Services (Pvt.) Ltd. (UPS)63. Visa Worldwide Singapore Pte. Limited64. Vision Network Television Ltd. (CNBC)65. WPP Marketing Communications (Pvt.) Ltd. (JWT)

ASSOCIATE MEMBER

1. Sun Consulting (Pvt.) Ltd.

MEMBERSHIP BY CATEGORY

Industrial Undertakings 17Trading 06Financial Institutions 06Others 37Quoted at Karachi Stock Exchange 11

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ANNUAL REPORT 2013

08

Member Companies' Contribution To Pakistan’s Economy*The ABC Financial Survey 2013 indicates that our member companies make a significant contribution to Pakistan’s economy, as follows:

Investment and Revenue Update

The ABC members have cumulative revenues of US$ 4.0 billion with an investment of over US$ 770 million.

Contribution to National Exchequer

The ABC members contribute a sizable amount to the national exchequer every year as direct and indirect taxes – last year the contribution was Rs. 87 billion.

Exports

The ABC members’ exported goods worth Rs. 13 billion during 2013.

Human Resources

The ABC member companies employed over 42,000 persons directly, who support 170,000 dependents and indirectly employ nearly one million people with their agents, distributors, suppliers, contractors, etc.

*The numbers quoted represent 66% of ABC Members

Executive Committee Report 2012-13

OVERVIEW During 2013 The American Business Council of

Pakistan (ABC) remained active in its efforts to promote, support, and advocate for its members. The business climate was difficult with the year opening on an unsteady note as a general sense of uncertainty prevailed in the run up to the Federal Elections in May 2013 and security remaining an on-going area of concern. Despite the challenging operating environment, ABC members maintained a growth trajectory and remained committed to doing business responsibly in Pakistan.

The Executive Committee maintained an

inclusive stance, seeking regular input from members and respective Sub-Committees on various matters including the Federal Budget, Trade Policy, Human Resources and Security. Representatives of the ABC met with heads of numerous government departments and concerned functionaries of the government, including the Prime Minister, Federal Minister for Finance, Chairman BoI, Federal Secretary Commerce & Chairman Federal Board of Revenue. During these meetings policy recommendations in support of an economic climate conducive to growth, development of human capital and foreign investment were put forth.

The United States (U.S.) is one of Pakistan’s most important export markets and the ABC members are a major source of investment in Pakistan. In an effort to facilitate U.S. investment, business travel to the U.S. and dialog with visitors on behalf of its members, the ABC Executive Committee worked closely with agencies of the American Government. A strong working relationship was maintained with the U.S. Embassy in Islamabad and U.S. Consulate in Karachi.

The participation of every member company

is greatly appreciated and essential to the ABC’s success as well as for the cultivation of the fundamentals of a strong business climate that can support and drive a vibrant economy. While the ABC will continue to provide a platform for its members to network and share ideas through regular events and conferences, for the year ahead we look towards our members for their active involvement to further ABC’s mission whilst making it an effective tool to represent and leverage U.S. enterprises in Pakistan.

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ANNUAL REPORT 2013

Highlights of the Year

1. ABC SUGGESTIONS TO THE FEDERAL GOVERNMENT

(a) Suggestions for the Federal Budget 2013-14

The American Business Council greatly appreciated the Government’s consultative efforts to involve all chambers and business forums in the budget preparation process. The Council submitted its proposals relating to tax and procedural issues (Annexure “A”) to the Federal Board of Revenue, Ministry of Commerce and the Board of Investment in May 2013.

(b) Suggestions for the Trade Policy 2013-14

The American Business Council suggestions for Trade Policy (Import/Export) 2013-14 were submitted to the Ministry of Commerce, Federal Board of Revenue and the Board of Investment in May 2013.

MEETINGS

• Executive Committee meeting with USAID Regional Director - January 11th, 2013

The Executive Committee met outgoing Regional Director USAID, Mr. Ed Birgells and his successor Mr. Leon Waskin at the ABC Secretariat in Karachi. The Executive Committee thanked Mr. Ed Birgells for his contributions and support and wished Mr. Leon Waskin success in his new role. The role of the private sector in USAID development initiatives was discussed. The possibility of USAID partnering with the Corporate Social Responsibility (CSR) departments of the ABC member companies to facilitate an exchange of information on the work being carried out by various NGOs was also discussed.

• Executive Committee meeting with the U.S. Consul General - January 17th, 2013

On invitation of the United States Consul General (USCG) in Karachi Mr. Michael Dodman, the newly elected ABC Executive Committee members attended a lunch meeting at USCG’s residence in Karachi.

Mr. Farrokh K. Captain, President of ABC briefed the Consul General on ABC’s plan for the upcoming year and reiterated the ABC’s commitment to raise its profile. Mr. Michael Dodman welcomed the incoming

ABC Executive Committee and expressed his appreciation for the initiatives being undertaken by ABC members in Pakistan.

• ABC lunch meeting with the American Journalists - January 22nd, 2013

The delegation from the International Center for Journalists met the ABC members over lunch in Karachi. The purpose of this visit was to develop a long-term partnership between news organizations and content creators. Intended to provide media professionals with an opportunity to gain insight into the culture and traditions of Pakistan, this initiative is likely to contribute towards a better understanding of Pakistan by the American audience.

• ABC Executive Committee’s visit to the U.S. Embassy - February 25th, 2013

ABC Executive Committee members led by the President of ABC, Mr. Farrokh K. Captain met the U.S. Ambassador H.E. Richard Olson; Robert Ewing, Economic Counselor; Jim Fluker, Commercial Counselor; Daniel Goodspeed, Consular Section Official; John Eustace, Regional Security Official; Justin Diaz and other Economic Section and U.S. Commercial Service Officials at the U.S. Embassy in Islamabad.

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Highlights of the Year• ABC President & Executive Director’s meeting

with Federal Minister for Finance & Chairman, BoI - February 25th, 2013

Mr. Farrokh K. Captain, ABC President and Ms. Raheen Mani, Executive Director met with Senator Saleem H. Mandviwalla, Federal Minister for Finance & Chairman, Board of Investment (BoI) on 25th February at his office in Islamabad. During the meeting the President ABC requested the ABC’s representation on government Advisory Councils of Commerce & Finance, the Chairman BoI graciously agreed to endorse the ABC’s request for active representation on the Advisory Councils of the Ministries of Commerce & Finance.

• ABC President & Executive Director meet with Chairman, Federal Board of Revenue – February 26th, 2013

Mr. Farrokh K. Captain, President of ABC and Ms. Raheen Mani, Executive Director met

Mr. Ali Arshad Hakeem, Chairman Federal Board of Revenue (FBR) in Islamabad. The ABC President stressed on the importance of having a transparent taxation system. The Chairman FBR lauded the ABC members for their contribution towards national exchequer and assured the President that ABC’s taxation proposals and policy recommendations will be taken into consideration. The Chairman FBR expressed his willingness to address ABC members as a Guest Speaker.

• ABC President & Executive Director meet Secretary Commerce - February 26th, 2013

Mr. Farrokh K. Captain, President ABC and Ms. Raheen Mani, Executive Director met

Mr. Munir Qureshi, Secretary Commerce in

Islamabad. The President of ABC used this opportunity to brief the Secretary Commerce on proposed amendments to ABC’s Articles of Association. The Secretary Commerce assured the ABC President that he would request the Director General Trade Organization to extend his support on the matter.

• Executive Director’s meeting with the U.S. Visa Section Chief - March 1st, 2013

On behalf of ABC Executive Committee, Ms. Raheen Mani, Executive Director met with Ms. Kelly Kopcial, U.S. Visa Section Chief at the U.S. Consulate in Karachi. The U.S. Visa Section Chief informed the Executive Director that various options were being considered to facilitate ABC business travelers.

• President of ABC’s dinner for members - March 11th, 2013

President of ABC invited members for dinner at his residence in Karachi.

• President of ABC & Executive Director’s meeting with the U.S. Consul General -

March 12th, 2013

Mr. Michael Dodman, U.S. Consul General visited the ABC Secretariat in Karachi and met with Mr. Farrokh K. Captain, President ABC and Ms. Raheen Mani, Executive Director. Matters of mutual interest were discussed in the meeting.

• ABC Members meet over lunch with Pakistan Ambassador to the U.S. - March 14th, 2013

A luncheon meeting with H.E. Sherry Rehman, Pakistan Ambassador to the U.S. was held in Karachi for the ABC members.

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ANNUAL REPORT 2013

Highlights of the Year The Ambassador underscored the need for

the United States and Pakistani government to take their bilateral relationship to new heights by focusing on trade and investment. She further added that there was great potential for increased cooperation between the two countries in a broad spectrum of areas. The meeting was well attended and received good feedback from members.

• Executive Committee meeting with the U.S. - Pakistan Business Council (USPBC)

Chairman and Executive Director - April 24th, 2013

The Executive Committee met over lunch with Mr. Miles Young, Chairman of the U.S.-Pakistan Business Council (USPBC) and Ms. Esperanza Gomez Jelalian, Executive Director, U.S.-Pakistan Business Council & Director, South Asia, U.S. Chamber of Commerce in Karachi. During the meeting, the USPBC Chairman praised the success of the Government of Pakistan in reforming and deregulating the country’s economy. The ABC Executive Committee agreed on the need for mutual cooperation on issues related to advancing U.S.-Pakistan bilateral business and investment opportunities in order to attract and facilitate prospective U.S. companies looking to setup business in Pakistan.

• Executive Committee meeting with the U.S. Economic Counselor and the Consul General - May 25th, 2013

The Executive Committee met Mr. Robert Ewing, U.S. Economic Counselor and Mr. Michael Dodman, Consul General at the ABC office in Karachi. The U.S. Economic Counselor stressed on the importance of business and investment in shifting the ties of

the two countries from conventional assistance towards a more business oriented one. The Economic Counselor was of the view that Pakistan’s emerging market and population of more than 190 million consumers holds great opportunities for American companies.

• U.S. Ambassador calls on Executive Committee - June 28th , 2013

U.S. Ambassador to Pakistan, H.E. Richard Olson paid a courtesy call to members of the Executive Committee in the ABC Secretariat in Karachi. The discussion predominantly centered on the security and energy issues faced by ABC members. The Executive Committee requested the U.S. Embassy to convey these concerns to high level representatives of the Pakistani government.

• Executive Committee meeting with the USAID Mission Director - July 9th, 2013

The ABC Executive Committee met with Gregory Gottlieb, USAID Mission Director at the ABC office in Karachi. The Mission Director shared that the primary focus of the U.S. civilian assistance program is to develop a stable, secure and tolerant Pakistan with a vibrant economy. USAID has focused its program over the last few years on five areas essential to Pakistan’s stability and long-term development that are reflective of Pakistani priorities; energy, economic growth, stabilization, education and health.

• Executive Committee meets President of the Overseas Private Investment Corporation, U.S. Ambassador and U.S. Consul General - July 18th, 2013

The Executive Committee members met with

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Highlights of the Year Ms. Elizabeth Littlefield, CEO and President of

the Overseas Private Investment Corporation (OPIC), U.S. Ambassador Richard Olson, Consul General in Karachi Michael Dodman and other U.S. government officials at the ABC office in Karachi.

The ABC members shared their view on the overall investment climate of Pakistan, economic outlook for the year ahead and presented new opportunities for U.S. investors to partner with Pakistani businesses. Recognizing how critical the energy sector is to Pakistan’s long-term economic growth, OPIC will pay close attention to how it can best support investors willing to address this challenge. Ms. Littlefield expressed her gratitude to the Executive Committee for their contribution towards a fruitful discussion.

OPIC has invested in 123 projects in Pakistan since its formation in 1971. Its current Pakistan portfolio includes 14 active projects worth nearly $300 million in key industries including energy, health care, financial services for small and medium sized enterprises, and telecommunications. OPIC is the U.S. Government’s development finance institution. It mobilizes private capital to help solve critical development challenges, providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.

• Executive Committee and Security Sub-Committee members engage with Citizens-Police Liaison Committee (CPLC) - July 25th, 2013

Members of the ABC Executive Committee and Security Sub-Committee met with Mr. Ahmed Chinoy, Chief of Citizens-Police Liaison Committee (CPLC) and his team on

their visit to the ABC Secretariat. The Executive Committee, on behalf of the Council, presented Mr. Ahmed Chinoy with a humble contribution of Rs. 250,000 for CPLC. Mr. Chinoy briefed members on CPLC’s role in monitoring and combating crime.

• President of ABC meets with Finance Minister – August 28th, 2013

The President of ABC was present in a meeting Federal Finance Minister Senator Ishaq Dar held with various members of the business community including Chief Executives of leading institutions, corporate leaders, and representatives of exchange companies, at the State Bank of Pakistan in Karachi. Attendees cited their concerns on government borrowing from the banking system and the stringent conditions tied with borrowing from International Monetary Fund (IMF). The Federal Minister assured participants that seeking financial assistance from IMF would in fact prevent Pakistan from defaulting on its debt obligations and would ultimately help strengthen the currency.

• President of ABC’s meeting with Pakistan’s Prime Minister – September 3rd, 2013

Mr. Farrokh K. Captain, President of ABC met Prime Minister Nawaz Sharif at the Governor House in Karachi. Amongst various issues discussed, the ABC President also voiced his concerns on the law and order situation of Karachi to the Prime Minister. The Prime Minister assured participants that his Government was committed to restoring law and order and bringing normalcy back to the country’s economic hub which was of foremost importance to his team.

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ANNUAL REPORT 2013

Highlights of the Year• Executive Committee meets the U.S. Senior

Commercial Officer – September 25th, 2013

Mr. David McNeil, U.S. Senior Commercial Officer (Commercial Counselor) visited the ABC office in Karachi and met the Executive Committee members as a courtesy call. Various matters of mutual interest were discussed during the meeting.

OTHER ACTIVITIES:

The ABC Member Internship Program in Collaboration with the U.S. Mission

The U.S. Mission in Pakistan and the ABC worked together to provide internship opportunities to Pakistani alumni of U.S. Government Funded Exchange Programs within member companies. The internships were fully funded by participating ABC companies in line with their internal policies. The U.S. Mission in Pakistan administers more than 30 academic and professional exchange programs funded by the U.S. government. These programs send more than 1,000 Pakistanis to the United States each year for periods ranging from three weeks to over a year. Participants reflect Pakistan’s rich diversity; approximately 50% are female, many come from disadvantaged and minority communities, and they represent a full range of academic and professional backgrounds. Many are in their final year or have just completed their studies, and some are mid-career professionals.

The ABC Participates in U.S. Embassy Global UGrad Reunion

The U.S. Embassy invited members of the ABC to participate in a panel discussion on internship opportunities available within their organizations at the second annual reunion for alumni of the

Global Undergraduate (UGrad) exchange program, on December 14th in Islamabad. The ABC Participants included Mr. Muhammad Navid Qazi from Cisco Systems Pakistan and Mr. Rahim Lalani from TRG.

The audience included nearly 300 alumni who have undertaken a semester of study in the United States. The Global UGrad program in Pakistan is the largest in the world. Since 2010, U.S. Embassy Islamabad has sent nearly 700 Pakistani university students to the United States for one semester of study at a U.S. university.

U.S. Visa Facilitation for ABC Member Company Employees

The ABC announced the launch of a U.S. visa facilitation scheme for its members on December 17th. The scheme requires AMEX to create a special visa appointment category for full-time employees of the American Business Council Member Companies anywhere in Pakistan who are going to U.S. on a temporary basis for business purposes, or to perform work as permitted by the appropriate nonimmigrant work visa. There will be 10 interview appointments per interview day reserved for the ABC member employees (adjusted if demand increases). With there otherwise often being some weeks wait time for a visa appointment, this facility will provide members with the flexibility to schedule a visa appointment at their earliest convenience. Over the course of the year the Executive Committee of The American Business Council of Pakistan (ABC) has worked to further strengthen its relationship with the U.S. Mission in Pakistan. Going forward, the ABC will continue to work with the U.S. Mission to provide facilities for its members.

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Highlights of the Year

CEO Roundtable Meetings

1st CEO Roundtable Meeting - February 6th, 2013

Held on February 6th 2013 the 1st CEO Roundtable Meeting was well attended by members of the ABC. Participants shared feedback on how business had fared in 2012, plans for 2013 and the opportunities and challenges present in each of their respective areas of business. The CEO Roundtable meeting allowed ABC members to network, exchange ideas and identify common areas of concern facing American businesses in Pakistan.

Dr. Amjad Waheed, CFA & CEO, NBP Fullerton Asset Management Ltd. (NAFA) was invited as Guest Speaker. Dr. Amjad Waheed spoke of how many developing countries including Pakistan face a saving investment gap and of the crucial role played by FDI in facilitating economic growth by filling this gap. FDI allows the transfer of technology, uplifts competition in the domestic input market, contributes to human capital development and profits created by FDI contribute to corporate tax revenues in the host country.

2nd CEO Roundtable Meeting - July 1st, 2013

The 2nd CEO Roundtable meeting was held on July 1st. The ABC members discussed the implications of the Federal Budget FY13-14 on the overall economy. Mr. Syed Shabbar Zaidi, Partner A.F. Ferguson and Co., and Mr. Muhammad Hidayatullah of M. Hidayatullah & Co., Chartered Accountants were invited to brief the audience on the impact of the Federal Budget on the economy. The Federal Budget included considerable changes in both expenditure and

taxation plans, as well as ambitious targets that will have a momentous effect on the external sector of the economy. The ABC members expressed their concern on rising external debt and rapidly shrinking foreign exchange reserves. The members were of the view that depleting foreign reserves will exert downward pressure on the currency and cause debt servicing costs to balloon.

3rd CEO Roundtable Meeting - July 8th, 2013

The 3rd CEO Roundtable meeting was held on July 8th, 2013 in Karachi with Dr. Ishrat Husain, former Governor, State Bank of Pakistan and presently Dean and Director of the Institute of Business Administration (IBA), Karachi, attending as Guest Speaker. Dr. Husain talked about the various social and economic challenges faced by Pakistan. His knowledge and experience provided invaluable insight to the ABC members.

4th CEO Roundtable Meeting – September 2nd, 2013

The 4th CEO Roundtable Meeting was held on September 2nd in Karachi. The ABC member company CEOs shared updates on overall business performance, investment plans for 2014 in their respective sectors of the economy and the challenges being faced by their businesses, with each other. Participants had an opportunity to assess how the economic climate was affecting various businesses, identify common issues being faced by American companies in Pakistan and develop strategies to contest these issues in a united manner.

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ANNUAL REPORT 2013

Highlights of the YearCHANGE AT ABC SECRETARIAT

Ms. Raaheen Mani resigned in June 2013 and was replaced by Ms. Aisha Kirmani as the ABC Secretary General in November 2013.

MEMBERSHIP

(i) Enrolment of New Members:

Teradata Pakistan (Pvt.) Ltd. June 7, 2013F.C.I. International (Pvt.) Ltd. August 23, 2013Ogilvy & Mather Pakistan (Pvt.) Ltd. August 23, 2013Primatics Financial (Pvt.) Ltd. August 23, 2013International Learning Center (Pvt.) Ltd. (Berlitz) August 23, 2013Sakonent (SMC Pvt.) Ltd. December 31, 2013

(ii) Cessation of Old Member:

AT&T Global Network Services International Inc.

MEETINGS OF THE EXECUTIVE COMMITTEE

The Executive Committee convened and participated in 32 meetings and events during the period. It constituted of 10 Sub-Committees, defined their Terms of Reference and gave policy directions from time to time.

On behalf of the Executive Committee,

Farrokh K. CaptainPresident

Karachi

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ACE Insurance Limited6th Floor, N.I.C. Building,Abbasi Shaheed Road,Off. Sharah-e-Faisal,Karachi - Pakistan.

Tel: 111-789-789Fax: (92-21) 35683935www.acelimited.com

Programs& EventsPhoto Gallery

ANNUAL REPORT 2013

Programs & Events Photo Gallery

The ABC CEO Roundtable – July 8, 2013, Karachi

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(From right) Mr. Osman Asghar Khan, Vice President ABC, Mr. AminM. Khowaja, General Manager, J.P. Morgan Pakistan, Mr. Tauqir Ahmed, Member Executive Committee and a guest

(From left) Mr. Osman Asghar Khan, Vice President ABC, Dr. Ishrat Husain, Dean & Director, IBA, Mr. Farrokh K. Captain, President ABC and Mr. Michael Dodman, US Consul General, Karachi



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ANNUAL REPORT 2013

(Center) Mr. Saad Amanullah Khan, Chairman, Finance Sub-Committee addressing members of the audience. (Left) Mr. Nadeem Elahi, Member Executive Committee

(Center) Mr. Nadeem Lodhi, Managing Director & CCO, Citibank N.A.(1st from left) Mr. S. Iqbal Ghazi, CEO, Sun Consulting and (3rd) Mr. Tauqir Ahmed, Member Executive Committee


Friends of CPLC – ABC donation for the year 2013 to the CPLC – July 25, 2013, Karachi

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(From right) Mr. Tauqir Ahmed, Member ExCom & Chairman Security Sub-Committee (2nd) Mr. Jamil A. Mughal, Director Marketing, Siza Foods (3rd) Mr. Ghulam Abbas, Security Consultant, IBM and other guests at the meeting

(From left) Mr. Shabeeh Ikram, General Manager, Johnson & Johnson (3rd) Mr. Kamal Ahmed, Director Finance, ACE Insurance (4th) Mr. Tasleemuddin Ahmed Batlay, Chairman, IPR & Legal Sub-Committee (5th) Mr. M. Iqbal Shekhani, Member Executive Committee and guests at the meeting

(4th from left) Mr. Ahmed Chinoy, Chief CPLC (2nd) Mr. Tauqir Ahmed, Chairman, Security Sub-Committee (3rd) Mr. Saad Amanullah Khan, Chairman, Finance Sub-Committee (5th) Mr. M. Iqbal Shekhani, Member Executive Committee


The ABC meeting with the U.S. Journalists – January 22, 2013, Karachi

(2nd from left) Mr. Farrokh K. Captain, President ABC (1st) Mr. Mujib Khan, Country Manager, New Hampshire Insurance (3rd) U.S. Journalist and (4th) Mr. Nadeem Elahi, Member Executive Committee

The ABC President with U.S. Journalist delegation and ABC members

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ANNUAL REPORT 2013

(1st from right) Mr. Irshad Kassim and (2nd) Mr. Ahmed Jamal Mir, Members of the Executive Committee with guests


ExCom meets CEO & President of the Overseas Private Investment Corporation (OPIC), U.S. Ambassador and U.S. Consul General - July 18th, 2013, Karachi

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(2nd from left) Mr. Farrokh K. Captain, President ABC (1st) Mr. M. Iqbal Shekhani (3rd) Ms. Zehra Naqvi and (4th) Mr. Irshad Kassim, Members of the Executive Committee

(1st from right) Mr. Irshad Ali Kassim, Member Executive Committee (2nd) Ms. Elizabeth Littlefield, CEO and President OPIC, (3rd) Mr. Farrokh K. Captain, President ABC, (4th) Ms. Anu Prattipati, Political and Economic Chief, (5th) H.E. Richard Olson, U.S. Ambassador to Pakistan

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ExCom meeting with the USAID Country Director - July 9th, 2013, Karachi

ANNUAL REPORT 2013

(1st from left) Mr. Nadeem Elahi (2nd) Mr. Ahmed Jamal Mir and (3rd) Mr. M. Iqbal Shekhani, Members of the Executive Committee

(2nd from right) Mr. Farrokh Captain, President ABC with (3rd) Mr. Gregory Gottlieb, USAID Country Director and Members of the Executive Committee


ExCom meeting with the U.S. Ambassador – June 28, 2013, Karachi

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(1st from left) Mr. Osman Khan, Vice President ABC (2nd) Mr. Farrokh Captain, President ABC (3rd) Mr. Tasleem Batlay (4th) Ms. Zehra Naqvi and (5th) Mr. Tauqir Ahmed, Members of the Executive Committee

(2nd From left) Mr. Michael Dodman, U.S. Consul General (3rd) H.E. Richard Olson, U.S. Ambassador to Pakistan (4th) Mr. Arshad Saeed Husain, Chairman Pharma Sub-Committee and (5th) Mr. Ahmed Jamal Mir, Member Executive Committee

H.E. Richard Olson, U.S. Ambassador to Pakistan with the ABC President, Executive Committee members and guests from the U.S. Consulate


ExCom meeting with U.S. Commercial Counselor – September 25, 2013, Karachi

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ANNUAL REPORT 2013

(1st from left) Mr. Malik Muhammad Attiq, U.S. Commercial Specialist, (2nd) Mr. David McNeil, U.S. Commercial Counselor with the ABC President and other members of the Executive Committee


ExCom meeting with the USAID Regional Director–January 11th,

2013, Karachi

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(1st from left) Mr. Saad Amanullah Khan, Chairman, Finance Sub-Committee (2nd) Mr. Irshad Kassim and (3rd) Mr. M. Iqbal Shekhani, Executive Committee members

The ABC President and Executive Committee members with Mr. Ed Birgells, USAID Regional Director (5th from left) and other USAID staff



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ANNUAL REPORT 2013

Mr. Farrokh K. Captain, President ABC greeting Mr. Muhammad Hidayatullah of M. Hidayatullah & Co., Chartered Accountants, Guest Speaker at the CEO Roundtable

The Guest Speaker, Mr. Muhammad Hidayatullah briefing members on the impact of the Federal Budget to the economy

(5th from left) Mr. Farrokh Captain, President ABC, presenting a memento to Mr. Muhammad Hidayatullah. From left (1st) Mr. Irshad Kassim (2nd) Mr. Ahmed Jamal Mir, Executive Committee members (3rd) Mr. Shabbar Zaidi, Partner, A.F. Ferguson & Co., (6th) Mr. Osman Khan, Vice President ABC and (7th) Mr. M. Iqbal Shekhani, ExCom member


U.S.-Pakistan Business Council (USPBC) Chairman and Executive Director meet the ABC - April 24th, 2013, Karachi

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(1st from left) Mr. Miles Young, Chairman, U.S.-Pakistan Business Council (USPBC), (2nd) Mr. Farrokh Captain, President ABC and (3rd) Ms. Esperanza Gomez Jelalian, Executive Director, U.S.-Pakistan Business Council & Director, South Asia, U.S. Chamberof Commerce

From right (1st) Mr. Miles Young, Chairman, U.S.-Pakistan Business Council (USPBC), (2nd) Mr. Saad Amanullah Khan, Chairman, Finance Sub-Committee (3rd) Mr. Farrokh Captain, President ABC (4th) Ms. Esperanza Gomez Jelalian, Executive Director, U.S.-Pakistan Business Council (USPBC), (5th) Mr. M. Iqbal Shekhani and (6th) Mr. Ahmed Jamal Mir, Executive Committee members

The ABC Executive Committee members with Mr. Miles Young, Chairman, U.S.-Pakistan Business Council (USPBC), Ms. Esperanza Gomez Jelalian, Executive Director, U.S.-Pakistan Business Council and other guests

Reports ofSub-Committees

Report of Finance & Taxation Sub-Committee

MEMBERS

Mr. S. Anis AhmedAbbott Laboratories (Pakistan) Ltd.

Mr. Hassan Ali New Hampshire Insurance Company

Mr. Hashim Sadiq AliAmerican Life Insurance Company (Pakistan) Ltd. Mr. Muhammad Arsalan BatlaOBS Pakistan (Pvt.) Ltd.

Mr. Humza ChaudhriACE Insurance Ltd.

Mr. Imran FarooquiProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Zafar HasanSIZA Foods (Pvt.) Ltd. (McDonald's)

Mr. Kashif Imtiaz KhanIBM

Mr. Munaf LakdaMuller & Phipps Pakistan (Pvt.) Ltd.

Mr. Syed Zeeshan MobinOBS Pakistan (Pvt.) Ltd.

Mr. Omer MuradWPP Marketing Communications (Pvt.) Ltd (JWT)

Mr. Javed MurtazaMonsanto Pakistan (Pvt.) Ltd.

Mr. Atif Izhar SiddiquiEli Lilly Pakistan (Pvt.) Ltd.

Mr. Syed WajeehuddinPfizer Pakistan Ltd.

Mr. Adamjee YakoobCitibank, N.A.

Mr. Ali Akbar ZaidyJohnson & Johnson Pakistan (Pvt.) Ltd.

TERMS OF REFERENCE

1. Study major Government policy directives on various matters relating to Finance and Taxation concerning members of the ABC and the American business community at large.2. Identify and develop positions on major issues relating to Finance and Taxation.3. Develop the ABC proposals for the Federal Budget.4. Ensure a level playing field for member companies by lobbying for the removal of discriminatory rules and regulations.5. Oversee financial matters of the ABC.

CHAIRMAN

Mr. Saad Amanullah KhanChief Executive OfficerGillette Pakistan Limited

34

THE ACTIVITIES OF THE SUB-COMMITTEE ARE SUMMARIZED BELOW:

1. The Chairman of the Finance Sub-Committee invited Mr. Syed Shabbar Zaidi, Partner, A.F. Ferguson and Co., at the ABC Secretariat on March 29th 2013 to seek input for the budget proposals of for ABC.2. The Chairman conducted a periodic review of the ABC budget and advised the Secretariat on placement of reserves.3. The Sub-Committee sought input from the ABC members to prepare an all inclusive proposal for the Federal Budget 2013-14. The ABC submitted 8 taxation related proposals impacting U.S. companies operating in Pakistan and on the procedural front, there were 6 proposals to help streamline processes & improve taxation collection systems. These proposals are aimed at positively impacting the operations of US companies in Pakistan. The procedural suggestions are designed to

help streamline and improve tax collection and appeal processes. The comprehensive document was submitted to the Federal Government in March 2013. The Sub- Committee reiterated its commitment to supporting the development of a robust, understandable and transparent taxation environment. 4. A summary of the Federal Budget Recommendations is available in the annexures.

As Chairman of the Sub-Committee, I wish to thank all members of the Sub-Committee and the ABC Secretariat for their support and cooperation during the year.

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ANNUAL REPORT 2013

MEMBERS

Mr. Wasif Waseem AshrafCrescent Bahuman Limited

Mr. Atif AftabOracle Corporation

Mr. Jarri Masood3M (Pvt.) Ltd

Mr. Danish Bin InbsatCitibank N.A.

Ms. Farhana FahadSinger Pakistan Limited

Ms. Habiba WarindIBM

Ms. Aqsa YahyaSheraton Karachi Hotel

Mr. Zeshan Taj KhanPfizer Pakistan Ltd.

Ms. Sanam Kohati FaizCitibank N.A.

Ms. Claudia ManuelProcter & Gamble (Pvt.) Ltd

Dr. M. Saeed ShekhaniOBS Pakistan (Pvt) Ltd.

TERMS OF REFERENCE:

1. To provide support to the ABC staff and define their reporting lines, benefits and increments.2. Study contemporary trends, practices and policies relating to Human Resource Management and Industrial Relations impacting members.3. Identify and develop position on major issues and make. recommendations to the Executive Committee for representation to the Government as and when needed.4. Serve as a forum for consultation and exchange of information with members and serve the community on matters relating to Human Resource Management and Industrial Relations.5. Creating partnerships with suitable philanthropic organizations that positively impact the ABC and the perception of US companies operating in Pakistan, with a clear established method of achieving these goals.6. Identify areas of need for both long term partnerships and during emergency relief efforts.7. Facilitate meetings between the ABC member ship and deserving philanthropic organizations to encourage greater interaction, awareness and support.8. Regularly communicate and highlight CSR achievements of the ABC and its member companies.9. Reflect the philosophy of our members and their commitment to being good corporate citizens.

Report of HR & CSR Sub-Committee

CHAIRMAN

Ms. Zehra NaqviChief Executive ACE Insurance Limited

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• The Chairperson of the HR Sub-Committee implemented a merit based increment system for the ABC Secretariat.• The Chairperson conducted a number of interviews to shortlist suitable candidates for the Secretary General position. • The Chairperson worked with the Executive Committee to ensure a competency based

recruitment process was applied to fill the Secretary General position. This included the development of a comprehensive job description for the position in question. • The Chairperson worked closely with the ABC President to develop a comprehensive employment contract with competitive compensation & benefits for the Secretary General position.

Thank you to all the Sub-Committee members and the ABC Secretariat for their support & contribution.

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ANNUAL REPORT 2013

CHAIRMAN

Mr. Faisal Hamid SabzwariCountry Manager PakistanProcter & Gamble Pakistan (Pvt.) Ltd.

Report of Industry and Trade Sub-Committee

MEMBERS

Mr. Kamran NishatMuller & Phipps Pakistan (Pvt.) Ltd.

Dr. Faraz ArifPfizer Pakistan Ltd.

Mr. Omeir DawoodjiProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Kashif ul HaqueIBM

Mr. Zahid HussainAbbott Laboratories (Pakistan) Ltd.

Mr. Bilal LakhaniProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Nadeem MalikAmerican Life Insurance Company (Pakistan) Ltd.

Mr. Kamran MazharACE Insurance Ltd.

TERMS OF REFERENCE

1. Study major Government policies relating to Trade, Industry (incl. Import & Export), and Environment impacting members of the ABC and the American business community at large.

2. Identify and develop positions on major issues relating to Government procedures, policies and enactments affecting Trade, Industry, etc.

3. Develop ABC suggestions for Import and Export Policies and the overall Trade Policy.

4. Ensure a level playing field for member companies in trade & industry by lobbying for the removal of discriminatory rules and regulations.


• The Sub-Committee discussed and addressed issues and suggestions received from members and finalized suggestions for the Trade Policy 2013-14. The table of contents is available in Annexure B.

As Chairman of the Sub-Committee, I wish to thank all members of the Sub-Committee and the ABC Secretariat for their support and cooperation during the year.

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Report of IPR & Legal Sub-Committee

MEMBERS

Mr. Fayyaz AhmedEli Lilly Pakistan (Pvt.) Ltd.

Mr. Muhammad KamranACNielsen Pakistan (Pvt.) Ltd.

Ms. Aiza KhawajaIBM

Mr. Bilal LakhaniProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Shaharyar NashatPfizer Pakistan Ltd.

Mr. Yasar NoorOracle Corporation

Mr. Raza Mustafa SaeediJohnson & Johnson Pakistan (Pvt.) Ltd.

Mr. Hashim SadiqAmerican Life Insurance Co. (Pak.) Ltd.

Mr. Jawaid SiddiquiDuPont Pakistan Operations (Pvt.) Ltd.

TERMS OF REFERENCE:

1. Identify key IPR issues impacting ABC members and work on programs and actions intended to influence legislation relating to IPR in both Pakistan and the U.S.2. Ensure a level playing field for member companies relating to IPR.3. Create a liaison with the government offices and establish a platform for the ABC and its members and to special focus on IPO to get back our seat on the IPO Policy Board.4. Advise on matters having legal implications or relating to the ABC.


• The Sub-Committee engaged with members to submit the ABC’s feedback on the working paper prepared by IPO-P for Pakistan’s accession to Patent Corporation Treaty (PCT).• The Sub-Committee lobbied for restoration of the ABC seat on IPO Policy Board. • The Chairman of the IPR and Legal Sub- Committee worked with the ABC Legal Advisors Orr, Dignam & Company to ensure that the changes made to the ABC Articles of Association were in compliance with the Trade Organizations Act 2013.

CHAIRMAN


CO-CHAIRMAN

Mr. Akram Wali MohammadGerry’s International (Pvt.) Ltd.


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ANNUAL REPORT 2013

CO-CHAIRMAN

Mr. Ahmed Jamal MirPrestige Communications (Pvt.) Ltd. (GREY)

MEMBERS

Mr. Nadeem ElahiTRG (Pvt.) Ltd.

Mr. Adeel ShahidCitibank, N.A.

Mr. Ahmer Ashraf Pfizer Pakistan Ltd.

Mr. Omeir DawoodjiProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Iqbal ShekhaniJohan (Pvt.) Ltd. (Culligan)

Mr. Akif Zia Malik New Hampshire Insurance Company

TERMS OF REFERENCE

1. Positively project the ABC to all stakeholders through events and special activities.

2. Ensure highlighting various ABC activities through different modes of media and provide support to the ABC in producing a quarterly newsletter.

3. Create awareness of ABC key issues.4. Propose a plan to invite high profile guest

speakers to address the ABC members on current issues or subjects of general business interest.

5. Propose a plan for the ABC Economic Summit and recommend high profile speakers and invitees for the event. Work with ABC Secretary General to plan and manage the event.


• The Sub-Committee worked with the ABC Secretariat to ensure the ABC CSR report was widely circulated and shared with all relevant stakeholders.

• It was actively engaged with members to develop content for publication of the ABC newsletter.

• The Sub-Committee worked with the Secretariat to resume the circulation of the monthly e-brief. The monthly update aims at creating awareness amongst members on ABC activities and initiatives.

• The Sub-Committee organized a number of CEO Roundtable briefings for members. These briefings provided members with an opportunity to network and learn about the opportunities and challenges being faced by businesses operating in various sectors of the economy.

• 1st CEO Roundtable Meeting - February 6th, 2013 – Member company representatives reviewed business performance over 2012 and

Report of Media, PR & Programs Sub-Committee

CHAIRMAN

Mr. Osman Asghar KhanCountry ManagerEMC Information Systems (Pvt.) Ltd.

40

41

plans for 2013. Dr. Amjad Waheed, CFA & CEO, NBP Fullerton Asset Management Ltd. (NAFA) was invited as Guest Speaker. Dr. Amjad Waheed provided members with an in-depth analysis of the economic challenges facing the nation.

• 2nd CEO Roundtable Meeting - July 1st, 2013 - Participants discussed the implications of the Federal Budget FY13-14 on the overall economy. Mr. Syed Shabbar Zaidi, Partner A.F. Ferguson and Co., and Mr. Muhammad Hidayatullah of M. Hidayatullah & Co., Chartered Accountants were invited to brief the audience on the impact of the Federal Budget on the economy.

• 3rd CEO Roundtable Meeting - July 8th, 2013 - Dr. Ishrat Husain, Former Governor, SBP and Dean and Director of IBA attended as a Guest Speaker. Dr. Husain spoke of the various social and economic challenges faced by Pakistan. His knowledge and experience provided invaluable insight to attendees.

• 4th CEO Roundtable Meeting – September 2nd, 2013 – Business managers shared an update on how the economic climate was affecting their respective businesses, identified common issues being faced by American companies in Pakistan and developed strategies to contest these issues in a united manner.

Unfortunately, due to a personal emergency the Economic Summit was postponed and then subsequently cancelled. The roundtables were all sponsored by the two co-chairs. Thank you to all the Sub-Committee members and the ABC Secretariat for their support & contribution.

ANNUAL REPORT 2013

MEMBERS

Mr. Muhammad AsimMonsanto Pakistan (Pvt.) Ltd.

Dr. Iftikhar Ahmed JafriPfizer Pakistan Ltd.

Mr. Atif KamalDuPont Pakistan Operations (Pvt.) Ltd.

Dr. Muhammad Saeed ShekhaniOBS Pakistan (Pvt.) Ltd.

Dr. Salman LodiJohnson & Johnson Pakistan (Pvt.) Ltd.

TERMS OF REFERENCE

1. Co-ordinate with members in all matters relating to the Pharmaceutical & Agricultural Chemicals industry to identify & develop positions on major issues pertaining to this sector.2. Ensure a level playing field for member companies in this sector by lobbying for the removal of discriminatory rules and regulations.


• The Sub-Committee worked with the Pharma Bureau to lobby the GoP and regulatory authorities for improving the functioning of the Drug Regulatory Authority, issuance of pending registrations, grant of an interim price adjust ment and on the development of a transparent pricing policy. • The Sub-Committee provided the U.S. Mission with timely information and input on Pharma related matters.• It effectively used the ABC platform to ensure that the U.S. Mission was kept abreast of issues affecting the Pharmaceutical Industry and actively supported the ABC Pharma companies.• Members of the Sub-Committee worked with the Pharma Bureau to develop new product pricing mechanisms. • The Sub-Committee worked towards ensuring a level playing field in the Agrochemicals and Seeds industry (registration of crop protection products and seeds, etc.).• It provided input to the IPR Sub-Committee on

CHAIRMAN

Mr. Arshad Saeed HusainManaging DirectorAbbott Laboratories (Pakistan) Ltd.

CO-CHAIRMAN

Mr. Kamran NishatMuller & Phipps Pakistan (Pvt.) Ltd.

Report of Pharmaceutical & Agricultural Chemicals Sub-Committee

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IPR issues (Smuggled and Counterfeit products) faced by the Pharma and Agro industry.• The Chairman of the Sub-Committee worked with the ABC President to submit a formal request to Prime Minister Mian Muhammad

Nawaz Sharif for reconsideration on the reversal of SRO 1002. The SRO would have provided an interim relief of 1.25% on medicine prices that have been frozen for the last 13 years.


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ANNUAL REPORT 2013

MEMBERS

Mr. Osman Asghar KhanEMC Information Systems (Pvt.) Ltd.

Mr. Ahmed Jamal MirPrestige Communications (Pvt.) Ltd. (Grey)

TERMS OF REFERENCE:

1. To oversee and review the membership criteria for the ABC2. Pursue a membership drive to seek new members for the ABC


• During the year a comprehensive exercise was undertaken to encourage new members to join the Council.• The Sub-Committee’s membership drive resulted in six new members being enrolled over the course of the year.• The Sub-Committee provided inputs into the changes required in the Membership section of the ABC’s Articles of Association.• After incorporating the necessary input from the ABC’s legal advisors, the findings and input of the Sub-Committee were approved at the AGM.

Report of Membership & Admin Sub-Committee

CHAIRMAN

Mr. Irshad Ali KassimChairmanKaram Ceramics Limited


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TERMS OF REFERENCE

1. To facilitate the presence of ABC in the North region.

2. To have close interaction with the ABC members located in North.

3. To have close liaison with the Government functionaries for resolution of all ABC issues.


• The Chairman of the North Members Sub-Committee participated and made valuable contributions to the ABC Executive Committee trip to Islamabad on February 25th, 2013 where they met the U.S. Ambassador Richard Olson; Robert Ewing, Economic Counselor; Jim Fluker, Commercial Counselor; Daniel Goodspeed, Consular Section Official; John Eustace, Regional Security Official; Justin Diaz and other Economic Section and U.S. Commercial Service Officials at the U.S. Embassy.

• The Chairman of North Sub-Committee participated in various forums such as Federal Government’s Trade Policy chaired by Federal Minister of Commerce and Secretary Commerce where he presented ABC’s recommendations for the Trade Policy.

CHAIRMAN

Mr. Navid QaziCountry General ManagerCisco Systems Pakistan (Pvt.) Ltd.


Report of North Members Sub-Committee

45

ANNUAL REPORT 2013

MEMBERS

Mr. Ghulam AbbasIBM

Mr. Syed AdnanTRG (Pvt.) Ltd.

Mr. Kamal AhmedACE Insurance Ltd.

Mr. Tauqeer AhmedNew Hampshire Insurance Company

Col. (R) Pervez AkhtarChevron Pakistan Ltd.

Mr. Irfan AmirAmerican Life Insurance Company(Pakistan) Ltd.

Mr. Rashid EjaziACNielsen Pakistan (Pvt.) Ltd.

Brig. (R) Farrukh Saeed Sheraton Karachi Hotel

Mr. Faisal GhayasSinger Pakistan Ltd.

Mr. Mohammad Rashid-ul-HassanOBS Pakistan (Pvt.) Ltd.

Mr. Imdad KhanLMK Resources Pakistan (Pvt.) Ltd.

Mr. Jamil MughalSIZA Foods (Pvt.) Ltd. (McDonald's)

Mr. Rehan QureshiEMC Information Systems (Pvt.) Ltd.

Mr. Usman QureshiDuPont Pakistan Operations (Pvt.) Ltd.

Col. (R) Chaudhry Muhammad SabahuddinCitibank, N.A.

Col. (R) Filraz SiddiquiPfizer Pakistan Ltd.

Report of Security Sub-Committee

CHAIRMAN

Mr. Tauqir AhmedChief ExecutiveDuPont Pakistan Operations Pvt.) Ltd.

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TERMS OF REFERENCE

1. To create a forum via which ABC companies are able to access effective information and contact the appropriate resources when the need arises.2. To maintain a database of actual incidents experienced by ABC member companies that can be taken up in meetings with the government or relevant people.3. To identify and maintain contacts within the Govt., Rangers, Police, CPLC and Army, to be shared with all members.4. To share information on security threats, advisory notes and best practices regarding safety measures amongst the Sub-Committee and larger membership as required via SMS.5. To remind all members to regularly update their security plans and strategies.


1. The Chairman worked with the Sub-Committee to map out security issues and put in place a cohesive way of working together by building up a reliable communication system.2. The Sub-Committee worked with Mr. Norbert Almeida, Head of Security at P&G, to include interested ABC Security Heads to the Security Alert SMS system. This facility allowed the ABC Security Heads to benefit from an increased flow of information and security advisories.

3. The Sub-Committee maintained contact with the rangers and police. 4. The Sub-Committee provided financial support to the CPLC by requesting donations from member companies and invited Mr. Ahmed Chinoy, Chief of Citizens-Police Liaison Committee (CPLC) and his team to meet with the ABC Executive Committee.5. The Sub-Committee provided the ABC Membership with the facility of using the expertise of the Sub-Committee as an advisory panel on security issues.

SUPPORT TO MEMBERS:

• Members’ specific issues were actively dealt with through coordination with the Police and CPLC for early resolution.• Law & order incidents within the business community were regularly shared with members along with proposed precautionary measures.

COORDINATION WITH US EMBASSY / CONSULATE:

The Sub-Committee had close interaction with U.S. Embassy and the Consulate. The U.S. Consulate in Karachi and Embassy in Islamabad issues periodic warnings / advisory information to U.S. citizens and American companies in Pakistan. These warden messages, which include precautionary measures, were immediately forwarded by email to ABC members.


47

ANNUAL REPORT 2013

MEMBERS

Mr. Tauqir AhmedDuPont Pakistan Operations (Pvt.) Ltd.

Mr. Faisal SabzwariProcter & Gamble Pakistan (Pvt.) Ltd.

Mr. Osman Asghar KhanEMC Information Systems (Pvt.) Ltd.

Mr. Ahmed Jamal Mir Prestige Communications (Pvt.) Ltd. (Grey)

The U.S. Relations Sub-Committee is headed by Mr. Farrokh K. Captain. The Subcommittee does not seek membership from outside the Executive Committee. It functions as a small task force as and when the President needs to call on it.

TERMS OF REFERENCE

1. The ABC to play a key role in defining and influencing U.S. policy, practices and procedures towards Pakistan.2. Maintain an active relationship with key stake holders representing the U.S. in Pakistan.3. Define the key messages of the ABC, to be shared and aligned with the U.S. at every opportunity.


• There was ongoing discussion with the U.S. Embassy and Consulate with the outcome being a much stronger relationship with the U.S. Mission. These interactions included two meeting with H.E. Richard G. Olson, U.S. Ambassador to Pakistan and several meetings with U.S. Consul General Michael Dodman.• The Sub-Committee met with H.E. Richard G. Olson, U.S. Ambassador to Pakistan on February 25th 2013 in Islamabad, along with other members of the Executive Committee.• H.E. Richard G. Olson, U.S. Ambassador to Pakistan paid a courtesy call to meet members of the Executive Committee at the ABC Secretariat on June 28th, 2013. • The Sub-Committee strategized on establishing an active role for Pakistan corporate sector in the formulation of U.S. economic policy towards Pakistan.• The Sub-Committee continued to explore ways and means to promote U.S.-Pakistan relations at the non-officials level. Changing perceptions both in Pakistan and the USA are the focal point of this thinking and it is important to continuously work on this front. The ABC visa facilitation program came after several years of interaction with U.S. Consular officials.• The Sub-Committee maintained dialogue with the U.S. Consul General Michael Dodman and Consular Chief Mark McGovern over the course of the year to successfully implement a U.S. visa facilitation scheme for the ABC member company employees. The scheme requires AMEX to create a special visa appointment category for full-time employees of the American Business Council Member

Report of US Relations Sub-Committee

CHAIRMAN

Mr. Farrokh K. CaptainChairman & Managing DirectorCaptain-PQ Chemical Industries (Pvt.) Ltd.

48

Companies anywhere in Pakistan who are going to the U.S. on temporary travel for business purposes, or to perform work as permitted by the appropriate nonimmigrant work visa. There will be 10 interview appointments per interview day reserved for the ABC member employees (adjusted if demand increases). With their

otherwise often being some weeks wait time for a visa appointment, this facility will provide members with the flexibility to schedule a visa appointment at their early convenience.


49

ANNUAL REPORT 2013

ABC was represented on the following Councils/Committees:

1. ADVISORY COUNCIL OF THE MINISTRY OF FINANCE President ABC

2. ADVISORY COUNCIL OF THE MINISTRY OF COMMERCE President ABC

3. PROVINCIAL COMMITTEE ON INVESTMENT (SINDH) President ABC

4. FEDERATION OF PAKISTAN CHAMBERS OF COMMERCE & INDUSTRY (FPCCI)

a) EXECUTIVE COMMITTEE Mr. Tasleemuddin Ahmed Batlay Director Colgate-Palmolive Pakistan Ltd.

b) GENERAL BODY Corporate Class Mr. Saad Amanullah Khan Chief Executive Officer Gillette Pakistan Ltd.

Associate Class Mr. Tasleemuddin Ahmed Batlay Director Colgate-Palmolive Pakistan Ltd.

ABC Representation

50

ABC Suggestions for the Federal Budget 2013-14

ANNUAL REPORT 2013

EXECUTIVE SUMMARY

Attached are the proposals for the upcoming Federal Budget 2013/2014 which comprise of 8 taxation related proposals and 6 procedural improvement/modification proposals. All these proposals will positively impact the ability for U.S. companies to operate efficiently in Pakistan. The procedural suggestions are designed to help streamline and improve tax collection and appeal processes.

The ABC vision remains to have a robust, understandable and transparent taxation environment which includes:

• EVERY EARNING MEMBER OF SOCIETY SHOULD BE PAYING TAXES:

• We have one of the lowest “Tax to GDP” ratios in the world, at less than 9%.

• Major sectors of the economy are not appropriately taxed, such as agriculture, real estate & the stock market.

• Industry, which makes up 20% of the GDP, is disproportionately taxed.

• Currently less than 2% of the population pays personal taxes.

• HAVE A SIMPLE TAXATION STRUCTURE:

• Taxes should be easy to levy and easy to file

for tax payers. • The focus should be on only 3 sources of

taxation, i.e. 1. General Sale Tax (GST); 2. Customs Duty; 3. Corporate and Personal Income Tax.

• SHOULD BE COMPETITIVE VIS-À-VIS OTHER COUNTRIES:

• Make Pakistan attractive for foreign investment by making its taxation competitive.

• This in turn will help reverse the unfortunate brain drain taking place.

Saad Amanullah KhanChairman Finance &

Taxation Sub-Committee

ABC Suggestions for Federal Budget 2013-14 ANNEXURE - A

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ABC Suggestions for Federal Budget 2013-14TAXATION PROPOSAL INDEX 1. HIGH CORPORATE TAXES

1A) Expansion of the Tax Net 1B) High Corporate Income Tax 1C) Rationalize Minimum Turnover Tax

for all Companies 1D) Simplify Advance Taxes for

Manufacturer 1E) High Rate of Advance Income Tax at

Import Stage 1F) Section 153A Tax under Garb of

Documentation 1G) Inter Corporate Dividend

2. PRESUMPTIVE TAX REGIME (PTR)

3. EXPANSION OF GENERAL SALES TAX (GST)

3A i) Suspension without notification 3A ii) Blacklisted Suppliers 3B) Withholding of Sales Tax

4. EXCISE DUTY

4 A) Elimination of FED on Soft Drinks 4B) Refund of FED (Excess Input less

output) is not allowed

5. PERSONAL INCOME TAX 5A) Tax Relief for lower Salaried Class 5 B) Implementation of a “Tax Payer Card”

5C) Elimination of Cap on exemption of Interest on House Loans

5 D) Tax on Employers’ Contribution to Recognized Provident Fund

5 E) Withholding tax on Banking Transactions

5F) Small Payments for Prize and Winnings 5G) Introducing Rebates for Salaried

Individuals and other individuals i) Tax Credit on Education Expenses ii) Tax Rebate on Medical Expenses iii) Increased range of Tax Slabs (Salaries)

5 H) Anomaly in tax slabs for salaried individuals

6. BANKING SECTOR

6A) Disallowance of Unrealized Loss on Foreign Exchange Contracts, Foreign Currency Options and Interest Rate Derivative Contracts

6 B) Disallowance of Bad Debts

7. SALES TAX 7 A) Pharmaceutical Sector i) Pharmaceutical Inputs ii) Import of In-Vitro Diagnostic

Equipment iii) Import of Amber Glass Bottles Type-III

8. CREATING VIBRANCY IN THE IT SECTOR

8 A) Incentivize IT Export of Services 8 B) Preferential Tax Regime for IT Sector 8 C) Value Addition Tax for Importers

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ANNUAL REPORT 2013


5F) Small Payments for Prize and Winnings 5G) Introducing Rebates for Salaried

Individuals and other individuals i) Tax Credit on Education Expenses ii) Tax Rebate on Medical Expenses iii) Increased range of Tax Slabs (Salaries)


6. BANKING SECTOR

6A) Disallowance of Unrealized Loss on Foreign Exchange Contracts, Foreign Currency Options and Interest Rate Derivative Contracts

6 B) Disallowance of Bad Debts

7. SALES TAX 7 A) Pharmaceutical Sector i) Pharmaceutical Inputs ii) Import of In-Vitro Diagnostic

Equipment iii) Import of Amber Glass Bottles Type-III


8 A) Incentivize IT Export of Services 8 B) Preferential Tax Regime for IT Sector 8 C) Value Addition Tax for Importers

PROCEDURAL PROPOSAL INDEX

1. GENERAL SALES TAX RELATED 1A) Section 8B of the Sales Tax Act 1990

should be abolished/amended 1B) Section 48 of the Sales Tax Act, 1990 1C) Sales Tax Withholding Agents &

Withholding Rules 2007

2. AMENDMENT OF ASSESSMENT – SECTION 122

3. APPEAL PROCESS – SECTION

124/127/129/131/132

4. STREAMLINING IDEAS FOR COLLECTION OF TAXES

4A) Streamline Collection of General Sales Tax 4B) Streamlining Collection of Withholding

Taxes 4C) Payments to Non Resident Persons

under Section 152 of the ITO, 2001 4D) Unwarranted Notices Received u/s 176 of the ITO 2001

4E) Tax Challaan Verification

5. CORPORATE TAX RELATED 5A) Long Outstanding Refund

6. UNWARRANTED NOTICES RECEIVED FROM TAX AUTHORITIES

56

1. HIGH CORPORATE TAXES

1 A) Expansion of the Tax Net

All sectors including Agriculture and Retail and Wholesale need to be brought under the tax net and proportionally taxed.a) All individuals and commercial businesses

should be taxed irrespective of their exemption status.b) Tax evaders need to identified and taxed.

Some ideas on identifying evaders are:a. Better coordination between SECP and FBR:

This will result in detecting companies which are although registered with SECP but are not registered with FRB and thus are not under the tax net.

b. International Travel, Utility an Communication Bills: Individuals and companies making payments for their utility bills (electricity, gas, water), communication bills (cell phones, PTCL) and for internationally travel (business or pleasure) need to be checked whether they are in the tax net. If spending is above a certain level then these entities made to pay taxes.

c. Foreign Remittances Taxed: Foreign transfers not related to royalty, dividends or business services need to be tracked and taxed. Under subsection 4 of section 111 of the Income Tax Ordinance 2001, Foreign Remittances through banking channels are not questioned or taxed. Modified this sub-section to the extent that a minimum tax can be levied.

d. Bank Account Information: It should be made mandatory for Banks and Financial Institutions to share with FBR all banks deposits, loans and investments made so that FBR may probe the source of such amounts deposited/invested.

e. Investments in Mutual Funds Pension Funds: Source of investment in Mutual Funds/Pension Funds for Tax Credit should be documented.

f. Dealers of Precious Metals: It should be made mandatory for all dealers of precious metal (gold etc.) to file or maintain records including name, NTN/CNIC, complete mailing address etc of all buyers of such metal and submit such details to FBR on quarterly basis.

1 B) High Corporate Income Tax

In order to remain internationally competitive, Pakistan needs to reduce its corporate tax rate to a maximum of 30% in line with regional standards.

1 C) Rationalize Minimum Turnover Tax for all Companies

It is recommended that to create a level playing field to the new entrants in the market the minimum tax should be reduced to 0.2% in the first 3 Tax Years of the company. For existing companies who have made investments exceeding US$ 0.5 Million, the same should be applicable for the year of additional investment to encourage investment in existing facilities. On net we recommend this facility should be valid for 10 years after the investment is made.

1 D) Simplify Advance Tax for Manufacturers

1. It is recommended that preferably the law be changed to the one, which was in force before the 2006 Finance Act amendment whereby a company was required to pay advance tax equal to one fourth of the tax liability finalized for the latest tax year or at least the benchmark of 90% should be reduced to 80%, as it has been historically.

Taxation Proposals for Federal Budget 2013-14

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ANNUAL REPORT 2013

2. Manufacturers should be given exemption from withholding taxes u/s 153 and u/s 148. They should only be required to pay advance tax u/s 147. This way the manufacturers will pay the same amount of advance tax but through a much simpler way. Reduce complexity at both ends, i.e. payer and government.

1 E) High Rate of Advance Income Tax at Import Stage

It is suggested that tax at source be reduced to 1% for manufactures. Further the commissioner should be empowered to issue exemption certificate.

1 F) Section 153 A Tax Under Garb of Documentation

Section 153A should not be reinstated as it has proved in the past to create more complexity and does not deliver benefits towards the documentation of the economy. We remain committed to seeking practical methods and solutions towards the documentation of the economy.

1 G) Inter Corporate Dividend

Tax on dividend to the corporate entities should be exempt from this withholding tax.

2. PRESUMPTIVE TAX REGIME (PTR)

It is proposed that Presumptive Tax Regime (PTR) should be eliminated. This can be done in phases with the objective fully document the existing economy, as well as to encourage foreign companies to enter into Pakistan’s market.

a) Initially FBR should allow adjustment of first

three years of tax losses against their full and final tax liability as assessed under PTR.b) Gradually incentivize companies, as it is

currently doing, to move to a Normal Tax Regime (NTR). One suggestion is to make NTR rates more attractive verses PTR and modify the law accordingly.

c) Manufacturers/importers assessed under NTR, meeting with a certain preset criteria, should be given the option to merge their manufacturing and trading profits for the purpose of their final tax calculations. Preset criteria will limit possible abuse & only those companies should be allowed to opt who meet the minimum criteria on investment in fixed assets, or company turnover.

d) In addition companies falling under PTR and making losses should not be subject to WWF levy.

3. EXPANSION OF GENERAL SALES TAX (GST)

To expand the tax net, attracting entities register for GST is critical. Some ideas for creating incentives and dispelling fear for potential entities to enter the GST net are:

Expansion and Communication:

1. The GST rate should be reduced to be comparable levels versus other Asian markets which will encourage registration. A general economic model is that if GST exceeds 10%, people start engaging in widespread tax evading activity.

2. The GST process should be simplified to enable medium and small sized trader's to understand the ‘concept; easily. The documentation requirements should be reduced to avoid unnecessary work.


58

3. Special team using 3rd party qualified companies should be brought on-board and who will work with businesses to help them understand and file for GST. This is in line with FBR work towards enhancing cooperation and helping in expanding the GST net.

4. The Government should run media and awareness programs to publicize these incentives and to explain the easy user friendly filing and collection system.

Incentives to Attract Registration:

1. No sales tax audits should be carried out for newly registered small traders during the first 5 years of an entity’s registration. Only exception will be if the entity claims any refunds, in that case for verifications.

2. Small traders, having limited turnover, may be allowed to file a sales tax return once every 6 months. This will make the compliance easy for small traders.

3. The same newly registered small traders should be offered lower income tax rates for first 3 years in case they opt for sales tax registration.

3 A i) Suspension without notification

To curtail the abuse of such provision, it is proposed that before declaring any person as blacklisted / suspended, the charge for issuing fake invoice or committing tax fraud should also be established in the Order-in-Original. Further, Input tax credit on account of purchases by a genuine buyer (from a subsequently declared blacklisted person) should be allowable to the extent of purchase until date of suspension.

3 A ii) Blacklisted Suppliers

FBR needs to issue guidance on this issue collecting units so that tax payers are not unnecessary bothered. This is especially important as most of the vendors in these cases are on active tax payers list when purchases were made from them.

3 B) Withholding of Sales Tax

It is proposed that SRO 603(I)/2009 be amended to read as follows:

“A person (being the recipient of service of advertisement who is registered for sales tax and is in a refund situation) who receives advertisement service, shall adjust the amount of sales tax (as mentioned in the invoice issued by the service provider) against the sales tax refundable from the Government.”

These withholding tax rules should be made applicable to listed companies and persons registered with Large Taxpayers Unit.

4. EXCISE DUTY

4 A) Elimination of FED on Soft Drinks

FED on the aerated waters should be levied @0% under section 5 of the Federal Excise Act, 2005.

4 B) Refund of FED (Excess Input less output) is not allowed

This FED @50% on “Concentrate” should be levied in same manners on “Sugar” under section 7 of the Federal Excise Act, 2005 i.e. sales tax mode.


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ANNUAL REPORT 2013

5. PERSONAL INCOME TAX

5 A) Tax Relief for lower Salaried Class

It is recommended that salaried class individuals should be given exemption up to Rs. 600,000 and amount earned above this limit should be considered as taxable.

5 B) Implementation of a “Tax Payer Card”

Introduce a "Tax Payer Card' to all individual tax payers with clear benefits (some suggestions' below):

1. Quick processing of application and 50% discount on government fees like passport fee, NIC fee, driving license fee; waiver from police enquiry etc.

2. Preferential treatment at all government offices, airport and railway stations.

3. Waiver on loan processing fee and any other one-time charges taken by nationalized banks for Loan/finance processing.

4. Reduced markup rates for these tax payers on loan taken from Nationalized Banks.

5. Waiver from CVT which is being paid by individuals on purchase of various items such as Property, Vehicles, International Air

tickets etc. 6. Preference and discount on motor vehicle

registration fee and annual vehicle tax. 7. Waiver of references for opening of new

bank accounts, and obtaining credit cards etc.8. Preference/priority in obtaining new

connections for utilities like electricity, telephone, gas and water.

Minimum criteria for people who get the "Tax Payers Card' should be those tax payers who have filed and completed tax returns for last 3 fiscal years with some minimum tax payment threshold of say Rs. 500,000 in a year. A proper mechanism may be established to monitor these tax payers on an annual basis to facilitate the process.

5 C) Elimination of Cap on exemption of Interest on House Loans

No cap should be placed on tax rebate on interest paid on Housing Finance loan to an existing tax payer.

5 D) Tax on Employers’ Contribution to Recognized Provident Fund

Due to above anomalies and complexities, tax on Provident fund contribution is unwarranted and should be withdrawn.


Government should use the withholding tax provisions to bring people in tax net rather making it a source of earning. This information should be used to assess the person’s income and its eventual tax liability therefore we propose to bring the rate to minimum say 0.1%. Keeping the other modalities same.

5 F) Small Payments for Prize and Winnings

To make the system workable, prizes offered by companies valued at less than Rs. 10,000 should not be subjected to deduction of tax.


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5 G) Introducing Rebates for Salaried and other Individuals

5 G i) Tax Credit on Education Expenses

We recommend that tax credit should be allowed for amount spent on children/dependant education to all salaried taxpayers at the average rate of tax. Tax credit was also available earlier in the tax ordinance 1979.

5 G ii) Tax Rebate on Medical Expenses

Tax credit on submission of evidences of expenses incurred on medical should be allowed to individuals.

5 G iii) Increased Range of Tax Slabs (Salaries)

The basic exemption limit should be enhanced to Rs. 500,000. Likewise there is an urgent need to redefine the overall tax slabs (salaried / non-salaried individuals) as follows:


Where the taxable income exceeds Rs. 500,000 but does not exceed Rs. 600,000 0.75% Where the taxable income exceeds Rs. 600,000 but does not exceed Rs. 700,000 1.5%Where the taxable income exceeds Rs. 700,000 but does not exceed Rs. 800,000 2.5%Where the taxable income exceeds Rs. 800,000 but does not exceed Rs. 900,000 3.5%Where the taxable income exceeds Rs. 900,000 but does not exceed Rs. 1000,000 4.5%Where the taxable income exceeds Rs. 1,000,000 but does not exceed Rs. 1,200,000 6%Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,400,000 7%Where the taxable income exceeds Rs. 1,500,000 but does not exceed Rs. 1,700,000 8%Where the taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,000,000 9%Where the taxable income exceeds Rs. 2,000,000 but does not exceed Rs. 2,500,000 10%Where the taxable income exceeds Rs. 2,500,000 but does not exceed Rs. 3,000,000 11%Where the taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 3,500,000 12%Where the taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 4,000,000 13%Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 4,500,000 14%Where the taxable income exceeds Rs. 4,500,000 but does not exceed Rs. 5,000,000 15%Where the taxable income exceeds Rs. 5,000,000 but does not exceed Rs. 6,000,000 16%

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ANNUAL REPORT 2013



To overcome the anomaly we suggest bringing the tax slabs for salaried individuals as follows:

6). BANKING SECTOR

6A). Disallowance of unrealized loss on Foreign Exchange Contracts, Foreign Currency Options and Interest Rate Derivative Contracts.

We recommend that such type of notices and orders without merit may not be issued which is not in spirit of law.

6 B). Disallowance of Bad Debts

We recommend that all bad debts disallowed up to December 2007 and reclaimed in current year’s tax returns are fully allowed to the tax payer without any further curtailment.

Currently for corporate loans, provisions for advances and off balance sheet items are allowed up to a maximum of 1% of total advances. We recommend that this limit be increased to 2% in the next budget.

Where the taxable income exceeds Rs.5000,000 but does not exceed Rs. 6000,000 16%Where the taxable income exceeds Rs.6000,000 but does not exceed Rs. 7500,000 17%Where the taxable income exceeds Rs.7500,000 but does not exceed Rs. 10,000,000 18%Where the taxable income exceeds Rs.10,000,000 but does not exceed Rs. 15,000,000 19%Where the taxable income exceeds Rs.15,000,000 20%

S.No. Taxable Income in Rupees Rate of tax. (1) (2) (3) 1. 0 to Rs.400,000 0% 2. Rs.400,000 to Rs.750,000 5% of the amount exceeding Rs. 400,000 3. Rs.750,000 to Rs.1,500,000 Rs. 17,500+10% of the amount exceeding Rs.750,000) 4. Rs.1,500,000 to Rs.2,000,000 Rs.92,500 +15% of the amount exceeding Rs.1,500,000 5. Rs. 2,000,000 to Rs. 2,500,000. Rs. 167,500 + 17.5% of the amount exceeding Rs. 2,000,000/- 6. Rs. 2,500,000 and above Rs. 255,000+ 20% of the amount exceeding Rs. 2,500,000/-)

The marginal reliefs should be accordingly adjusted.Also, tax credit for personal expenditure on medical and education of children should be introduced with the condition of submission of evidence of payment with full particulars of payee.

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7. SALES TAX

7 A) Pharmaceutical Sector

7 A i) Pharmaceutical Inputs

Pharmaceutical products, their raw materials and packaging materials should be removed from the list of exempt items and be zero-rated for Sales Tax purposes.

7 A ii) Import of In-Vitro Diagnostic Equipment

The sales tax zero rating / exemption should be allowed for import of diagnostic equipment.

7 A iii) Import of Amber Glass Bottles Type-III

Elimination / reduction in sales tax on imports thereof.


8 A) Incentivize IT Export of Services

1. Provide an attractive tax environment which draws investor’s attention from around the world. Great examples exist in Philippines which is the world’s leader in IT services. There by registering with the Board of Investments or PEZA (Philippine Economic Zone Authority) foreign companies can get great incentives which include 4 to 8 year tax holidays, exemption from taxes & duties on imported spare parts, exemption from wharf-age dues and export tax, duty, impost & fees, tax credits, etc.

2. We need an attractive infrastructure and legal environment to attract investment. These should include providing strong

incentives such as IT villages with low-cost high-quality connectivity and legislature to encourage risk taking.

8 B) Preferential Tax Regime for IT Sector

It is recommended that:

1. GST is waived on IT imports for next 5-years so that IT industry is able to anchor, get firm foot-hold and blossom.

2. Banning import of IT scrap used personal computer & servers into the country.

8 C) VALUE ADDITION TAX FOR IMPORTERS

It is proposed that this tax should be eliminated for trading concerns, and in case if imported for self utilization, then should be exempted from this levy.

PROCEDURAL PROPOSALS

1. GENERAL SALES TAX RELATED

1 A) Section 8B of the Sales Tax Act 1990 should be abolished / amended

Since Section 8B is distortion of VAT laws, therefore it is suggested that this section should be abolished to allow full input sales tax adjustment in the same month.

1 B) Section 48 of the Sales Tax Act, 1990

All cases should be decided as per the strict interpretation of law. Section 48 should not be exercised unless the case under litigation has undergone two appellate proceedings. In this regard, the honorable High Court in a recent judgment has held that the recovery action against the registered person cannot be taken


63

ANNUAL REPORT 2013

Taxation Proposals for Federal Budget 2013-14unless the case has been heard by a forum outside the jurisdiction of Federal Board of Revenue. Based on this position, it is suggested that Section 48 of the Act may be amended in a manner that recovery proceedings are initiated by the department after issuance of 2nd appellate order.

We may wish to refer to “Law of the People’s Republic of China on Tax Administration (Promulgated on NPC Chairman Order [2001] No. 60 on April 28, 2001)” as best practice guideline. Although the measures for collection (e.g. written notification followed by detention, seal off or sale of goods to recover tax over dues) are similar to our law to certain extent but Article 43 advises caution on part of tax authorities and sets out penalty for irresponsible action by tax officials.

Chapter III Tax Collection: Article 43In the event that the tax authorities abuse the power of taking measures for preserving tax revenue or compulsory measures for law enforcement or take measures for preserving tax revenue or compulsory measures for law enforcement inappropriately, thus hurting the legitimate rights of the taxpayer, withholding agent or tax payment guarantor, the tax authorities shall be responsible for compensation in accordance with the law.

1C) Sales Tax Withholding Agents & Withholding Rules 2007

Sales tax withholding on Non-LTU registered suppliers though registered with RTU is a discriminatory regime of withholding provision for Sale Tax on non-LTU persons, should be removed.

2. AMENDMENT OF ASSESSMENT – SECTION 122

We recommend that the time period allowed to

the Commissioner to amend an assessment order be reduced from a period of 5 years to 2 years. We further recommend that a time frame of 60 days should be fixed for the Commissioner to complete this audit from the date it is started.

3. APPEAL PROCESS – SECTION 124/127/129/131/132

We recommend that the entire appeal process from the time the assessee files its return to the time when an assessment is deemed to be complete, should not exceed two years. The following steps should be taken to ensure the above.

1. A time frame should be introduced, whereby ITAT is required to give its decision within 3 months of filing of an appeal, as is currently the case with CIT (appeals) and it should be strictly followed. In case no notice of hearing is issued by the ITAT, the relief sought by the appellant in the appeal shall be deemed to have been granted.

2. We recommend that the two months period stipulated in law should be strictly adhered to. In the event the time frame of 2 months is breached, it should be stated in law that the assesses may assume that relief is deemed to have been given, i.e. the appeal effect order stands issued in favor of the assesses, and where payment has been made a refund stands determined.

3. It is proposed that instead of depositing full amount of tax, partial payment at 25% of the additional amount of tax assessed should be levied so that assessments are carried out on merit basis rather to meet the collection targets.

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4. STREAMLINING IDEAS FOR COLLECTION OF TAXES

4 A) Streamline Collection of General Sales Tax

FBR should convince NBP to provide electronic banking facilities to taxpayers for tax payments without requiring to maintain bank accounts with NBP.

Or alternatively, commercial banks should be allowed to collect tax from their customers (i.e. tax payers) at their counters as agents of NBP. The proceeds could be transferred to NBP on a mechanism similar to nostro & vostro accounts between banks. This way NBP will receive the funds on almost real time basis and on the front end it should resolve problems faced by tax payers.

4 B) Streamline Collection of Withholding Taxes

It is recommended that payers should be allowed to deposit all withholding tax deducted during the month on the 7th of the following month.

4 C) Payments to Non Resident Persons under Section 152 of the Income Tax Ordinance, 2001 It is recommended that the tax authorities examine each application received for a nil withholding tax certificate, and give its decision based on the merits of the case within the time frame of 30 days as stipulated in law. Incase no response is received from the tax authorities within 30 days, it will be deemed as accepted by tax authorities for nil withholding tax. There is absolutely no justification in not responding within the 30 day time frame

allowed as this causes unnecessary hardship to tax payers who have to meet the expectation of non-resident service providers to make this payment within a reasonable time frame. 4 D) Unwarranted notices received u/s 176 of the Income Tax Ordinance 2001

We recommend that such notice without any base may not be issued as this only serves at harassing the existing tax payer who is already contributing to the Government Treasury.

4E) Tax Challan Verification

It is recommended that FBR should use the data collected and compiled at PRAL for verification of tax payments by tax payers. There should be a time limit defined of 5 years after which no such request should be made to the tax payer.

5. CORPORATE TAX RELATED

5 A) Long Outstanding Refunds

These long outstanding refunds should be disbursed at the earliest. For refunds pending longer than 2 years, the Government should issue bonds to the tax payer.

6) UNWARRANTED NOTICES RECEIVED FROM TAX AUTHORITIES

We recommend that such notice without any base may not be issued as this only serves at harassing the existing tax payer who is already contributing to the Government Treasury.


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ANNUAL REPORT 2013

The Sub-Committee submitted comprehensive recommendations for the Trade Policy 2013-14 to the Federal Government in May 2013. The recommendations were finalizing after incorporating the suggestions of the ABC members.

These contents of the proposals included:

A. Improving Investment ClimateA1. Front Loading Industrial InvestmentsA2. Anomalies in Customs & Regulatory DutiesA3. Improvement in InfrastructureA4. Improvement in the Environment

B. Encouraging Exports and Lowering Cost of Local Industries

B1. High Utility Cost of Local IndustriesB2. Transparency in use of Funds of Export

Development Fund (EDF)B3. Export Duty Drawback - Rates and Delayed

RealizationB4. Enhanced Export Competitiveness for

Pharmaceutical Products to Afghanistan

C. Import Policy – GeneralC1. Power Generation - Duties & Taxes on

Co-Generation EquipmentC2. Procurement System to bring Transparency

and Efficiency in Government purchasesC3. Custom duties on spare parts and machinery

not Manufactured / produced locally

D. Proposals – Specific to Pharmaceutical Industry

D1. Shelf Life Restrictions: Pharmaceutical Raw Materials and Finished Products

D2. PricingD3. Amber Glass Bottles: for Pharmaceutical

IndustryD4. Quota Allocations: of Psychotropic Drugs

D5. Simplification of Approval Process: for Import of Raw Materials of Pharmaceutical Industry

D6. Tariff ProtectionD7. GST on Packing MaterialsD8. Toll ManufacturingD9. Enhanced Export Competitiveness for

Pharmaceutical Products to AfghanistanD10. Export Duty Drawback - Rates and Delayed

RealizationD11. Lower health care costs – medical testing /

diagnostic / Lab reagentsD12. Dressing and Appliances Identifiable for

Ostomy useD13. Need for Reduction of Custom Duties/Sales

Tax on the Import of Raw Materials for Daily Consumption

D14. Withdrawal of Taxes and Levies on Pharmaceutical Industry

E. Trade AgreementsE1. Afghan Transit TradeE2. Trade with IndiaE3. BITE4. Trading BlocsE5. Strategic Trade Policy Framework

Summary of the ABC Suggestionsfor the Trade Policy 2013-14 ANNEXURE - B

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FinancialStatements

KPMG Taseer Hadi & Co.Chartered AccountantsSheikh Sultan Trust Building No. 2Beaumont RoadKarachi, 75530 Pakistan

Telephone + 92 (21) 3568 5847Fax + 92 (21) 3568 5095Internet www.kpmg.com.pk

Financial Statements

We have audited the annexed balance sheet of The American Business Council of Pakistan (here-in-after referred as “the Council”) as at 30 June 2013 and the related income and expenditure account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Council’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with 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 account have been kept by the Council as required by the Companies Ordinance, 1984;

b) in our opinion:

i) the balance sheet and income and expenditure account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

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

iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Council;

Auditors’ report to the members

70

We have audited the annexed balance sheet of The American Business Council of Pakistan (here-in-after referred as “the Council”) as at 30 June 2013 and the related income and expenditure account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Council’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with 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 account have been kept by the Council as required by the Companies Ordinance, 1984;

b) in our opinion:

i) the balance sheet and income and expenditure account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

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

iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Council;

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, income and expenditure account, statement of comprehensive income, cash flow statement 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 Council’s affairs as at 30 June 2013 and of the deficit, its cash flows and changes in equity for the year then ended; and

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

Date: 25 October 2013 KPMG Taseer Hadi & Co. Chartered AccountantsKarachi Amyn Pirani

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ANNUAL REPORT 2013

2012

1,224,276 333,079

1,557,355

1,357,223 88,043

7,500,000 576,576

9,521,842

5,119,500 91,173

205,082 5,415,755 4,106,087 5,663,442

40,000 5,013,837 5,053,837

91,172 518,433 609,605

5,663,442

2013

946,469 -

946,469

1,858,362 123,591

8,000,000 7,963

9,989,916

5,182,500 91,172

433,299 5,706,971 4,282,945 5,229,414

40,000 4,424,670 4,464,670

- 764,744 764,744

5,229,414

The American Business Council of PakistanBalance SheetAs at 30 June 2013

NON-CURRENT ASSETSProperty and equipmentDeferred taxation

CURRENT ASSETSAdvances, deposits, prepayments and other receivablesTaxation - net of provisionShort term investmentsBank balances CURRENT LIABILITIESAdvance subscriptionDeferred income- current portionAccrued expenses and other liabilities Net current assets

FINANCED BY:Initial contribution Accumulated surplus

NON- CURRENT LIABILITIES Deferred incomeDeferred liability - staff gratuity

Note

56

789

10

111213

12 18.5

The annexed notes 1 to 26 form an integral part of these financial statements.

STATEMENT UNDER SECTION 241(2) OF THE COMPANIES ORDINANCE, 1984

The President of the Council being presently out of Pakistan, these financial statements have been signed by two members of the Executive Committee as required under provisions of section 241(2) of the Companies Ordinance, 1984.

(Rupees)

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, income and expenditure account, statement of comprehensive income, cash flow statement 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 Council’s affairs as at 30 June 2013 and of the deficit, its cash flows and changes in equity for the year then ended; and

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

Date: 25 October 2013 KPMG Taseer Hadi & Co. Chartered AccountantsKarachi Amyn Pirani

MEMBER EXECUTIVECOMMITTEE


72

2012

8,262,500

131,500 3,000

577,517 1,599,589

10,574,106

4,466,011 248,400 359,242

1,070,754 75,671

292,646 161,145

88,294 70,173

218,482 1,650

501,208 796,145 142,166

5,977 157,657

44,500 31,038

288,000 273,796

9,292,955 1,281,151

532,306 (82,829)

(449,477) 831,674




The American Business Council of PakistanIncome and Expenditure AccountFor the year ended 30 June 2013

INCOMEAnnual subscriptions Representative fee Gain on sale of fixed assetsMark-up on deposit accountReports, publications and other income

EXPENDITURES (administrative)Salaries and other benefitsStaff provident fundStaff gratuityRent and rates Printing and stationery Conveyance and fuel Fee and subscriptions Repairs and maintenance InsurancePostage, telephone and faxBank chargesDepreciationLegal and professional chargesMeetings Newspapers ElectricityReceivable written offWorkers' Welfare FundSecurity chargesOthers

(Deficit) / surplus for the year before tax Taxation - Current - Deferred (Deficit) / surplus for the year

Note

1415

16

17

18.6

5

619

2013

8,125,000

120,500 11,026

556,987 1,414,098

10,227,611

5,265,642 297,360 494,111

1,156,410 72,042

391,019 177,810

97,428 89,048

289,273 2,498

563,833 690,852

- 14,720

190,864 51,000

4,617 288,000 267,983

10,404,510 (176,899)

79,189 333,079

(412,268) (589,167)

(Rupees)



73

ANNUAL REPORT 2013



2013 2012 (Rupees) (Deficit) / surplus for the year (589,167) 831,674 Other comprehensive income - - Total comprehensive income for the year (deficit) / surplus for the year) (589,167) 831,674

The American Business Council of PakistanStatement of Comprehensive IncomeFor the year ended 30 June 2013




74

The American Business Council of PakistanCash Flow StatementFor the year ended 30 June 2013

(Rupees)




2012

1,281,151

501,208

(91,173) 44,500 (3,000)

359,242 2,091,928

123,994

27,250 87,052

2,330,224

(206,992) (166,959)

1,956,273

(15,800) (1,500,000)

3,000 (1,512,800)

443,473

133,103 576,576

Note

10

2013

(176,899)

563,833

(91,172) 51,000

(11,026) 494,111 829,847

(552,140)

63,000 228,217 568,924

(247,800) (114,737) 206,387

(340,000)

(500,000) 65,000

(775,000)

(568,613)

576,576 7,963

CASH FLOWS FROM OPERATING ACTIVITIES

(Deficit) / surplus for the year before tax

Adjustments for:DepreciationGrant from members towards refurbishment cost - recognised in the Income and Expenditure accountReceivable written offGain on disposal of fixed assetsGratuity - net

Decrease / (increase) in operating assets:Advances, deposits, prepayments and other receivables

Increase / (decrease) in operating liabilities:Advance subscription and contributions Accrued expenses and other liabilities

ratuity paid - ContributionIncome taxes paidNet cash flows from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Property and equipment purchasedShort term investments - netProceeds from disposal of fixed assets Net cash flows from investing activities

(Decrease) / increase in cash and cash equivalents

Cash and cash equivalents at beginning of the yearCash and cash equivalents at end of the year



75

ANNUAL REPORT 2013




Initial Accumulated Total contribution surplus ------------------ (Rupees) ----------------- Balance as on 30 June 2011 40,000 4,182,163 4,222,163 Total comprehensive income for the year (surplus for the year) - 831,674 831,674 Balance as on 30 June 2012 40,000 5,013,837 5,053,837 Total comprehensive income for the year (deficit for the year) - (589,167) (589,167) Balance as on 30 June 2013 40,000 4,424,670 4,464,670

The American Business Council of PakistanStatement of Changes in Equity For the year ended 30 June 2013



76

The American Business Council of PakistanNotes to the Financial StatementsFor the year ended 30 June 2013

1. STATUS AND NATURE OF BUSINESS The American Business Council of Pakistan (hereinafter referred as "the Council" ) was incorporated

as a Company limited by guarantee as Association of no profit under the Companies Act, 1913 (VII of 1913, now Companies Ordinance, 1984) on 05 February 1984. The principal activity of the Council is to promote and develop trade and industry between Pakistan and United States of America. The Council comprises of 59 corporate and 01 associate members. The Council has been granted license as a Chamber under section 3(2)(b) of the Trade Organizations Ordinance, 2007. The Council’s registered office is situated at F-30, Block 7, KDA Scheme No. 5, Kehkashan,Clifton, Karachi.

2. BASIS OF PREPARATION

2.1 Statement of compliance

These 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 as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions of and directives issued under the Companies Ordinance, 1984 shall prevail.

2.2 Basis of measurement

These financial statements have been prepared under the historical cost convention.

2.3 Functional and presentation currency

These financial statements are presented in Pak Rupees, which is the Council's functional currency. All financial information presented in Pak Rupees has been rounded off to the nearest Rupee. 2.4 Use of estimates and judgments

The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision

affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of approved accounting standards as applicable in Pakistan, that have significant effect on the financial statements and estimates with a

significant risk of material adjustment in the next year include estimation of liability for gratuity and taxation.

The actuarial assumptions adopted in determination of the gratuity liability are disclosed in note 18 to the financial statements. Any deviations of actual results versus assumptions might affect

recognized gains and losses. The matter of taxation is discussed in note 19.1.

3. Standards, interpretations and amendments of approved accounting standards not yet effective The following standards, amendments and interpretations of approved accounting standards will be

effective for accounting periods beginning on or after 01 July 2013:

- IAS 19 Employee Benefits (amended 2011) - (effective for annual periods beginning on or after 1 January 2013). The amended IAS 19 includes the amendments that require actuarial gains and losses to be recognised immediately in other comprehensive income; this change will remove the corridor method and eliminate the ability for entities to recognise all changes in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed under IAS 19; and that the expected return on plan assets recognised in profit or loss is calculated based on the rate used to discount the defined benefit obligation. Accordingly, aggregate unrecognized actuarial losses of Rs. 173,061 as at 30 June 2013 as disclosed in note 18.2 to the financial statements would need to be recognised by the Council in its financial statement for the year ended 30 June 2014.

- IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or after 01 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). Three new standards IFRS - Consolidated Financial Statements, IFRS 11- Joint Arrangements and IFRS 12- Disclosure of Interest in Other Entities dealing with IAS 27 would be applicable effective 1 January 2013. IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications.

- IAS 28 Investments in Associates and Joint Ventures (2011) - (effective for annual periods beginning on or after 01 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the amendments to apply IFRS 5 to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale; and on cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture.

- Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) – (effective for annual

periods beginning on or after 01 January 2014). The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’; and that some gross settlement systems may be considered equivalent to net settlement.

- Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) – (effective for annual periods beginning on or after 01 January 2013). The amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting agreement or similar arrangement.

- Annual Improvements 2009–2011 (effective for annual periods beginning on or after 01 January 2013). The new cycle of improvements contains amendments to the following four standards,with consequential amendments to other standards and interpretations.

- IAS 1 Presentation of Financial Statements is amended to clarify that only one comparative period which is the preceding period – is required for a complete set of financial statements. If an entity presents additional comparative information, then that additional information need not be in the form of a complete set of financial statements. However, such information should be accompanied by related notes and should be in accordance with IFRS. Furthermore, it clarifies that the ‘third statement of financial position’, when required, is only required if the effect of restatement is material to statement of financia position.

- IAS 16 Property, Plant and Equipment is amended to clarify the accounting of spare parts, stand-by equipment and servicing equipment. The definition of ‘property, plant and equipment’ in IAS 16 is now considered in determining whether these items should be accounted for under that standard. If these items do not meet the definition, then they are accounted for using IAS 2 Inventories.

- IAS 32 Financial Instruments: Presentation - is amended to clarify that IAS 12 Income Taxes applies to the accounting for income taxes relating to distributions to holders of an equity instrument and transaction costs of an equity transaction. The amendment removes a perceived inconsistency between IAS 32 and IAS 12.

- IAS 34 Interim Financial Reporting is amended to align the disclosure requirements for segment assets and segment liabilities in interim financial reports with those in IFRS 8 Operating Segments. IAS 34 now requires the disclosure of a measure of total assets and liabilities for a particular reportable segment. In addition, such disclosure is only required when the amount is regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment.

The amendments have no impact on financial statements of the Council.

- IFRIC 20 Stripping cost in the production phase of a surface mining (effective for annual periods beginning on or after 01 January 2013). The interpretation requires production stripping cost in a surface mine to be capitalized if certain criteria are met. The amendments have no impact on financial statements of the Council.

- IFRIC 21- Levies ‘an Interpretation on the accounting for levies imposed by governments’ (effective for annual periods beginning on or after 1 January 2014). IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

- IAS 39 Financial Instruments: Recognition and Measurement- Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective for annual periods beginning on or after 1 January 2014). The narrow-scope amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract agree to replace their original counterparty with a new one). The amendments have no impact on financial statements of the Council.

- Amendment to IAS 36 “Impairment of Assets” Recoverable Amount Disclosures for Non-Financial

Assets (effective for annual periods beginning on or after 1 January 2014) These narrow-scope amendments to IAS 36 Impairment of Assets address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments have no impact on financial statements of the Council.

4. SIGNIFICANT ACCOUNTING POLICIES

4.1 Property and equipment

Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of asset. When the parts of an item of property or equipment have a different useful lives, they are accounted for as separate item (major components) of the property and equipment.

Gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and are recognized net in income and expenditure account.

Subsequent costs

The cost of replacing a part of an item property or an equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Council and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. All other expenses are charged to income during the financial period in which these are incurred.

Depreciation

Depreciation is charged to income and expenditure account using the straight line method so as to write off the depreciable amount of an asset over its estimated useful life at the rates given in note

Useful lives and residual value of property and equipment

Depreciation methods, useful lives and residual value are reassessed at each financial year end and adjusted if appropriate.

Impairment of Property and Equipment

The carrying amount of property and equipment are regularly reviewed to determine whether there is any indication of impairment. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Such losses are recognised directly in income and expenditure account.

An impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount. Such reversals are only made to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

4.2 Investments

4.2.1 These are classified as held to maturity. These are invested with fixed or determinable payments and fixed maturity for which the Council has ability to hold them till maturity. These investments are initially recognised in the balance sheet at cost inclusive of transaction cost if any and subsequently

stated at amortised cost using effective interest rate method.

4.3 Financial instruments

Financial assets and financial liabilities are recognised at the time when the Council becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Council loses control of the contractual rights that comprises that financial assets. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to income currently.

After initial recognition, all financial assets and financial liabilities are measured at fair value. The particular recognised method adopted for measurement of financial liabilities investments subsequent to initial recognition is disclosed in the individual policy statement associated with

each item.

4.4 Impairment

Financial assets

A financial asset is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A financial assets is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of estimated cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income and expenditure account.

Non-financial assets

The carrying amount of the assets are reviewed at each balance sheet date to determine whether

there is any indication of impairment. If such indication exists, the asset's recoverable amount is estimated in order to determine the extent of impairment loss, if any. Impairment losses are recognised as expense in income and expenditure account. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

4.5 Offsetting of financial assets and liabilities

Financial assets and financial liabilities are only offset and the net amount reported in the statement of assets and liabilities when there is a legally enforceable right to set off the recognised amount and the Council intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

4.6 Foreign currencies translations

Transactions denominated in foreign currencies are recorded in Pakistani Rupees, at the foreign exchange rate prevailing at the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the foreign exchange rates at the balance sheet date. Exchange differences are taken to the income and expenditure account.

4.7 Other assets

Other assets are stated at cost less impairment losses, if any.

4.8 Revenue recognition

a) Members entrance fee and initial contribution are recognised as income when received. b) Annual subscription and representative fee are accounted for on time proportion basis when

due. c) Interest on term deposits is recognised on time proportion basis taking into account effective

yield on the deposit. d) Other income is recorded when these are due and on the provision of the service.

4.9 Deferred income

Grants received from members are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Council will comply with the conditions associated with the grant.

Grants that compensate the Council for expenses incurred are recognised in income and expenditure account as other income on a systematic basis in the same period in which the expenses are recognised. Grants that compensate the Council for the cost of an asset are recognised in the income and expenditure account on a systematic basis over the useful life of the asset.

4.10 Staff retirement benefits

The Council operates:

a) a recognised contributory provident fund covering all its permanent employees. Equal monthly contributions are made by the Council and the employees to the fund at a rate of ten percent of basic salary.

b) an approved funded gratuity scheme for all its regular employees who have completed the minimum qualifying period of service as defined under the scheme. Contributions are made to cover the obligations under the scheme on the basis of actuarial valuation and are charged to income and expenditure account. The most recent valuation was carried out as at 30 June 2013 using the “Projected Unit Credit Cost Method”.

The amount recognised in the balance sheet represents the present value of defined benefit obligations as adjusted for unrecognised actuarial gains and losses and as reduced by the fair value of plan assets.

The Council is using 'corridor approach' to recognise actuarial gains and losses. Cumulative net unrecognised actuarial gains and losses at the end of previous year which exceeds 10% of the greater of present value of the Council’s gratuity obligations and the fair value of plan assets are amortised over the average expected remaining working lives of the employees.

When the calculations above results in benefit to the Council, the recognised asset is limited to the net total of any cumulative unrecognised actuarial losses and past service cost and the present value of any economic benefits available in the form of any refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the Council if it is realisable during the life of the plan or on settlement of the plan liabilities.

Actuarial assumptions are the Council's best estimates of the variables that will determine the ultimate cost of providing post employment benefits. Changes in these assumptions in future years may affect the liability / asset under these plans in future years.

4.11 Taxation

Income tax for the year comprises current and deferred tax. Income tax is recognised in the income and expenditure account.

Current

Provision for current taxation is based on taxable income at current rates of taxation after taking into account tax credits and tax rebates available, if any, in accordance with the provision of the Income Tax Ordinance, 2001.

Deferred

Deferred tax is recognised using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and their tax base. This is recognised on the basis of the expected manner of the realization or settlement of the carrying amount of assets and liabilities using the tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that is no longer probable that the related tax benefit will be realised.

4.12 Cash and cash equivalents

Cash and cash equivalents comprise of cash and bank balances.

4.13 Provisions

Provisions are recognised when the Council has a present legal or constructive obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are regularly reviewed at each balance sheet date and adjusted to reflect the current best estimate.

5. PROPERTY AND EQUIPMENT

77

ANNUAL REPORT 2013










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



78










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



79

ANNUAL REPORT 2013










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



80










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



81

ANNUAL REPORT 2013










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



82










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



83

ANNUAL REPORT 2013










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions


5. PROPERTY AND EQUIPMENT 2013 COST Rate DEPRECIATION Written down As at Additions / As at % As at For the As at value as at 01 July (disposals) 30 June 01 July year / 30 June 30 June 2012 2013 2012 (disposals) 2013 2013 ----------------- (Rupees) ------------------ ----------------- (Rupees) ------------------ Owned

Furniture 791,139 - 791,139 10-20 478,312 133,969 612,281 178,858 fixtures - -

Office equipment 870,244 - 870,244 10-33.33 691,167 57,513 748,680 121,564 - -

Computers 205,520 71,000 276,520 25 142,081 30,308 172,389 104,131 - Vehicle 1,384,000 269,000 1,586,000 20-33.33 715,067 342,043 1,044,084 541,916 (67,000) (13,026)

3,250,903 340,000 3,523,903 2,026,627 563,833 2,577,434 946,469 (67,000) (13,026) 2012 COST Rate DEPRECIATION Written down As at Additions / As at % As at For the As at value as at 01 July (disposals) 30 June 01 July year / 30 June 30 June 2012 2013 2012 (disposals) 2013 2013 ----------------- (Rupees) ------------------ ----------------- (Rupees) ------------------ Owned

Furniture and 791,139 - 791,139 10-20 344,342 133,969 478,311 312,828 fixtures - -

Office equipment 854,444 15,800 870,244 10-33.33 629,090 62,077 691,167 179,077 - - 315,520 - 205,520 25 223,720 28,362 142,082 63,438 (110,000) (110,000) Vehicle 1,443,900 - 1,384,000 20-33.33 498,167 276,800 715,067 668,933 (59,900) (59,900)

3,405,003 15,800 3,250,903 1,695,319 501,208 2,026,627 1,224,276 (169,900) (169,900)

84










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



6. DEFERRED TAXATION 2013 2012 (Rupees) Balance as on 01 July 2012

- Debit balance arising in respect of deferred income 63,821 63,821 - Debit balance arising in respect of staff gratuity 181,452 181,452 - Debit balance arising in respect of depreciation 87,806 87,806 333,079 333,079 Deferred tax asset derecognised 333,079 - - 333,079

6.1 The Council is making efforts for registration under section 42 of the Companies Ordinance 1984 and simultaneous treatment as a not for profit organisation for income tax purposes. The Council expects this to be finalised within the next financial year. As such the balance of deferred tax asset have been derecognized. Furthermore for this reason deferred tax asset of Rs. 142,075 for the current year has not been recognised.

7. ADVANCES, DEPOSITS, PREPAYMENTS Note 2013 2012 AND OTHER RECEIVABLES (Rupees)

Loans to employees 7.1 149,300 54,150 Deposits 54,000 34,000 Prepayments 418,815 277,985 622,115 366,135 Annual subscription receivable: Corporate members/Ordinary and associate members 462,500 402,500 Additional representatives 10,500 12,000 473,000 414,500 Other receivables:

Mark-up on deposit accounts - Pak Oman Investment Bank 72,247 106,588 Advertisement charges 300,000 175,000 Others 391,000 295,000 763,247 576,588 1,858,362 1,357,223 7.1 This represents interest free loans payable within one year from the date of disbursement.

8. TAXATION - net of provision Balance as at 01 July 88,043 453,390 Amounts charged during the year (79,189) (532,306) 8,854 (78,916) Taxes paid during the year 114,737 166,959 Balance as at 30 June 123,591 88,043

85

ANNUAL REPORT 2013










































Subsequent costs


Depreciation







4.2 Investments






each item.

4.4 Impairment

Financial assets











4.7 Other assets






4.9 Deferred income











4.11 Taxation


Current


Deferred




4.13 Provisions



9. SHORT TERM INVESTMENTS - Held to maturity 2013 2012 (Rupees) Certificates of investment of:

- Pak Oman Investment Company Limited 8,000,000 7,500,000 These certificates carry interest at 9.00 % (2012 : 11.60% to 11.90 %) per annum and mature in August

2013 (2012: 3 months to 6 Months) and are renewable.

10. BANK BALANCES 2013 2012 (Rupees)

Current account 7,963 576,576 11. ADVANCE SUBSCRIPTION

Corporate members 5,182,500 5,119,500 12. DEFERRED INCOME

Deferred income - opening 182,345 273,518 Recognised as income (91,173) (91,173) Deferred income 91,172 182,345 Current 91,172 91,173 Non-current - (91,172) 91,172 182,345 13. ACCRUED EXPENSES AND OTHER LIABILITIES

Amount payable to CPLC 70,000 50,000 Workers' Welfare Fund payable 106,164 101,547 ABC Press advertisement in Business Recorder 172,125 - Accrued expenses - others 85,010 53,535 433,299 205,082 14. ANNUAL SUBSCRIPTION INCOME

Corporate members 8,075,000 8,212,500 Associate members 50,000 50,000 8,125,000 8,262,500 15. REPRESENTATIVE FEE INCOME

Corporate members 120,500 131,500

86

16. REPORTS, PUBLICATIONS AND OTHER INCOME

Income from subscription of advertisements in annual report Contribution by members towards: Printing cost of annual report Annual report printing cost

Income from Sub-Lessee

Income from meetings Expenses from meetings

Contribution for ABC Economic Summit by ABC members Cost incurred on ABC Economic Summit

Amortisation of deferred income Others

16.1 This represents contribution toward printing cost from members who did not publish any advertisement in Annual Report.

16.2 This represents the amortization of grant received from members toward the refurbishment of new office The said grant is amortised over the average useful life (i.e. 5 years) of the related assets. Refer note 12 also.

17. SALARIES AND OTHER BENEFITS

Salaries Salaries of contract employees Medical expenses Bonus

18. DEFERRED LIABILITY - staff gratuity

The Council operates an approved gratuity fund for all its employees, which is administered by the Board of Trustees. The gratuity scheme benefit is equal to thirty days last drawn gross salary for each year of eligible service or part thereof in excess of 6 months.

18.1 Principal actuarial assumptions

The last actuarial valuation of the scheme was carried out on 30 June 2013 by an independent actuary and the significant assumptions used for actuarial valuation were as follows:

2012

585,000

255,000 (312,000) 528,000

-

- - -

2,400,000 (1,437,084)

962,916

91,173 17,500

1,599,589

3,789,564 72,300

288,350 315,797

4,466,011

2013

785,000

230,000 (290,000) 725,000

120,000

209,556 (202,412)

7,144

2,100,000 (1,646,094)

453,906

91,173 16,875

1,414,098

4,537,080 85,400

265,072 378,090

5,265,642

Note

16.1

16.2

(Rupees)

87

ANNUAL REPORT 2013

Discount rate Expected rate of increase in salary in future years Expected rate of return on plan assets Withdrawal rate before normal retirement age

18.2 Reconciliation of payable to defined benefit plan

Present value of defined benefit obligations Fair value of plan assets Net actuarial (gain) / loss not recognised Liability recognised in the balance sheet

18.3 Movement in defined benefit obligation

Obligation as at 1 July Current service cost Interest cost Actuarial loss on obligation Obligation as at 30 June

18.4 Movement in fair value of plan assets

Plan assets as at 1 July Expected return on plan assets Contribution by the Council Actuarial loss on plan assets Plan assets as at 30 June

18.5 Movement in payable to defined benefit plan

Balance as at 1 July Charge for the year Contribution during the year Balance as at 30 June 18.6 Charge for defined benefit plan

Current service cost Interest cost Expected return on plan assets Expense recognised in income and expenditure account

2012

13.50% 13.50% 10.00%

Light

2012

1,968,580 (1,396,548)

(53,599) 518,433

1,350,059 279,827 214,637 124,057

1,968,580

1,083,113 135,222 206,992 (28,779)

1,396,548

366,183 359,242

(206,992) 518,433

279,827 214,637

(135,222) 359,242

Note

18.318.4

18.5

18.6

2013

11.00% 11.00%

0.00% Light

2013

2,664,451 (1,726,646)

(173,061) 764,744

1,968,580 341,075 310,133

44,663 2,664,451

1,396,548 157,097 247,800 (74,799)

1,726,646

518,433 494,111

(247,800) 764,744

341,075 310,133

(157,097) 494,111

(Rupees)

88

18.7 Actual return on plan assets The actual return on the assets during the year is: - Expected return on plan assets - Actuarial loss on plan assets

18.8 Components of plan assets as a percentage of total plan assets

Bank balance in profit and loss sharing account 18.9 Five year data on surplus / (deficit) of the plan & experience adjustments

Present value of defined benefit obligation Fair value of plan assets

- Surplus / (deficit)

- Experience adjustments on plan liabilities gain / (loss) - Experience adjustments on plan assets gain / (loss)

19. RECONCILIATION BETWEEN (DEFICIT) / SURPLUS FOR THE YEAR AND TAX EXPENSE

(Deficit) / surplus for the year before tax Tax @ 35% (2012: @ 35%)

- Deferred tax derecognised - Deferred tax asset not recognised - Others

19.1 During 2011, the Council was approved as a Non Profit Organisation under section 2 (36) (c) and is in the process of applying approval for exemption from tax on its income under clause 58(3) of Part I of Second Schedule to Income Tax Ordinance, 2001.

2013

157,097 (74,799) 82,298

100%

2012

135,222 (28,779) 106,443

100%

2009

689,392

669,629

(19,763)

(35,161)

(10,423)

2012

1,281,151

448,403

- -

1,074 449,477

2010

921,888

844,023

(77,865)

90,907

(33,086)

2013

(176,899)

(61,915)

333,079 142,075

(971) 412,268

2011

1,350,059

1,083,113

(266,946)

(32,012)

(60,781)

Note

66

2012

1,968,580

1,396,548

(572,032)

(124,057)

(28,779)

2013

2,664,451

1,726,646

(937,805)

(44,663)

(74,799)

(Rupees)

(Rupees)

-----------------------------------(Rupees)------------------------------------

89

ANNUAL REPORT 2013

2013

8,000,000

Note

9

2012

7,500,000

(Rupees)

19.2 Income tax returns of the Council have been filed up to and including the financial year ended 30 June 2012 which are deemed to be assessed under the Income Tax Ordinance, 2001 unless

selected for audit.

20. FINANCIAL RISK MANAGEMENT

The Council has exposure to the following risks from its use of financial instruments:

- Market risk - Credit risk - Liquidity risk This note presents information about the Council’s exposure to each of the above risks, the Council’s

objectives, policies and processes for measuring and managing risk, and the Council’s management of capital.

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

market interest rates or the market price of securities due to change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand for securities and liquidity in the market.

The Council presently invests its surplus funds in short term certificates of investment of investment banks / development financial institutions.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At 30 June 2013, details of the interest rate profile of the Council's interest bearing financial instruments were as follows:

Fixed rate instruments Short term investments Fair value sensitivity analysis for fixed rate instruments

The Council does not account for any fixed rate financial assets at fair value through income and expenditure. Therefore, a change in interest rates at the reporting date would not affect income and expenditure account and the equity of the Council.

20.2 Credit Risk

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

90

Concentrations of credit risk indicate the relative sensitivity of the Council's performance to developments affecting a particular industry.

The Council’s policy is to enter into financial contracts in accordance with the investment guidelines approved by the Executive Committee. The Council does not expect to incur material credit losses on its financial assets.

Exposure to credit risk

Credit risk of the Council arises principally from short term investment, bank balances, advances, deposits and other receivables. The carrying amount of financial assets represents the maximum

credit exposure.

The maximum exposure to credit risk at the reporting date is as follows:

Short term investments including profit due Bank balances Advances, deposits and other receivables

None of these assets are impaired or past due as at 30 June 2013.

Credit ratings

Details of credit rating of the Council's bank as at 30 June were as follows:

A1

Concentration of credit risk

Concentration of credit risk exists when changes in economic or industry factors affect the group of counterparties whose aggregate credit exposure is significant in relation to the Council’s total credit exposure.

Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economics, political or other

conditions.

Maximum Exposure

7,606,588 576,576

972,650 9,155,814

Balance as per the Balance

Sheet

7,606,588 576,576

972,650 9,155,814

(Rupees)2012

576,576

2013

7,963

Maximum Exposure

8,072,247 7,963

1,367,300 9,447,510

Balance as per the Balance

Sheet

8,072,247 7,963

1,367,300 9,447,510

2013 2012

91

ANNUAL REPORT 2013

Details of Council's concentration of credit risk of financial instruments by economic sector distribution are as follows:

Commercial banks Investment Company Employees Utility Companies Others

Impairment losses and past due balances

None of the financial assets are impaired or past due.

20.3 Liquidity risk

Liquidity risk is the risk that the Council may encounter difficulty in raising funds to meet its obligations and commitments associated with financial instruments. The Council manages the liquidity risk by maintaining maturities of financial assets and financial liabilities and investing a major portion of the Council’s assets in highly liquid financial assets.

Maturity analysis for financial liabilities

The table below analyses the Council's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows.

The maturity profile of the Council's liabilities based on contractual maturities is given below:

Non - derivative liabilities

Accrued expenses and other liabilities

Non - derivative liabilities

Accrued expenses and other liabilities

(%)

6.30 83.08 0.59 0.37 9.66

100.00

(Rupees)

576,576 7,606,588

54,150 34,000

884,500 9,155,814

(%)

0.08 85.44

1.58 0.58

12.32 100.00

(Rupees)

7,963 8,072,247

149,300 54,000

1,164,000 9,447,510

2013 2012

On demand

327,135

On demand

103,535

Carrying amount

327,135

Carrying amount

103,535

----------(Rupees)----------

30 JUNE 2013

30 JUNE 2012

92

20.4 Fair values of financial assets and liabilities

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arms length transaction.

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

21. TRANSACTIONS WITH RELATED PARTIES

The related parties comprise of key management personnel and staff retirement benefit funds. Details of transactions and balances with related parties, other than those which have been specifically disclosed elsewhere in these financial statements are as follows:

Payable to the Staff Gratuity Fund Contribution to Staff Provident Fund Charge for staff gratuity fund

Transactions with key management personnel are disclosed in note 22. These transactions are in accordance with the terms of their employment. Contributions / charge for the retirement benefits are in accordance with the staff services rules and / or actuarial advise.

22. REMUNERATION OF KEY MANAGEMENT PERSONNEL (EXECUTIVE DIRECTOR)

Managerial remuneration Bonus In addition, a Council maintained car is also provided to the executive director.

23. CAPITAL RISK MANAGEMENT

The Council is a public company limited by guarantee and accordingly has no capital. The Council is funded by contributions from members and the executive committee fixes the contributions required from members in order to enable it to meet its future liabilities. The Council is not exposed to externally imposed capital requirement.

2012

518,433 248,400 359,242

2013

764,744 297,360 494,111

Note

18.2

18.6

(Rupees)

2012

2,923,385 315,797

3,239,182

2013

3,236,534 378,090

3,614,624

(Rupees)

93

ANNUAL REPORT 2013

24. ACCOUNTING ESTIMATES AND JUDGEMENTS

Income Taxes

In making the estimates for income taxes currently payable by the Council, the management looks at the current income tax law and the decisions of appellate authorities on certain issues in the past.

Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Property and equipments

The estimates are made by the management in respect of useful lives, residual values and depreciation method used which reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Further, the Council reviews the value of the assets for possible impairment on an annual basis. Any change in the estimates in future years might affect the carrying amounts of the respective items of tangible fixed assets with a corresponding affect on the depreciation charge and impairment.

Other assets

Judgement is required in assessing the need for impairment, if any.

25. GENERAL

25.1 NUMBER OF EMPLOYEES

The total number of employees as at the year end were 4.

25.2 Provident Fund related disclosure

The Council operates recognised contributory provident fund for all its permanent employees. Details of net assets and investments of these funds are as follows:

Size of the fund - Net assets Cost of the investment made Percentage of the investment made Fair value of the investment made

2012 (Audited)

1,155,492 1,145,446

99% 1,197,526

2013 (Unaudited)

1,676,646 1,665,919

99% 1,757,115

94



The break up of fair value of the investment is :

Bank balances Investments

The management, based on the un-audited financial statements of the funds, is of the view that the investments out of provident funds have been made in accordance with the provisions of Section 227 of the Companies Ordinance, 1984 and the rules formulated for this purpose.

26. DATE OF AUTHORISATION

These financial statements were authorized for issue by the Executive Committee in their meeting held on 25 October 2013.



%

16%84%

100%

Amount

195,446 1,002,080 1,197,526

%

41%59%

100%

Amount

715,919 1,041,196 1,757,115

2013 (Unaudited) 2012 (Audited)

95

ANNUAL REPORT 2013

Appreciation

The Executive Committee highly appreciates and thanks the following members for actively supporting the ABC by inserting their advertisements in this Annual Report:

1. ACE Insurance Limited2. DuPont Pakistan Operations (Pvt.) Ltd.3. EMC Information Systems (Pvt.) Ltd.4. Gillette Pakistan Limited5. Johan (Pvt.) Ltd. (Culligan)6. OBS Pakistan (Pvt.) Ltd.7. Oracle Corporation8. Pfizer Pakistan Ltd.9. Prestige Communications (Pvt.) Ltd. (Grey)10. Procter & Gamble Pakistan (Pvt.) Ltd.11. Siza Foods (Pvt.) Ltd. (McDonald’s)

We would also like to thank:

1. Prestige Communications (Pvt.) Ltd. (Grey) for designing the ABC Annual Report 20132. Captain-PQ Chemical Industries (Pvt.) Ltd. for donating Rs. 200,000 towards the ABC’s CSR Initiatives

96

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