Kohinoor Textile Mills Limited: Annual Report

Annual Report 2010
Kohinoor Textile Mills Limited

A KOHINOOR MAPLE LEAF GROUP COMPANY
Design & Printed by:
Registered Office : 42 - Lawrence Road, Lahore Pakistan. T : +92 - 42 - 3630 2261, 36302262 F : +92 - 42 - 3636 8721
w w w . k m l g . c o m
Annual Report 2010
Annual Report 2010
CONTENTS KOHINOOR TEXTILE MILLS LIMITED Company Profile Company Information Vision Statement Mission Statement Statement of Ethics and Business Practices Statement of Strategic Objectives Notice of Annual General Meeting Organization chart Directors' Report Brief Profile of Directors Key Operating and Financial Data-Six Years Summary Calendar of Major Events Horizontal Analysis of Financial Statements Vertical Analysis of Financial Statements Distribution of wealth Statement of Compliance with Best Practices of Code of Corporate Governance Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance Auditors' Report Balance Sheet Profit and Loss Account Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Pattern of Holding of the Shares CONSOLIDATED FINANCIAL STATEMENTS Directors' Report on Consolidated Financial Statements Auditors' Report Balance Sheet Profit and loss Account Cash Flow Statement Statement of Changes in Equity Notes to the Consolidated Financial Statements FORM OF PROXY 74 75 76 78 79 80 81 2 3 4 4 5 6 7 10 20 21 22 23 24
26 27 28 30 31 32 33 70
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COMPANY INFORMATION
BOARD OF DIRECTORS
MR. TARIQ SAYEED SAIGOL MR. TAUFIQUE SAYEED SAIGOL MR. SAYEED TARIQ SAIGOL MR. WALEED TARIQ SAIGOL MR. KAMIL TAUFIQUE SAIGOL MR. ZAMIRUDDIN AZAR MR. ABDUL HAI MEHMOOD BHAIMIA CHAIRMAN CHIEF EXECUTIVE
COMPANY PROFILE
AUDIT COMMITTEE
MR. ZAMIRUDDIN AZAR MR. SAYEED TARIQ SAIGOL MR. WALEED TARIQ SAIGOL MR. KAMIL TAUFIQUE SAIGOL CHAIRMAN MEMBER MEMBER MEMBER
CHIEF FINANCIAL OFFICER

MS. BUSHRA NAZ MALIK
COMPANY SECRETARY
MR. MUHAMMAD ASHRAF
INTERNAL AUDITOR
MR. ZEESHAN AHMAD
AUDITORS
M/S. RIAZ AHMAD & COMPANY CHARTERED ACCOUNTANTS
BANKERS AL BARAKA ISLAMIC BANK B.S.C. (E.C.) ALLIED BANK LIMITED ASKARI BANK LIMITED BANK ALFALAH LIMITED FAYSAL BANK LIMITED MCB BANK LIMITED MEEZAN BANK LIMITED NATIONAL BANK OF PAKISTAN NIB BANK LIMITED SILK BANK LIMITED STANDARD CHARTERED BANK (PAKISTAN) LIMITED HSBC BANK MIDDLE EAST LIMITED THE BANK OF PUNJAB UNITED BANK LIMITED
THEN AND NOW
he Company commenced operation in 1953 as a private limited company and became a public limited company in 1968. The initial capacity of its Rawalpindi unit comprised 25,000 spindles and 600 looms. Later, fabric processing facilities were added and spinning capacity was augmented. Additional production facilities were acquired on the Raiwind-Manga Road near Lahore in District Kasur and on the Gulyana Road near Gujar Khan, by way of merger. The Company's production facilities now comprise 151,902 ring spindles capable of spinning a wide rang of counts using cotton and Man-made fibers. The weaving facilities at Raiwind comprise 204 looms capable of weaving wide range of greige fabrics.
The processing facilities at the Rawalpindi unit are capable of dyeing and printing fabrics for the home textile market. The stitching facilities produce a diversified range of home textiles for the export market. Both the dyeing and stitching facilities are being augmented to take advantage of greater market access. Fully equipped laboratory facilities for quality control and process optimization have been up at all three sites. The Company has been investing heavily in Information Technology, training of its human resources and preparing its management to meet the challenges of market integration. Kohinoor Textile Mills Limited continues to ensure that its current competitive position is maintained as well as supporting the ongoing improvement process in our endeavour to maintain world best practice manufacturing.
TANGIBLE FIXED ASSETS-NET
REGISTERED OFFICE
42-LAWRENCE ROAD, LAHORE. TEL: (92-042) 36302261-62 FAX: (92-042) 36368721
SHARE REGISTRAR
VISION CONSULTING LTD 3-C, LDA FLATS, LAWRENCE ROAD, LAHORE. TEL: (92-042) 36375531-36375339 FAX: (92-042) 36374839 E-Mail: info@vcl.com.pk & vclcom@yahoo.com Website: www.vcl.com.pk
MILLS PESHAWAR ROAD, RAWALPINDI TEL: (92-051) 5473940-3 FAX: (92-051) 5471795 8th K.M., MANGA RAIWIND ROAD, DISTRICT KASUR. TEL: (92-042) 35394133-35 FAX: (92-042) 35394132 GULYANA ROAD, GUJAR KHAN, DISTRICT RAWALPINDI TEL: (92-0513) 564472-74 FAX: (92-0513) 564337 WEB SITE: www.kmlg.com Note: KTML financial statements are also available at the above website.
SALES TREND
12,000 RUPEES IN MILLION 10,000 8,000 6,000 4,000 2,000 0 2004 -2005 2005 -2006 2006 -2007 2007 -2008 2008 -2009 2009 -2010 4,695 7,140 6,904 7,558 8,459 10,693 RUPEES IN MILLION
7,000 6,000 5,000 3,971 4,000 3,000 2,000 1,000 2,666 3,561 3,973 4,140
6,496
2004 -2005 2005 -2006 2006 -2007 2007 -2008 2008 -2009 2009 -2010
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Vision Statement
Mission Statement
The Kohinoor Textile Mills Limited Stated Vision Is To Achieve And Then Remain As The Most Progressive And Profitable Company In Pakistan In Terms Of Industry Standards And Stakeholders Interest.
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The Company Shall Achieve Its Mission Through A Continuous Process Of Having Sourced, Developed, Implemented And Managed The Best Leading Edge Technology, Industry Best Practice, Human Resource And Innovative Products And Services And Sold These To Its Customers, Suppliers And Stakeholders.
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Statement of Ethics and Business Practices

2010 - 2011
The following principles constitute the code of conduct which all Directors and employees of Kohinoor Textile Mills Limited are required to apply in their daily work and observe in the conduct of Company's business. While the Company will ensure that all employees are fully aware of these principles, it is the responsibility of each employee to implement the Company's policies. Contravention is viewed as misconduct. The code emphasizes the need for a high standard of honesty and integrity which are vital for the success of any business. PRINCIPLES 1. Directors and employees are expected not to engage in any activity which can cause conflict between their personal interest and the interest of the Company such as interest in an organization supplying goods/services to the Company or purchasing its products. In case a relationship with such an organization exists the same must be disclosed to the Management. 2. Dealings with third parties which include Government officials, suppliers, buyers, agents and consultants must always ensure that the integrity and reputation of the Company is not in any way compromised. 3. Directors and employees are not allowed to accept any favours, gifts or kickbacks from any organization dealing with the Company. 4. Directors and employees are not permitted to divulge any confidential information relating to the Company to any unauthorized person. Nor should they issue any misleading statements pertaining to the affairs of the Company. 5. The Company has strong commitment to the health and safety of its employees and preservation of environment and the Company will persevere towards achieving continuous improvement of its HSE performance by reducing potential hazards preventing pollution and improving awareness. Employees are required to operate the Company's facilities and processes keeping this commitment in view. 6. Commitment and team work are key elements to ensure that the Company's work is carried out effectively and efficiently. Also all employees will be equally respected and actions such as sexual harassment and disparaging remarks based on gender, religion, race or ethnicity will be avoided. 06
Statement Of Strategic Objectives

2010- 2011
Following are the main principles which constitute the strategic objectives of Kohinoor Textile Mills Limited: 1. Effective use of available resources and improved capacity utilization of the Company's production facilities; 2. Modernization of production facilities in order to ensure the most effective production; 3. Effective marketing and innovative concepts; 4. Implementation of effective technical and human resource solutions; 5. Strengthening independence in terms of secure supply of low-cost services and resources, including energy supply, transportation and logistics services; 6. Explore alternative energy resources; 7. Further improvements in corporate code governance through restructuring of assets and optimization of management processes; 8. Personnel development, creating proper environment for professional growth of highly skilled professionals, ensuring safe labour environment, competitive staff remuneration and social benefits in accordance with scope and quality of their work; 9. Compliance with local and international environmental and quality management standards, implementation of technologies allowing to comply with the limitations imposed on pollutant emissions; and 10.Implementation of projects in social and economic development of communities.
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NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 42 n d Annual General Meeting of the members of KOHINOOR TEXTILE MILLS LIMITED will be held on Saturday, October 30, 2010 at 3:00 p.m. at its Registered Office, 42-Lawrence Road, Lahore, to transact the following business: -
Chief Financial Officer/ Group Director Finance
Manager Tax & Corporate
1. 2. 3.
To confirm the minutes of the Extraordinary General Meeting held on May 03, 2010. To receive, consider and adopt the audited accounts of the Company for the year ended June 30, 2010 together with the Directors' and Auditors' Reports thereon. To appoint Auditors for the ensuing year and fix their remuneration. The present Auditors M/s. Riaz Ahmad & Company, Chartered Accountants, retire and being eligible offer themselves for reappointment. To transact any other business with the permission of the Chair. BY ORDER OF THE BOARD
Functional Reporting
ORGANIZATION CHART OF KTML
4.
Chief Executive Officer KTML
Chairman
NOTES: 1. Share transfer books of the Company will remain closed from 23-10-2010 to 30-10-2010 (both days inclusive). Physical transfers/CDS Transaction IDs received in order at Share Registrar of the Company i.e. M/s. Vision Consulting Ltd, 3-C, LDA Flats, Lawrence Road, Lahore upto the close of business on October 22, 2010 will be considered in time. A member eligible to attend and vote at this meeting may appoint another member as his/her proxy to attend and vote instead of him/her. Proxies in order to be effective must reach the Company's Registered Office not less than 48 hours before the time for holding the meeting. CDC Shareholders, entitled to attend and vote at this meeting, must bring with them their National Identity Cards / Passports in original along with Participants' ID Numbers and their Account Numbers to prove his/her identity, and in case of Proxy, must enclose an attested copy of his/her NIC or Passport. Representatives of corporate members should bring the usual documents required for such purpose. Shareholders are requested to immediately notify the change in their addresses, if any, to the Company's Share Registrar. Members, who have not yet submitted photocopies of their computerized National Identity Cards to our Share Registrar, are requested to send the same at the earliest.
General Manager Spinning
2.
General Manager Processing
3.
Managing Director KRM
Manager Procurement
Manager Marketing & Home
4. 5.
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General Manager Finance
General Manager Production
Senior Manager Marketing
Senior Manager Commercial
Lahore: October 09, 2010
(MUHAMMAD ASHRAF) Company Secretary
Director KTML
General Manager Finance
Senior Manager Information
Manager Maintenance
Manager MIS
Manager Operations & Utilities
Company Secretary
Manager Human Resource
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DIRECTORS' REPORT TO THE SHAREHOLDERS

The Directors feel pleasure in presenting the 42nd annual report along with audited financial statements for the year ended June 30, 2010. REVIEW OF OPERATIONS The financial year ended June 30, 2010, was characterized by extremes of market conditions which led to varying degrees of success in the operating units of the Company, from windfall profits in the spinning division to only nominally positive performance in the processing and made-ups division. Extremely strong yarn markets due to high domestic demand in China and India, coupled with the purchase of raw materials at competitive prices, led to substantial profits for both of the Company's spinning units.
Locally, the Company continues to face continuous cost increases, especially in labour, gas and electricity. In addition, extremely high general inflation has raised the price of raw materials and inputs across the board. Inflation and most, if not all, costs are expected to rise in the future as supplies of basic necessities such as power and food grow tighter. In order to mitigate the effects of these cost increases, the Company has initiated another major round of cost cutting efforts with a focus on increasing efficiency to reduce labour costs in the made-ups division and using lower-cost materials to create quality yarns with open-end and compact spinning equipment in the spinning units.
FINANCIAL REVIEW During the year under review, the Company's revenues increased by 26.42% to Rs. 10,693.338 million (2009: Rs. 8,458.899 million), while costs of sales rose by 20.75% to Rs. 8,692.529 million (2009: Rs. 7,198.993 million). The resulting increase in gross profit to Rs. 2,000.809 million (2009: Rs. 1,259.906 million) is primarily due to the abnormally strong performance of the spinning units due to the factors outlined above. Operating profit for the year under review was recorded at Rs. 1,449.216 million (2009: Rs. 723.554 million). The Company made an after tax profit of Rs. 277.861 million, a substantial improvement from a loss of Rs. 439.811 million during the previous year. 11
Weaving profit was satisfactory though reduced from the previous year because of the high price of yarn. Similarly, strong fabric prices were one of several challenges in the made-ups division.
The Company sold made-ups to major retailers, a market in which price increases are not instantaneous and are rarely, if ever, at par with the increases in the yarn and raw material markets in terms of both timing and magnitude. While significant price increases were granted by the Company's customers, these were not on the same level as the cost increases incurred during the year which necessitated financing the madeups division from some of the gains of the spinning units. These factors also contributed to the fabric division's sub-par performance relative to previous projections. 10
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The Directors have shown their inability to pay any dividend due to cash flow constraints. However, Management of the Company is committed to ensure efficient operation of the Company to deliver value to the customers and other stakeholders. Earning per Share for the year ended 30 June 2010 was Rs. 1.91.
INFORMATION TECHNOLOGY Your company is equipped with highly advanced ERP solution (Oracle e-Business suite 11i) along with IT professionals who are involved in essential management of sensitive data, exclusive computer networking and systems-engineering. In your Company a diverse teams of business and technical experts are ready to help defining our business objectives, design a dynamic business to consumer and business to business solution and implement it timely and cost effectively. The Company is in process of upgrading its ERP solution to next level i.e. Oracle eBusiness suite R12 to adopt the best for its business reporting.
The Directors recommend as under:

Rupees in Thousand
Profit before taxation Provision for taxation Profit after taxation Accumulated loss brought forward Accumulated loss carried forward
DEBT:EQUITY RATIO
100% 90% 80% 70% PERCENTAGE 60% 50% 40% 30% 20% 10% 0% 2004 -2005 2005 -2006 2006 -2007 2007 -2008 2008 -2009 2009 -2010 DEBT EQUITY 42 51 44 44 42 58 49 56 56 58
376,448 (98,587) 277,861 (429,748) (151,887) SOCIAL COMPLIANCE AND HUMAN RESOURCE HUMAN RESOURCE The Company is devoted to promoting the social and ethical accountability and taking a human-oriented approach towards its employees, consumers and all stakeholders, which is an intrinsic requirement for achieving sustainable development. The Company believes that our people are our asset. Therefore, the Company puts great stress on the Company values, good practices and the improvement of working conditions and the health and safety protection of its employees. The Company has taken a number of measures to develop its employees to meet the challenges of today's competitive corporate world. The Company has invested extensively in employee development programs, health and safety training in our in-house training facility instead with the latest audio / visual equipment. Complying with our human resource policies, the Company does not employ any child labour and is an equal opportunity employer. Company maintains a high standard of employees working and living conditions; providing free, safe and clean residential facilities, utilities, medical care, life insurance and education. 13
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SHARE HOLDERS EQUITY

8,000 7,000
RUPEES IN MILLION
G.P % TO SALE
20% 18% 16% 14% 12% 14.26% 14.80% 14.64% 15.38% 14.89%
18.71%
6,000 5,000 4,000 3,000 2,000 1,000 0 2004 -2005 2005 -2006 2006 -2007 2007 -2008 2008 -2009 2009 -2010 2,623 2,668 3726 3935 3059 3361
10% 8% 6% 4% 2% 0% 2004 -2005 2005 -2006 2006 -2007 2007 -2008 2008 -2009 2009 -2010
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The Company has taken a number of measures to develop its employees to meet the challenges of today's competitive corporate world. The Company has invested extensively in employee development programs by providing technical, computer, management, health & safety training in our in house training facility installed with the latest audio / visual equipment. The Company is committed to comply with international standards and is a Social Accountability Standard SA-8000:2001 certified company.
QUALITY MANAGEMENT SYSTEMS Yo u r C o m p a n y i s I S O 9001:2008 certified. The surveillance audits are being regularly and successfully completed on six monthly bases. Conforming to the Company's Quality Management Systems, Product quality is consistently maintained and monitored at every stage. Yarn and fabric is tested in most modern textile testing laboratories working at all divisions. These laboratories are equipped with latest equipments and are environmentally controlled to the most stringent of international standards. Quality control in made ups production facilities is based on AQL system, ensuring high control on quality of products. Internal / external audits and management reviews, clearly demonstrate control improvements and Company's long term commitment to improve its management systems to any reputed international standard.
SOCIAL SECTOR PROJECTS By the grace of God, the management of your Company is pleased to inform that the construction of Sayeed Saigol Cardiac Complex at the Gulab Devi Chest Hospital, Lahore has now been completed and handed over to the administration of Gulab Devi Chest Hospital, Lahore. Your Company has contributed a sum of total Rs. 65.634 million as donors. CORPORATE SOCIAL RESPONSIBILITY (4 th CSR Award) Kohinoor Maple Leaf Group has also received an award on account of its performance of th various social obligations during the year 2008-09 at the 4 Corporate Social Responsibility st (CSR) Award Ceremony held on 21 January, 2010 at Karachi.
Mr. Sohail Sadiq General Manager Finance is receiving 4th CSR National Excellence Award -2009 from Mr. Sheikh Muhammad Afzal Alias Provincial Minister for Environment & Alternate Energy Government of Sindh.
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SAFETY, HEALTH AND ENVIRONMENT Your Company provides and maintains so far as practicable, equipment, systems and working conditions which are safe and without risk to the health of all employees, visitors, contractors and public. Management has maintained its strong commitment to a safe environment in its operations throughout the year. The Company is well aware of the relationship between the textile production and related environment issues. Keeping in view the ethical obligations to the environment, the working on implementation of ISO14001-2004 Environment Management System the documentation and environment monitoring process has been completed and certification process is targeted to be completed by the end of the current year. Installation of effluent treatment plant (ETP) has been completed and results have been tested through internal lab tests and EPA approved external labs. The Company takes care and applies appropriate procedures to design /manufacture textile products so as to ensure that no harmful substances are present in its products. It adopts recognized environment friendly working methods and makes careful selection of dye stuffs, optimizes dye baths, uses chlorine free bleaching techniques, low formaldehyde finishing methods and heavy metal free materials. By employing these recognized methods, the Company produces safe products and has been able to comply with requirements of European legislation regarding use of azo dyes and been certified under OEKO Tex 100 Standard, confirming the Company's commitment to using harmless dyes and chemicals in its production processes.
SECURITY Your Company is well cognizant of its responsibilities in ensuring the health and safety of the workplace and its people. At your Company, health and safety policies and practices are monitored and reviewed regularly. We believe that Workplace safety is the responsibility of the management, which involves making the workplace safer for the employees and thus safeguarding their health. Workplace safety ensures that an employee can feel secure about undertaking his routine tasks with complete determination and confidence. Workplace safety aims at eliminating the health risks involves in a particular job and hence makes the job profile a secure option for interested candidates. Therefore, KTML participates in all social responsibility education and monitoring activities. KTML supports United State's Customs Trade Partnership against Terrorism (C TPAT) and is committed to improve security conditions within the organization as well as throughout its supply chain from the factory to overseas. KTML is proud to be a partner of Customs Trade Partnership against Terrorism (C - TPAT) and is a certified Company and is meeting all requirements of this security standard.
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BUSINESS PROCESS RE-ENGINEERING Your Company is in process to implement the methodologies to redesign business process. The methodology includes the five activities: Prepare for reengineering, Map and analyze as-is-process, Design To-be process, Implement re-engineered process, learn and Improve continuously.
COMPLIANCE OF CODE OF CORPORATE GOVERNANCE The Board of Directors periodically reviews the Company's strategic direction. Business plans and targets are set by the Chief Executive and reviewed by the Board. The Board is committed to maintain a high standard of corporate governance. The Board has reviewed the Code of Corporate Governance and confirms that:
LIQUIDITY MANAGEMENT
Management monitors forecasts of the Company's liquidity reserve and cash and cash equivalents on the basis of expected cash flow. In addition, the Company's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these; monitoring balance sheet liquidity ratios against internal and external regulatory requirements; and maintaining debt financing plans.
A)
b) c)
FUTURE OUTLOOK The well-publicized hikes in the price of raw material have taken on extreme proportions worldwide. Locally, the recent floods have damaged and destroyed a large, but so far unmeasured, portion of the Pakistani cotton crop. Rains in China have also disturbed cotton production in that region. Combined with very intense and growing domestic demand in China and India, as well as Brazil's recent transformation into an importer of cotton, these factors seem to indicate continued high raw material prices for the foreseeable future. This situation is further exacerbated by the continued ban on cotton exports by the Indian government, which has disturbed all aspects of the textile production chain. Future prospects therefore remain unclear for the time being. The Company hopes to clarify its position for the future before the end of November, when the cotton season is in full swing and the ultimate fate of the Indian export ban has been decided. 18
d)
e) f) g) h) i)
The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity. Proper books of account of the Company have been maintained. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from, has been adequately disclosed. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the Company's ability to continue as a going concern. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations of the stock exchanges. Outstanding taxes and other government levies are given in related note(s) to the audited accounts. Key operating and financial data of last six years is annexed.
Value of investment of provident fund trust, based on their unaudited accounts of June 30, 2010 is as under:
Provident fund
(Rs. in thousand) 188,066
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DIRECTORS AND BOARD MEETINGS
AUDIT COMMITTEE Name Designation Chairman Member Member Member (Non Executive / independent Director) (Non Executive / independent Director) (Executive Director) (Executive Director)
During the year under review, five meetings of the Board of Directors were held and the attendance of Directors was as under: -
Mr. Mr. Mr. Mr.
Zamiruddin Azar Sayeed Tariq Saigol Waleed Tariq Saigol Kamil Taufique Saigol
The Main terms of reference of the Audit Committee of the Company include the following:
a.
Names of Directors Mr. Mr. Mr. Mr. Mr. Mr. Mr. Tariq Sayeed Saigol Taufique Sayeed Saigol Sayeed Tariq Saigol Waleed Tariq Saigol Kamil Taufique Saigol Zamiruddin Azar Abdul Hai Mehmood Bhaimia
Meetings Attended
b.
5 4 4 5 3 5 5
c.
Leave of absence was granted to Directors who could not attend the Board meetings. However, Mr. Taufique Sayeed Saigol and Mr. Kamil Taufique Saigol participated in the proceedings of Board of Directors' Meeting dated 28-04-2010 through teleconference. CRITERIA TO EVALUATE BOARD PERFORMANCE Following are the main criteria:
1. 2. 3. 4. 5. 6. 7. 8. 9. d. e. f. g. h. i.
Financial policies reviewed and updated; Capital and operating budgets approved annually; Board receives regular financial reports; Procedure for annual audit; Board approves annual business plan; Board focuses on goals and results; Availability of board's guideline to management; Regular follow up to measure the impact of board's decisions; Assessment to ensure compliance with code of ethics and corporate governance.
Determination of appropriate measures to safeguard the Company's assets; Review of preliminary announcements of results prior to publication; Review of quarterly, half-yearly and annual financial statements of the Company, prior to their approval by the Board of Directors, focusing on: Major judgmental areas; Significant adjustments resulting from the audit; The going-concern assumption; Any changes in accounting policies and practices; Compliance with applicable accounting standards; and Compliance with listing regulations and other statutory and regulatory requirements. Ensuring coordination between the internal and external auditors of the Company; Review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the Company; Ascertaining that the internal control system including financial and operational controls, accounting system and reporting structure are adequate and effective; Instituting special projects, value for money studies or other investigations on any matter specified by the Board of Directors; Monitoring compliance with the best practices of corporate governance and identification of significant violations thereof; and Consideration of any other issue or matter as may be assigned by the Board of Directors.
Further issuance of capital otherwise than right In accordance with the approval of the valued shareholders in the Extra Ordinary General Meeting held on May 03, 2010 and subsequent sanction granted by the Securities and Exchange Commission of Pakistan under Section 86(1) of the Companies Ordinance, 1984, the Company has allotted 100 million ordinary shares of Rs. 10/- each otherwise than through a right issue at par value to the respective subscriber. In accordance with the covenant forming part of share subscription arrangement, the Company has despatched consent letters to the registered members whose names were born in the members register 21
During the financial year no share transfers involving Directors, Company Secretary, CFO and Executives of the Company (including their spouses and minor children) were reported.
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as on April 26, 2010, for subscription of shares at par value in proportion to the paid up value of shares held by them out of the above mentioned 100 million shares. Incorporation of wholly owned subsidiary company The Company has set up a wholly owned subsidiary company namely Concept Trading (Private) Limited during the year incorporated on March 11, 2010 having authorised share capital of Rs. 500,000/- divided into 50,000 ordinary shares of Rs. 10/- each with issued, subscribed and paid up Capital of Rs. 200,000/- divided into 20,000 ordinary shares of Rs. 10/- each. Mr. Taufique Sayeed Saigol and Mr. Kamil Taufique Saigol are Directors of subsidiary company. Pattern of Shareholding The statement of shareholding of the Company in accordance with Code of Corporate Governance and Companies Ordinance, 1984 as at June 30, 2010 is annexed. Auditors The present auditors of the Company M/s. Riaz Ahmad & Company, Chartered Accountants audited the financial statements of the Company and have issued report to the members. The auditors will retire at the conclusion of the Annual General Meeting. Being eligible, they have offered themselves for re-appointment. The Board has recommended the appointment of M/s. Riaz Ahmad & Company, Chartered Accountants, as auditors for the ensuing year as suggested by the Audit Committee subject to approval of the members in the forthcoming Annual General Meeting. Acknowledgement The Directors are grateful to the Company's members, financial institutions and customers for their cooperation and support. They also appreciate hard work and dedication of all the employees working at various divisions.
BRIEF PROFILE OF DIRECTORS

MR. TARIQ SAYEED SAIGOL
Mr. Tariq Sayeed Saigol is a member of the Saigol Family who pioneered in Textile manufacturing after partition and later ventured into the financial sector, chemicals, synthetic fibers, sugar, edible oil refining, civil engineering, construction, cement and energy.
Chairman / Chief Executive/Director Kohinoor Maple Leaf Industries Limited Tarbela Hydro Limited Zimpex (Private) Limited Chairman / Director Kohinoor Textile Mills Limited Maple Leaf Cement Factory Limited
Mr. Saigol was schooled at Aitchison College, Lahore and graduated from Government College, Lahore following which he studied Law at University Law College, Lahore. He started his career in 1968 at Kohinoors Chemical Complex at Kala Shah Kaku. Upon trifurcation of the Group in 1976, he became Chief Executive of Kohinoor Textile Mills Limited, Rawalpindi. Since 1984, he has been Chairman of the Kohinoor Maple Leaf Group which has interests in textiles, cement manufacturing and energy. He has been Chairman of All Pakistan Textile Mills Association in 1992-94, President of Lahore Chamber of Commerce and Industry for 1995-97 and Chairman, All Pakistan Cement Manufacturers Association from 2003-2006. Mr. Saigol has been a member of the Federal Export Promotion Board and Central Board of State Bank of Pakistan. He has also served on several Government Commissions and Committees on a number of subjects, including Export Promotion, reorganization of WAPDA and EPB, Right Sizing of State owned Corporations and Resource Mobilization. He is the author of Textile Vision 2005 adopted by the Government in 2000 and also its critique prepared in 2006. He joined the Central Board of State Bank of Pakistan for a second term in 2007 and is a member of the Prime Ministers Economic Advisory Council established in 2008. He takes keen interest in the development of education and health care in Pakistan. He has been a member of the Board of Governors of Lahore University of Management Sciences, Founding Chairman of the Board of Governors of Chandbagh School, founder Trustee of Textile University of Pakistan, member of the Syndicate of University of Health Sciences and Member Board of Governors of Aitchison College, Lahore. He is conferred with Sitara-e-Isaar by President of Pakistan in 2006. He is a keen golfer and has represented Pakistan at Golf in Sri Lanka and Pakistan in 1967.
Chief Executive/Director Kohinoor Textile Mills Limited Director Maple Leaf Cement Factory Limited Kohinoor Maple Leaf Industries Limited Tarbela Hydro Limited Zimpex (Private) Limited
For and on behalf of the Board
MR. TAUFIQUE SAYEED SAIGOL
Lahore September 29, 2010
TAUFIQUE SAYEED SAIGOL Chief Executive
He is Chief Executive of Kohinoor Textile Mills Limited and director in all KMLG Group companies. Mr. Taufique Sayeed Saigol is a leading and experienced industrialist of Pakistan. He graduated as an Industrial Engineer from Cornell University, USA in 1974. He is widely traveled and his special forte is in the export business. He is a business man of impeccable credibility and vision and has substantial experience of working in different environments.
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BRIEF PROFILE OF DIRECTORS

MR. TARIQ SAYEED SAIGOL
Chief Executive/Director Maple Leaf Cement Factory Limited Director Kohinoor Textile Mills Limited Kohinoor Maple Leaf Industries Limited
in different environments.
MR. SAYEED TARIQ SAIGOL
Director Maple Leaf Cement Factory Limited Chief Financial Officer Kohinoor Textile Mills Limited Maple Leaf Cement Factory Limited
Mr. Tariq Sayeed Saigol is a member of the Saigol Family who pioneered in Textile manufacturing after partition and later ventured into the financial sector, chemicals, synthetic fibers, sugar, edible oil refining, civil engineering, construction, cement and energy.
Mr. Saigol was schooled at Aitchison College, Lahore and graduated from Government College, Lahore following which he studied Law at University Law College, Lahore. Director He started his career in 1968 at Kohinoors Chemical Complex at Kala Shah Kaku. Upon trifurcation of the Group in 1976, he became Chief Executive of Kohinoor Textile Mills Limited, Rawalpindi. Since 1984, he has been Chairman of the Kohinoor Maple Leaf Group which has interests in textiles, cement manufacturing and energy. He has been Chairman of All Pakistan Textile Mills Association in 1992-94, President of Lahore Chamber of Commerce and Industry for 1995-97 and Chairman, All Pakistan Cement Manufacturers Association Director Kohinoor Textile Mills Limited from 2003-2006.
Maple Leaf Cement Factory Limited Kohinoor Textile Mills Limited Maple Leaf Cement Factory Limited Security General Insurance Company Ltd.
Mr. Sayeed Saigol is the Chief Executive of Maple Leaf Cement. He graduated from McGill University with a degree in management. Mr. Sayeed Saigol also has several years of work experience in the textile industry. Prior to joining Maple Leaf Cement he was involved in setting up and managing an apparel dyeing company. He is a member of the board of governors of the Lahore University of Management Sciences (LUMS).
MR. WALEED TARIQ SAIGOL

Mr. Waleed Saigol is the Managing Director of Kohinoor Raiwind Mills. He holds a bachelors
BOARD COMMITTEES
AUDIT COMMITTEE The committee is responsible for assisting the board of directors in the board's oversight responsibilities relating to the integrity of the Company's financial statements, financial reporting process, and systems of internal accounting and financial controls; the qualifications, independence, and performance of the independent auditor and the performance of the Company's internal audit department; and the Company's legal and regulatory compliance. The audit committee is appointed by the board to assist the board in monitoring and consists of following: CHAIRMAN Mr. Zamiruddin Azar MEMBERS Mr. Sayeed Tariq Saigol Mr. Waleed Tariq Saigol Mr. Kamil Taufique Saigol Scope and Objectives

Mr. Saigol has been a member of the Federal Export Promotion Board and Central Board of State Bank of Pakistan. He has also served on several Government Commissions and Committees on a number of subjects, including Export Promotion, reorganization of WAPDA and EPB, Right Sizing of State owned Corporations and Resource Mobilization. He is the author of Textile Vision 2005 adopted by the Government in 2000 and also its critique prepared in 2006. He joined the Central Board of State Bank of Pakistan for a second term in 2007 and is a Director Kohinoor Textile Mills Limited member of the Prime Ministers Economic Advisory Council Maple Leaf Cement Factory Limited established in 2008. He takes keen interest in the development of education and health care in Pakistan. He has been a member of the Board of Governors of Lahore University of Management Sciences, Founding Chairman of the Board of Governors of Chandbagh School, founder Trustee of Textile University of Pakistan, member of the Syndicate of University of Health Sciences and Member Board of Governors of Aitchison College, Lahore. He is conferred with Sitara-e-Isaar by President of Pakistan in 2006. Director He is a keen golfer and has represented Pakistan at Golf in Sri Lanka and Pakistan in 1967.
Kohinoor Textile Mills Limited Shabbir Tiles & Ceramics Limited Pak Grease Mfg. Co. (Pvt) Limited Askari General Insurance Limited
MR. TAUFIQUE SAYEED SAIGOL

He is Chief Executive of Kohinoor Textile Mills Limited and director in all KMLG Group companies. Mr. Taufique Sayeed Saigol is a leading and experienced industrialist of Pakistan. He graduated as an Industrial Engineer from Cornell University, USA in 1974. He is widely traveled and his special forte is in the export business. He is a business man of impeccable credibility and vision and has substantial experience of working
The Integrity of the financial statements of the Company. The independent auditors' qualifications, independence, and performance. The performance of the Company's internal audit function. The compliance by the Company With Legal And Regulatory Requirements. 25
24
Annual Report 2010
Annual Report 2010
PROJECT MANAGEMENT COMMITTEE Project Management Committee of senior representatives is formed to direct the organization to ensure the proper supervision and effectiveness of project operations . Members Director Head of the Department Finance Head of the Department Production Head of the Department Marketing Head of the Department Human Resource Head of the Department Commercial Head of the Department Information Technology Head of the Department Engineering Scope and Objectives
Members Director Head of the Department Finance Head of the Department Production Head of the Department Information Technology Head of the Department Marketing Head of the Department Human Resource Head of the Department Engineering Scope and Objectives
Our BPR team implies specific business objectives such as cost reduction, time reduction, output quality improvement etc. We focus on the most important processes that reflect our business vision. Understand and measure the existing process to avoid repeating of old mistakes and to provide a baseline for future improvements. Design and build the prototype of new processes and ensure quick delivery of results and involvement and satisfaction of customers.
The Scope and objective of the Project Management Committee is to:

Steer and guide the project. Review progress and outputs. Review outcomes and their impact on the project. Agree important decisions and changes to plan. Discuss risks, problems, issues and explore solutions. Keep an eye on how things are going and what could be improved. The project work is performed on schedule and deliverables/reports are delivered on time. The project work is done within the allocated budget. The project team have well-defined roles and responsibilities. There are effective methods for planning, communicating, and making decisions. The project reflects on its work and takes a positive and flexible approach to updating plans.
No. of Meetings Held: 08 MANAGEMENT INFORMATION SYSTEM COMMITTEE

Management Information Systems (MIS) are the term given to the discipline focused on the integration of computer systems with the aims and objectives on an organization. The development and management of information technology assists executives and the general workforce in performing any tasks related to the processing of information. Members Director Head of the Department Information Technology Head of the Department Finance Head of the Department Marketing Head of the Department Human Resource Deputy Manager Information Technology
No. of Meetings Held: 10 BUSINESS PROCESS RE-ENGINEERING COMMITTEE

Business Process Re-engineering team see that which technology allows you to do, and then determine if this helps you rethink the process by starting with the capabilities of modern information technology.
26
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Annual Report 2010
Annual Report 2010
Scope and Objectives MIS is especially useful in the collation of business data and the production of reports to be used as tools for decision making that would otherwise be broadly useless to decision makers. MIS supports financial statements and performance reports to assist in the planning, monitoring and implementation of strategy. MIS systems use raw data to run simulations hypothetical scenarios that answer a range of 'what if' questions for alterations in strategies.
No. of Meetings Held: 07 ENERGY MANAGEMENT COMMITTEE

Energy Management Committee (EMC) is formed to improve performance through wise energy use Members Director Head of the Department Engineering Head of the Department Production Head of the Department Finance Scope and Objective Our team is committed for annual energy cost reductions from continuous improvements.
Developed to minimize environmental impacts. It incorporates energy efficiency, water conservation, waste minimization, pollution prevention, resource efficient materials and indoor air quality in all phases of a building's life.
EMC design plan that helps us meet our climate protection
commitments.
The appointment of a full time energy management coordinator
ensures the plan proceeds.

Responsible for energy procurement, monitoring and targeting
energy savings, maintaining program of energy saving measures, raising energy awareness and corporate wide energy monitoring and reporting.
No. of Meetings Held: 09

28 29
Annual Report 2010
Annual Report 2010
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
2004-2005 9-Months 4,695,280
2010 Rs " 000 " Wealth Generated Net sales Other operating income %age
2009 Rs " 000 " %Age
Net sale (Rs. 000) Profitability(Rs.000) Gross Profit Operating profit Profit / (Loss) before tax Provision for income tax Profit / (Loss) after tax Financial Position (Rs.000) Tangible fixed assets-net Investment & Other assets
10,693,338
8,458,899
7,558,322
7,140,167
6,903,625
2,000,809 1,449,216 376,448 98,587 277,861
1,259,906 723,554 (536,676) (96,865) (439,811)
1,162,700 1,013,140 130,805 134,325 (3,520)
1,045,526 575,658 (28,293) 11,529 (39,822)
1,021,807 803,056 354,984 56,780 298,204
669,444 320,804 147,598 59,071 88,527
10,693,338 78,651 10,771,989
99.27% 0.73% 100.00%
8,458,899 126,551 8,585,450
98.53% 1.47% 100.00%
6,496,299 4,004,892 10,501,191 6,556,108 8,169,138 (1,613,030) 8,888,161
4,140,233 4,003,422 8,143,655 5,131,884 6,762,527 (1,630,643) 6,513,012
3,972,540 3,998,629 7,971,169 5,757,221 5,477,572 279,649 8,250,818
3,971,021 3,661,682 7,632,703 4,547,065 4,231,049 316,016 7,948,719
3,561,259 1,800,012 5,361,271 3,939,417 3,855,596 83,821 5,445,092
2,666,186 1,803,215 4,469,401 3,170,105 3,106,544 63,561 4,532,962
Current assets Current liabilities Net working capital Capital employed Less: Redeemable Capital, long term loan & other liabilities Less: Surplus on revaluation of property Share holders Equity Represented By: Share capital Reserves & un-app. Profit
Distribution of Wealth Cost of sales (excluding employees' remuneration) Marketing, selling and administration expenses Employees' remuneration Financial charges Government taxes (Includes income tax) Profit / (Loss) for the period
7,952,404
73.82%
6,508,657
75.81%
1,853,068 3,673,825 3,361,268
2,190,079 1,263,592 3,059,341
3,052,128 1,263,592 3,935,098
2,959,093 1,263,592 3,726,034
2,776,985 2,668,107
1,910,160 2,622,802
497,243 873,126 1,072,768 98,587 277,861 10,771,989
4.62% 8.11% 9.96% 0.92% 2.58% 100.00%
546,013 807,226 1,260,230 (96,865) (439,811) 8,585,450
6.36% 9.40% 14.68% -1.13% -5.12% 100.00%

75.81%
Cost of sales (excluding employees' remuneration)
1,455,262 1,906,006 3,361,268
1,455,262 1,604,079 3,059,341
1,455,262 2,479,836 3,935,098
1,455,262 2,270,772 3,726,034
1,058,374 1,609,733 2,668,107
962,158 1,660,644 2,622,802
Investors information Gross Profit to sales (%age) Net Profit to sales (%age) Profit margin Debt : equity ratio Current ratio Acid test ratio Breakup value per share of Rs.10 each Earning per share Dividend Bonus Average collection period Inventory turn over Average age of inventory Summary of Cash flows Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Net change in cash and cash equivalents Quantitative Data Yarn (Kgs "000") : Production (cont. into 20s) KTM Division KGM Division
18.71 2.60 0.03 34 : 66 0.80 0.47 23.10 1.91 40.60 4.17 87.53
14.89 (5.20) (0.05) 42 : 58 0.76 0.45 21.02 (3.02) 51.58 4.17 87.53
15.38 (0.05) (0.00) 44 : 56 1.05 0.69 27.04 (0.02) 58.18 3.73 98.09
14.64 (0.56) (0.01) 44 : 56 1.07 0.59 25.60 (0.32) 49.83 3.62 100.70
14.80 4.32 0.04 51 : 49 1.02 0.47 25.21 2.82 10.00 40.39 4.32 84.41
14.26 1.89 0.02 42 : 58 1.02 0.51 27.26 0.93 10.00 45.80 4.08 89.39
73.82%
Cost of sales (excluding employees' remuneration)
4.62%
Marketing, selling and administration expenses
6.36%
Marketing, selling and administration expenses
(403,780) (310,582) 712,916 (1,446)
106,116 (644,726) 543,520 4,910
(51) (776,196) 787,903 11,656
(215,658) (1,155,933) 998,512 (373,079)
(226,700) (636,823) 1,151,994 288,471
176,304 (1,320,706) 1,147,547 3,145
8.11%
Employees' remuneration
9.40%
Employees' remuneration
9.96%
14.68%
Financial charges
35,211 31,295 66,506
35,298 26,318 61,616
36,605 28,899 65,504
33,388 26,028 59,416
31,223 23,680 54,903
22,675 15,026 37,701
Financial charges
0.92%
Government taxes
-1.13%
Government taxes
Sales/Tran.for wvg.(actual count) KTM Division KGM Division Cloth (Linear meters "000"): Processing (Rawalpindi Division) Production Sales Weaving (Raiwind Division) Production Sales
7,202 4,104 11,306
6,042 2,987 9,029
6,790 4,265 11,055
6,788 3,862 10,650
7,595 3,639 11,234
5,461 2,192 7,653
2.58%
Profit / (Loss) for the period
-5.12%
Profit / (Loss) for the period
34,653 34,065
30,626 28,783
22,988 23,581
27,358 26,768
30,855 21,860
17,623 16,991
21,489 21,691
22,727 23,316
21,986 22,220
20,806 21,094
20,090 20,942
16,409 16,267
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Annual Report 2010
Annual Report 2010
HORIZONTAL ANALYSIS OF FINANCIAL STATEMENTS 2010

Balance Sheet 2010
VERTICAL ANALYSIS OF FINANCIAL STATEMENTS 2008

% change w.r.t 2009 % change w.r.t 2008 Balance Sheet
2009
Rs " 000
2010
Rs " 000 %
2009
Rs " 000 % Rupees in thousand
2008
Rs " 000 " %
Rs " 000 " Rupees in thousand
Total equity Total surplus on revaluation of property Total non-current liabilities Total current liabilities Total equity and liabilities Total non-current assets Total current assets Total assets Profit and Loss Account Net sales Cost of sales Gross profit Distribution cost Administrative expenses Other operating expenses Other operating income Profit from operations Finance cost Profit/ (Loss) before taxation Provision for taxation Loss after taxation
3,361,268 3,673,825 1,853,068 8,169,138 17,057,299 10,501,191 6,556,108 17,057,299
3,059,341 1,263,592 2,190,079 6,762,527 13,275,539 8,143,655 5,131,884 13,275,539
3,935,098 1,263,592 3,052,128 5,477,572 13,728,390 7,971,169 5,757,221 13,728,390
9.87 190.74 (15.39) 20.80 28.49 28.95 27.75 28.49
(14.58) 190.74 (39.29) 49.14 24.25 31.74 13.88 24.25
Total equity Total surplus on revaluation of property Total non-current liabilities Total current liabilities Total equity and liabilities Total non-current assets Total current assets Total assets Profit and Loss Account
3,361,268 3,673,825 1,853,068 8,169,138 17,057,299 10,501,191 6,556,108 17,057,299
19.71 21.54 10.86 47.89 100.00 61.56 38.44 100.00
3,059,341 1,263,592 2,190,079 6,762,527 13,275,539 8,143,655 5,131,884 13,275,539
23.04 9.52 16.50 50.94 100.00 61.34 38.66 100.00
3,935,098 1,263,592 3,052,128 5,477,572 13,728,390 7,971,169 5,757,221 13,728,390
28.66 9.20 22.23 39.90 100.00 58.06 41.94 100.00
10,693,338 8,692,529 2,000,809 397,818 195,103 37,323 78,651 1,449,216 1,072,768 376,448 98,587 277,861
8,458,899 7,198,993 1,259,906 464,848 175,965 22,090 126,551 723,554 1,260,230 (536,676) (96,865) (439,811)
7,558,322 6,395,622 1,162,700 381,161 149,542 22,158 403,301 1,013,140 882,335 130,805 134,325 (3,520)
26.42 20.75 58.81 (14.42) 10.88 68.96 (37.85) 100.29 (14.88) 170.14) 201.78) 163.18)
41.48 35.91 72.08 4.37 30.47 68.44 (80.50) 43.04 21.58 187.79 (26.61) (7,993.78)
Net sales Cost of sales Gross profit Distribution cost Administrative expenses Other operating expenses Other operating income Profit from operations Finance cost Profit/ (Loss) before taxation Provision for taxation Loss after taxation
10,693,338 8,692,529 2,000,809 397,818 195,103 37,323 78,651 1,449,216 1,072,768 376,448 98,587 277,861
100.00 81.29 18.71 3.72 1.82 0.35 0.74 13.55 10.03 3.52 0.92 2.60
8,458,899 7,198,993 1,259,906 464,848 175,965 22,090 126,551 723,554 1,260,230 (536,676) (96,865) (439,811)
100.00 85.11 14.89 5.50 2.08 0.26 1.50 8.55 14.90 (6.34) (1.15) (5.20)
7,558,322 6,395,622 1,162,700 381,161 149,542 22,158 403,301 1,013,140 882,335 130,805 134,325 (3,520)
100.00 84.62 15.38 5.04 1.98 0.29 5.34 13.40 11.67 1.73 1.78 (0.05)
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STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED JUNE 30, 2010 This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulations of Stock Exchanges in Pakistan for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner:1. The Company encourages the representation of non-executive Directors on its Board of Directors. At present the Board of Directors includes four independent non-executive Directors namely: i. ii. iii. iv. Mr. Tariq Sayeed Saigol Mr. Sayeed Tariq Saigol Mr. Zamiruddin Azar Mr. Abdul Hai Mehmood Bhaimia
disclosed in the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The Board has formed an Audit Committee. It comprises four members. Two of them are non-executive Directors including the Chairman of the Committee. 16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the Committee have been formed and advised to the Committee for compliance. 17. The Board has set-up an effective internal audit function. 18. The Statutory Auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan. 19. The Statutory Auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Listing Regulations and the Auditors have confirmed that they have observed IFAC guidelines in this regard. 20. We confirm that all other material principles contained in the Code have been complied with.
2. The Directors have confirmed that none of them is serving as a Director in more than ten listed companies, including this Company. 3. All the resident Directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. No casual vacancy occurred in the Board of Directors of the Company during the year ended June 30, 2010. 5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been signed by all the Directors and employees of the Company. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other Executive Directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a Director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The Board had arranged Orientation Courses for its Directors during the preceding years to make them aware of their duties and responsibilities. The Directors have also provided declarations that they are aware of their duties, powers and responsibilities under the Companies Ordinance, 1984 and the listing regulations of the Stock Exchanges. There was no need felt by the Directors for any further Orientation Courses in this regard. 10. The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO. 11. The Directors' Report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The Directors, CEO and executives do not hold any interest in the shares of the Company other than that
(Taufique Sayeed Saigol) Lahore: September 29, 2010 Chief Executive
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REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of KOHINOOR TEXTILE MILLS LIMITED ("the Company") for the year ended 30 June 2010, to comply with the Listing Regulations of the respective Stock Exchanges, where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the statement of compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. Further, Listing Regulations of the Karachi, Lahore and Islamabad Stock Exchanges require the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended 30 June 2010.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of KOHINOOR TEXTILE MILLS LIMITED as at 30 June 2010 and the related profit and loss 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 company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved 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 company as required by the Companies Ordinance, 1984; (b) in our opinion: i) the balance sheet and profit and loss 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 except for the changes as stated in Notes 2.1(d)(i), 2.5 and 2.8 (d) with which we concur; ii) the expenditure incurred during the year was for the purpose of the company's business; and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss 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 company's affairs as at 30 June 2010 and of the profit, its comprehensive income, 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 (XVIII of 1980).
RIAZ AHMAD & COMPANY Chartered Accountants Name of engagement partner: Atif Bin Arshad ISLAMABAD Date: September 29, 2010 RIAZ AHMAD & COMPANY Chartered Accountants Name of engagement partner: Atif Bin Arshad ISLAMABAD Date: September 29, 2010
36
37
2010 NOTE EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorized share capital 370,000,000 ( 2009: 170,000,000) ordinary shares of Rupees 10 each 30,000,000 ( 2009: 30,000,000) preference shares of Rupees 10 each Issued, subscribed and paid up share capital Reserves Total equity Surplus on revaluation of property NON-CURRENT LIABILITIES Long term financing Liabilities against assets subject to finance lease Lease finance advance Deferred tax CURRENT LIABILITIES Trade and other payables Accrued mark-up Short term borrowings Current portion of non-current liabilities TOTAL LIABILITIES CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND LIABILITIES 3 4 5
BALANCE SHEET (Restated) 2009
AS AT 30 JUNE 2010 2010 NOTE ASSETS NON-CURRENT ASSETS Property, plant and equipment Investment properties Long term investments Long term deposits (Restated) 2009
(Rupees in thousand)
3,700,000 300,000 4,000,000 1,455,262 1,906,006 3,361,268 3,673,825
1,700,000 300,000 2,000,000 1,455,262 1,604,079 3,059,341 1,263,592
14 15 16 17
6,496,299 1,720,835 2,249,170 34,887 10,501,191
4,140,233 1,720,835 2,248,970 33,617 8,143,655
6 7 8
1,628,067 67,005 157,996 1,853,068 1,040,257 289,987 6,070,435 768,459 8,169,138 10,022,206 17,057,299
1,918,571 100,919 35,922 134,667 2,190,079 849,755 185,259 4,810,471 917,042 6,762,527 8,952,606 13,275,539
9 10 11 12
CURRENT ASSETS Stores, spare parts and loose tools Stock-in-trade Trade debts Advances Security deposits and short term prepayments Interest accrued Other receivables Short term investments Taxation recoverable Cash and bank balances
18 19 20 21 22 23 24 25
345,798 2,393,113 1,329,065 596,795 15,578 141 401,928 642,111 99,805 78,851 5,903,185
303,947 1,779,826 1,050,101 303,362 28,383 122 301,732 607,610 74,842 80,297 4,530,222
Non-current assets classified as held for sale
26
652,923 6,556,108 17,057,299
601,662 5,131,884 13,275,539
13 TOTAL ASSETS
The annexed notes form an integral part of these financial statements.
CHIEF EXECUTIVE 38
DIRECTOR
39
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2010 2010 NOTE SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST ADMINISTRATIVE EXPENSES OTHER OPERATING EXPENSES 29 30 31 27 28 2009
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010 2010 2009
10,693,338 (8,692,529) 2,000,809 (397,818) (195,103) (37,323) (630,244) 1,370,565 78,651 1,449,216 8,458,899 (7,198,993) 1,259,906 (464,848) (175,965) (22,090) (662,903) 597,003 126,551 Adjustment of cross currency interest rate swap 723,554 Deferred tax on adjustment of cross currency interest rate swap
PROFIT/ (LOSS) AFTER TAXATION OTHER COMPREHENSIVE INCOME/ (LOSS) 277,861 (439,811)
Surplus / (deficit) on remeasurement of available for sale investment Deferred tax on remeasurement of available for sale investment
32,632 8,566 24,066 -
(409,506) (107,495) (302,011) (206,054) (72,119) (133,935)
OTHER OPERATING INCOME PROFIT FROM OPERATIONS FINANCE COST PROFIT / (LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT/ (LOSS) AFTER TAXATION EARNING/ (LOSS) PER SHARE - BASIC AND DILUTED (Rupees) The annexed notes form an integral part of these financial statements.
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(1,072,768) 376,448
(1,260,230) (536,676) 96,865 (439,811) (3.02) TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR The annexed notes form an integral part of these financial statements. Other comprehesive income / (loss) for the year - net of tax
24,066
(435,946)
34
(98,587) 277,861 1.91
301,927
(875,757)
CHIEF EXECUTIVE
DIRECTOR
CHIEF EXECUTIVE
DIRECTOR
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41
3,722,030
3,935,098
213,068
Total Equity
3,059,341
3,361,268
(875,757)
301,927
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2010 2010 NOTE CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Finance cost paid Workers' profit participation fund paid Income tax paid Net increase in long term deposits Net cash generated from / (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure on property, plant and equipment Payment for non-current assets classified as held for sale Investments made Return on bank deposits received Proceeds from sale of property, plant and equipment Proceeds from sale of investments Proceeds from sale of non current-assets classified as held for sale Dividends received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term financing Repayment of long term financing Short term borrowings - net Lease finance advance Repayment of liabilities against assets subject to finance lease Repayment of lease finance advance Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The annexed notes form an integral part of these financial statements. (420,840) 1,259,964 (90,286) (35,922) 712,916 (1,446) 80,297 78,851 200,000 (408,395) 815,947 35,922 (99,954) 543,520 4,910 75,387 80,297 35 2009
2,266,768
213,068
2,479,836
(875,757)
1,604,079
301,927
Total Reserves
Revenue Reserves
674,317 (968,040) (108,787) (1,270) (403,780)
1,500,213 (1,311,367) (25) (77,912) (4,793) 106,116
1,460,554
1,460,554
(29,937)
(29,937)
40,000
(439,811)
1,020,743
(429,748)
277,861
Accumulated loss
1,490,491
1,490,491
Capital Reserves
(281,042) (51,261) (200) 934 7,765 13,222 (310,582)
527,360
213,068
740,428
Fair value reserve
144,919
144,919
(302,011)
144,919
438,417
Share premium
1,455,262
1,455,262
1,455,262
Share Capital
1,455,262
144,919
462,483
24,066
(490,255) (190,230) (20,225) 2,230 4,817 7,395 25,000 16,542 (644,726)
General Reserve
1,450,491
Reserves
1,019,282
806,214
213,068
133,935
133,935
Hedging Reserve
(133,935)
(435,946)
SubTotal
583,336
607,402
24,066
1,450,491
(40,000)
(151,887)
1,298,604
(439,811)
Sub Total
277,861
1,906,006
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010
The annexed notes form an integral part of these financial statements.
Effect of change in accounting policy -Note 2.8 (d)
Total comprehensive income for the year ended 30 June 2010
Balance as at 30 June 2008-Restated
Total comprehensive loss for the year ended 30 June 2009
Balance as at 30 June 2008
Transfer to accumulated loss
CHIEF EXECUTIVE
DIRECTOR
CHIEF EXECUTIVE
DIRECTOR
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. THE COMPANY AND ITS OPERATIONS Kohinoor Textile Mills Limited is a public limited company incorporated in Pakistan under the Companies Act,1913 (now Companies Ordinance, 1984) and listed on the Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the Company is situated at 42-Lawrence Road, Lahore. The principal activity of the Company is manufacturing of yarn and cloth, processing and stitching the cloth and trade of textile products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated: 2.1 Basis of Preparation a) Statement of Compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. b) Accounting Convention These financial statements have been prepared under the historical cost convention, except for the certain financial instruments, investment properties and freehold land which are carried at their fair values. These financial statements represent separate financial statements of the Company. The consolidated financial statements of the Group are being issued separately. c) Critical accounting estimates and judgments The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgments were exercised in application of accounting policies are as follows: Financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques based on assumptions that are dependent on conditions existing at balance sheet date. Useful lives, patterns of economic benefits and impairments Estimates with respect to residual values, useful lives and pattern of flow of economic benefits are based on the analysis of the management of the Company. Further, the Company reviews the value of assets for possible impairment on an annual basis. Any change in the estimates in the future might affect the carrying amount of respective item of property, plant and equipment, with a corresponding effect on the depreciation charge and impairment.
Taxation In making the estimates for income tax currently payable by the Company, the management takes into account the current income tax law and the decisions of appellate authorities on certain issues in the past. Provisions for doubtful debts The Company reviews its receivable against any provision required for any doubtful balances on an ongoing basis. The provision is made while taking into consideration expected recoveries, if any. Impairment of investments in subsidiary companies In making an estimate of recoverable amount of the company's investments in subsidiary companies, the management considers future cash flows. d) Standards and amendments to published approved accounting standards that are effective in current year i) Changes in accounting policies and disclosures arising from standards and amendments to published approved accounting standards that are effective in the current year IAS 1 (Revised) 'Presentation of Financial Statements' (effective for annual periods beginning on or after 01 January 2009).The revised standard prohibits the presentation of items of income and expenses (that is non-owner changes in equity) in the statement of changes in equity, requiring nonowner changes in equity to be presented separately from owner changes in equity in a statement of comprehensive income. As a result the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. IFRS 7 (Amendment) Financial instruments: Disclosures (effective for annual periods beginning on or after 01 January 2009). This amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share. IFRS 8 'Operating Segments' (effective for annual periods beginning on or after 01 January 2009). It introduces the "management approach" to segment reporting. IFRS 8 requires presentation and disclosure of segment information based on the internal reports regularly reviewed by the Company's chief operating decision makers in order to assess each segment's performance and to allocate resources to them. Previously, the Company did not present segment information as IAS 14 limited reportable segments to those that earn a majority of their revenue from sales to external customers and therefore did not require the different stages of vertically integrated operations to be identified as separate segments. Under the management approach, the Company has determined operating segments on the basis of business activities i.e. Spinning, Weaving, Processing and Home Textile. As the change in accounting policy only results in additional disclosures of segment information, there is no impact on earnings per share. ii) Other amendment to published approved accounting standards that is effective in the current year IAS 23 (Amendment) 'Borrowing Costs' (effective for annual periods beginning on or after 01 January 2009). It requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for its intended use or sale) as part of the cost of that asset. The Company's accounting policy on borrowing cost, as disclosed in note 2.13, complies with the above mentioned requirements to capitalize borrowing cost and hence this change has not impacted the Company's accounting policy.
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e) Standards, interpretations and amendments to published approved accounting standards that are effective in current year but not relevant There are other new standards, interpretations and amendments to the published approved accounting standards that are mandatory for accounting periods beginning on or after 01 July 2009 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements. f) Standard and amendments to published approved accounting standards that are not yet effective but relevant Following standard and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 01 July 2010 or later periods: IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 01 January 2013). IFRS 9 has superseded the IAS 39 'Financial Instruments: Recognition and Measurement'. It requires that all equity investments are to be measured at fair value while eliminating the cost model for unquoted equity investments. Certain categories of financial instruments available under IAS 39 will be eliminated. Moreover, it also amends certain disclosure requirements relating to financial instruments under IFRS 7. The management of the Company is in the process of evaluating impacts of the aforesaid standard on the Company's financial statements. There are other amendments resulting from annual Improvements projects initiated by International Accounting Standards Board in April 2009 and May 2010, specifically in IFRS 7 'Financial Instruments: Disclosures', IFRS 8 'Operating Segments', IAS 1 'Presentation of Financial Statements', IAS 7 'Statement of Cash Flows', IAS 24 'Related Party Disclosures' and IAS 36 'Impairment of Assets' that are considered relevant to the Company's financial statements. These amendments are unlikely to have a significant impact on the Company's financial statements and have therefore not been analyzed in detail. g) Standards, interpretations and amendments to published approved accounting standards that are not effective in current year and not considered relevant There are other accounting standards, amendments to published approved accounting standards and new interpretations that are mandatory for accounting periods beginning on or after 01 July 2010 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements. 2.2 Employee benefit The Company operates an approved funded provident fund scheme covering all permanent employees. Equal monthly contributions are made both by the Company and employees at the rate of 8.33 percent of basic salary and cost of living allowance to the fund. The Company's contributions to the fund are charged to profit and loss account. 2.3 Taxation Current Provision for current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for 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 the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that 2.5 2.4
taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except to the extent that it relates to items recognized in other comprehensive income are directly in equity. In this case the tax is also recognized in other comprehensive income or directly in equity, respectively. Provisions Provisions are recognized when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate of the amount can be made. Property, plant and equipment Owned Property, plant and equipment except freehold land and capital work in progress are stated at cost less accumulated depreciation and accumulated impairment losses (if any). Cost of property, plant and equipment consists of historical cost, borrowing cost pertaining to erection/construction period of qualifying assets and other directly attributable cost of bringing the asset to working condition. Freehold land is stated at revalued amount less any identified impairment loss. Capital work in progress is stated at cost less any identified impairment loss. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefit associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the period in which they are incurred. During the current year, the Company has changed its accounting policy for measurement of freehold land from cost model to revaluation model. Freehold land is now stated at revalued amount less any identified impairment loss. Previously, freehold land was stated at cost less any identified impairment loss. The effect of revaluation of freehold land has been dealt with in accordance with the requirements of International Accounting Standard (IAS) 16 "Property, Plant and Equipment". Had there been no change in this accounting policy, property, plant and equipment would have been lower by Rupees 2,410.233 million. This change in accounting policy has not impact on profit or loss. Depreciation Depreciation on all property, plant and equipment is charged to profit and loss account applying the reducing balance method so as to write off the cost / depreciable amount of the asset over their estimated useful lives at the rates given in Note 14.1. Depreciation on additions is charged from the month the assets are available for use while no depreciation is charged in the month in which the assets are disposed off. The residual values and useful lives of assets are reviewed by the management, at each financial year end and adjusted if impact on depreciation is significant. Derecognition An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognized. Leased Finance lease Leases where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Assets subject to finance lease are capitalized at the commencement of the lease term at the lower of
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present value of minimum lease payments under the lease agreements and the fair value of the leased assets, each determined at the inception of the lease. The related rental obligation, net of finance cost, is included in liabilities against assets subject to finance lease. The liabilities are classified as current and long term depending upon the timing of payments. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The finance cost is charged to profit and loss account over the lease term. Depreciation of assets subject to finance lease is recognized in the same manner as for owned assets. Depreciation of the leased assets is charged to profit and loss account. 2.6 Investment properties Land and buildings held for capital appreciation or to earn rental income are classified as investment properties. Investment properties are carried at fair value which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. The valuation of the properties is carried out with sufficient regularity. Gains or losses arising from a change in the fair value of investment properties are included in the profit and loss account currently. 2.7 Intangible assets Intangible assets, which are non-monetary assets without physical substance, are recognized at cost, which comprise purchase price, non-refundable purchase taxes and other directly attributable expenditure relating to their implementation and customization. After initial recognition an intangible asset is carried at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized from the month, when these assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortized over its estimated useful life over which economic benefits are expected to flow to the Company. The useful life and amortization method is reviewed and adjusted, if appropriate, at each balance sheet date. 2.8 Investments Classification of investment is made on the basis of intended purpose for holding such investment. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation on regular basis. Investments are initially measured at fair value plus transaction costs directly attributable to acquisition, except for "investment at fair value through profit and loss " which is measured initially at fair value. The Company assesses at the end of each reporting period whether there is any objective evidence that investments are impaired. If any such evidence exists, the Company applies the provisions of IAS 39 'Financial Instruments: Recognition and Measurement' to all investments, except investments in subsidiary companies, which are tested for impairment in accordance with the provisions of IAS 36 'Impairment of Assets'. a) Investment at fair value through profit or loss Investment classified as held-for-trading and those designated as such are included in this category. Investments are classified as held-for-trading if they are acquired for the purpose of selling in the short term. Gains or losses on investments held-for-trading are recognised in profit and loss account. b) Held-to-maturity Investments with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long term investments that are intended to be held to maturity are subsequently measured at amortized cost. This cost is computed as the 2.9
amount initially recognised minus principal repayments, plus or minus the cumulative amortisation, using the effective interest method, of any difference between the initially recognized amount and the maturity amount. For investments carried at amortised cost, gains and losses are recognized in profit and loss account when the investments are derecognized or impaired, as well as through the amortisation process. c) Available-for-sale Investments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity, or changes to interest rates or equity prices are classified as available-for-sale. After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized directly in statement of other comprehensive income until the investment is sold, de-recognized or is determined to be impaired, at which time the cumulative gain or loss previously reported in statement of other comprehensive income is included in profit and loss account. These are sub-categorized as under: Quoted For investments that are actively traded in organized capital markets, fair value is determined by reference to stock exchange quoted market bids at the close of business on the balance sheet date. Unquoted Fair value of unquoted investments is determined on the basis of appropriate valuation techniques as allowed by IAS 39 "Financial Instruments: Recognition and Measurement". During the current year ended, the Company has changed the accounting estimate for valuation of its unquoted available for sale investment. Fair value of unquoted, available for sale investment is now determined by using net assets based valuation method. Previously, valuation was carried out using dividend stream method. Effect of this change in accounting estimate is recognized prospectively in accordance with the requirements of International Accounting Standard (IAS) 8 "Accounting Policies, Changes in Accounting Estimates and Errors". Had there been no change in this accounting estimate, short term investments, fair value reserve and deferred taxation would have been lower by Rupees 32.633 million, Rupees 24.067 million and Rupees 8.566 million respectively with no effect on the profit or loss. d) Investment in Subsidiary Companies Investments in subsidiary companies are stated at cost less impairment loss, if any, in accordance with the provisions of IAS 27 'Consolidated and Separate Financial Statements'. During the current year, the Company has changed its accounting policy for measurement of its investments in subsidiary companies. Investment in subsidiary companies are now measured at cost less impairment loss, if any. Previously investment in subsidiary companies was classified as available for sale and measured at fair value. Effect of this change in accounting policy is recognized retrospectively in accordance with the requirements of International Accounting Standard (IAS) 8 "Accounting Policies, Changes in Accounting Estimates and Errors". Had there been no change in this accounting policy, fair value reserve and investment in subsidiary companies would have been lower by Rupees 1,668.617 million. Inventories Inventories, except for stock in transit and waste stock/ rags are stated at lower of cost and net realizable value. Cost is determined as follows: Stores, spare parts and loose tools Useable stores, spare parts and loose tools are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.
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Stock-in-trade Cost of raw material, work-in-process and finished goods is determined as follows:. (i) For raw materials: (ii) For work-in-process and finished goods: Annual average basis. Average manufacturing costincluding a portion of production overheads. `
outstanding and rates applicable thereon. 2.15 Foreign currencies These financial statements are presented in Pak Rupees, which is the Companys functional currency. All monetary assets and liabilities denominated in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date, while the transactions in foreign currency during the year are initially recorded in functional currency at the rates of exchange prevailing at the transaction date. All nonmonetary items are translated into Pak Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange gains and losses are included in the income currently. 2.16 Financial instruments Financial instruments carried on the balance sheet include investments, deposits, trade debts, advances, interest accrued, other receivables, cash and bank balances, long-term financing, liabilities against assets subject to finance lease, lease finance advance, short-term borrowings, accrued mark-up and trade and other payables etc. Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of instrument. Initial recognition is made at fair value plus transaction costs directly attributable to acquisition, except for financial instrument at fair value through profit or loss which is measured initially at fair value. Financial assets are de-recognized when the Company loses control of the contractual rights that comprise the financial asset. The Company loses such control if it realizes the rights to benefits specified in contract, the rights expire or the Company surrenders those rights. Financial liabilities are de-recognized when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on subsequent measurement (except available for sale investments) and de-recognition is charged to the profit or loss currently. The particular measurement methods adopted are disclosed in the following individual policy statements associated with each item and in the accounting policy of investments. a) Trade and other receivables Trade debts and other receivables are carried at original invoice value less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. b) Borrowings Borrowings are recognized initially at fair value and are subsequently stated at amortized cost. Any difference between the proceeds and the redemption value is recognized in the profit and loss account over the period of the borrowings using the effective interest method. c) Trade and other payables Liabilities for trade and other amounts payable are initially recognized at fair value, which is normally the transaction cost. 2.17 Impairment a) Financial assets A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negative effect on the estimated future cash flow of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference between its carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of available for sale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on a individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
Materials in transit are valued at cost comprising invoice value plus other charges paid thereon. Waste stock / rags are valued at net realizable value. Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessarily to make a sale. 2.10 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as cash flow hedges. The Company documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the profit and loss account. Amounts accumulated in statement of other comprehensive income are recognized in profit and loss account in the periods when the hedged item will affect profit or loss. 2.11 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at banks on current, saving and deposit accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in values. 2.12 Non current assets classified as held for sale Non-current assets are classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than continuous use. These are measured at lower of carrying amount and fair value less costs to sell. 2.13 Borrowing cost Interest, mark-up and other charges on long-term finances are capitalized up to the date of commissioning of respective qualifying assets acquired out of the proceeds of such long-term finances. All other interest, markup and other charges are recognized in profit and loss account. 2.14 Revenue recognition Revenue from difference sources is recognized as under: a) Revenue from local sales is recognized on dispatch of goods to customers while in case of export sales it is recognized on the date of bill of lading. b) Dividend on equity investments is recognized when right to receive the dividend is established. ` c) Profit on deposits with banks is recognized on time proportion basis taking into account the amounts
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3. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL

b) Non financial assets The carrying amount of assets are reviewed at each balance sheet date for impairment whenever events are changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amounts. The resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the surplus on revaluation of that asset. 2.18 Related party transactions and transfer pricing Transactions and contracts with related parties are carried out at an arm's length price determined in accordance with comparable uncontrolled price method. 38,673,628 2.19 Segment reporting Segment reporting is based on the operating (business) segments of the Company. An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Company's other components. An operating segment's operating results are reviewed regularly by the chief executive officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the chief executive officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those income, expenses, assets, liabilities and other balances which can not be allocated to a particular segment on a reasonable basis are reported as unallocated. The Company has three reportable business segments. Spinning (Producing different quality of yarn using natural and artificial fibers), Weaving (Producing different quality of greige fabric using yarn) and Processing and Home Textile (Processing greige fabric for production of printed and dyed fabric and manufacturing of home textile articles) . Transaction among the business segments are recorded at arm's length prices using admissible valuation methods. Inter segment sales and purchases are eliminated from the total. 2.20 Dividend and other appropriations Dividend distribution to the Company's shareholders is recognized as a liability in the Company's financial statements in the period in which the dividends are declared and other appropriations are recognized in the period in which these are approved by the Board of Directors. 2.21 Off setting Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legal enforceable right to set off and the Company intends either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 52,241,019 145,526,216 38,673,628 52,241,019 145,526,216 2010 2009 (Number of shares) 1,596,672 26,156,000 1,596,672 26,156,000 Ordinary shares of Rupees 10 each allotted on reorganisation of Kohinoor Industries Limited Ordinary shares allotted under scheme of arrangement of merger of Part II of Maple Leaf Electric Company Limited Ordinary shares allotted under scheme of arrangement of merger of Kohinoor Raiwind Mills Limited and Kohinoor Gujar Khan Mills Limited. Ordinary shares of Rupees 10 each issued as bonus shares Ordinary shares of Rupees 10 each issued for cash 2010 2009 (Rupees in thousand) 15,967 261,560 15,967 261,560
26,858,897
26,858,897
268,589
268,589
386,736 522,410 1,455,262
386,736 522,410 1,455,262
3.1 Zimpex (Private) Limited which is an associated company held 22,510,635 (2009: 22,510,635) ordinary shares of Rupees 10 each as at 30 June 2010. (Restated) NOTE 2010 2009 (Rupees in thousand) 4. RESERVES Composition of reserves is as follows: Capital Share premium Fair value reserve - net of deferred tax Revenue General reserve Accumulated loss 1,450,491 (151,887) 1,298,604 1,906,006 1,450,491 (429,748) 1,020,743 1,604,079 4.1 4.2 144,919 462,483 607,402 144,919 438,417 583,336
4.1 This reserve can be utilized by the Company only for the purposes specified in section 83(2) of the Companies Ordinance, 1984. 4.2 Fair value reserve - net of deferred tax Balance as at 01 July Add/ (less) : Fair value adjustment on investment in Security General Insurance Company Limited during the year Less: Related deferred tax asset/ liability on investment in Security General Insurance Company Limited Balance as at 30 June 438,417 32,632 8,566 462,483 740,428 (409,506) (107,495) 438,417
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NOTE 5. SURPLUS ON REVALUATION OF PROPERTY Investment properties Freehold land 5.1
2009 2010 (Rupees in thousand) 1,263,592 2,410,233 3,673,825 1,263,592 1,263,592
6.1
The Bank of Punjab - (BOP-1) This represents demand finance facility of Rupees 400 million, obtained for import of state of art machinery and is allowed for a period of four years with a grace period of six months. The loan is repayable in 7 equal half yearly installments commenced after conclusion of grace period. It is secured by bank's exclusive hypothecation charge on machinery imported and personal guarantees of sponsor directors. Facility amounting to Rupees 300 million carries mark up at the rate of 6 months average KIBOR plus 100 basis points (bps) and additional facility of Rupees 100 million carries mark up at the rate of 6 months average KIBOR plus 275 bps with a floor of 5% per annum, payable quarterly. On November 29, 2006 loans amounting to Rupees 150.431 million were converted to LTF-EOP consisting of Rupees 61.725 million at 6 % per annum and Rupees 88.706 million at 7 % fixed rate of mark up.
5.1
Freehold land is now stated at revalued amount as a result of change in accounting policy from cost model to revaluation model. The revaluation of freehold lands were carried out by Independent valuer M/s ARCH-e'decon (Evaluators, Surveyors, Architects & Engineers) as at 30 March 2010. The value of land has increased by Rupees 2,410.233 million due to revaluation. 2009 2010 (Rupees in thousand)
6.2
NIB Bank Limited (NIB - 1) This represents LTF-EOP facility of Rupees 157 million obtained for import of textile machinery for a period of three years including a grace period of six months. It is repayable in ten equal quarterly installments. It is secured by first exclusive hypothecation charge on the imported machinery and allied equipment, including installation and local component costs. It carries mark up at fixed rate of 6 % per annum.
6. LONG TERM FINANCING From banking companies and other financial institutions Secured The Bank of Punjab (BOP - 1) NIB Bank Limited (NIB - 1) NIB Bank Limited (NIB - 2) Albaraka Islamic Bank B.S.C (E.C) (AIB) Allied Bank Limited (ABL -1 ) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICPL-1) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICPL-2) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICPL-3) Standard Chartered Bank (Pakistan) Limited (SCB-2) Standard Chartered Bank (Pakistan) Limited - Syndicated term finance Allied Bank Limited - Syndicated term finance The Bank of Khyber - Syndicated term finance Pak Libya Holding Company - Syndicated term finance Bank Al Falah Limited - Syndicated term finance Faysal Bank Limited - Syndicated term finance Standard Chartered Bank (Pakistan) Limited (SCB-1) Faysal Bank Limited (FBL - 1) Less: Current portion shown under current liabilities Other loans - Unsecured 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.10 6.10 6.10 6.10 6.10
26,623 107,716 198,803 8,333 65,094 18,055 10,000 156,250 100,000 186,500 543,150 95,500 47,750 477,500 279,750 2,321,024 700,434 1,620,590 4,794
46,598 139,815 223,200 41,666 113,067 21,666 20,000 187,500 175,000 200,000 568,750 100,000 50,000 500,000 300,000 20,226 34,376 2,741,864 830,770 1,911,094 4,794 2,683 7,477 1,918,571
6.3
NIB Bank Limited (NIB - 2) This represents a term finance facility of Rupees 300 million under State Bank of Pakistan (LTF-EOP) scheme for a period of five years with a grace period of one year. The financing is for import of 72 Picanol Omni Plus wide width Air Jet Looms and Tying & Knotting machine plus five (5) Gen Set gas generators being part of BMR. It is repayable in equal quarterly installments, commencing after expiry of grace period. The facility is secured against first pari passu charge over fixed assets of Raiwind Division and personal guarantees of the sponsor directors. It carries fixed mark up at the rate of 7% per annum.
6.4
Albaraka Islamic Bank B.S.C (E.C) (AIB) This represents murabaha finance facility of Rupees 100 million, obtained for construction of buildings. The facility is allowed for a period of four years including a grace period of one year. The facility is repayable in sixteen equal quarterly installments commenced with first payment due at the end of 15th month from the date of disbursement. It is secured by pari passu charge and hypothecation on fixed assets i.e. land and building constructed for ring spinning and stitching. It carries mark up at the rate of 3-years KIBOR plus 2% per annum with floor of 12.75% per annum.
6.5
Allied Bank Limited (ABL-1) This represents term finance facility of Rupees 300 million , obtained for import of state of art machinery and is allowed for a period of five years with a grace period of one year. The facility is repayable in sixteen (16) equal quarterly installments commenced after conclusion of grace period. It is secured by first exclusive charge on machinery imported. Facility amounting to Rupees 100 million carries mark up at the rate of 6 months KIBOR plus 1.25% per annum, facility of Rupees 125 million carries mark up at the rate of 6 months KIBOR plus 1.75% per annum and facility of Rupees 75 million carries mark up at the rate of 6 months KIBOR plus 2.50% per annum with no floor and cap. On December 28, 2006 loans amounting to Rupees 124.732 million were converted to LTF-EOP at 7% per annum fixed rate of mark up.
12
Kohinoor Sugar Mills Limited (KSML) Kohinoor Industries Limited (KIL)
6.11 6.12 2,683 7,477 1,628,067
6.6
Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 1) This represents the LTF-EOP facility of Rupees 65 million for import of textile machinery and is allowed for a
54
55
period of five years with a grace period of six months. The facility is repayable in eighteen (18) equal quarterly installments commenced from February 19, 2006. It is secured by first exclusive charge on imported machinery. It carries mark up at a fixed rate of 7% per annum. 6.7 Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 2) This represents a term finance of Rupees 40 million under State Bank of Pakistan (LTF-EOP) scheme at subsidized and fixed rate of mark up of 7% per annum. The financing is for import of warping and sizing machines being part of BMR. This facility for a period of five years with a grace period of one year and is repayable in equal quarterly installments. 6.8 Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 3) This represents term finance facility of Rupees 250 million obtained for debt reprofiling for a period of five years including grace period of one year. The facility is repayable in 8 equal six monthly installments. It is secured by first pari passu charge by way of hypothecation on all present and future plant and machinery of the Company and by way of mortgage on land measuring 121 acres, 2 kanals and 1 marla, situated at main Peshawar Road, Rawalpindi with 25% margin. Initially ranking charge will be created which will be upgraded within 90 days from the date of disbursement. The facility carries mark up at the rate of 3 months KIBOR plus 170 bps per annum with quarterly repricing effective from March 03, 2008. 6.9 Standard Chartered Bank (Pakistan) Limited (SCB-2) This represents the term finance facility of Rupees 200 million, obtained for the purpose of financing the unwinding cost of cross currency swap deal with the bank and is allowed for a period of two years. The facility is payable in eight equal quarterly installments. It is secured by ranking charge of Rupees 266.666 million on land of Kohinoor Textile Mills Limited situated at Rawalpindi. It carries mark up at the rate of 3-months average KIBOR plus 2.75% per annum with no floor and cap. 6.10 Syndicated Term Finance Syndicated Finance of Rupees 1.750 billion was arranged through Standard Chartered Bank (Pakistan) limited (SCBL) to swap highly priced loans. Long term facility was arranged and availed in Islamic and conventional mode of financing. Standard Chartered Bank (Pakistan) Limited (Arranger), Allied Bank Limited and Bank of Khyber disbursed Rupees 868.750 million under Islamic mode of financing whereas Bank Alfalah Limited, Faysal Bank Limited and Pak Libya Holding Company disbursed Rupees 850 million under conventional means of financing. Tenor of the loan was 5 years including one year grace period and was repayable in 16 equal quarterly installments. During the year, the Company has entered into supplimental to its syndicated term finance facility agreement where by the repayment schedule of the purchase price has been modified. Now the loan is repayble in twenty four installments within a tenor of six years . It is secured by first pari passu charge over the fixed assets of the Company including surplus land and buildings at Peshawar Road, Rawalpindi. It carries mark-up at 3 months average KIBOR plus 150 bps to be repriced at the end of each quarter. 6.11 Kohinoor Sugar Mills Limited (KSML) A civil suit has been filed by KSML for recovery of disputed liability which is being contested by the Company. 6.12 Kohinoor Industries Limited (KIL) The balance is an old one, un-reconciled, unconfirmed and disputed. 6.13 Current portion of long term liabilities include overdue installments amounting to Rupees 134.816 million (2009: Nil)
NOTE 7. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE Minimum lease payments Less: Un-amortized finance charges Present value of minimum lease payments Less: Current portion shown under current liabilities
2010 2009 (Rupees in thousand)
12
155,263 20,233 135,030 68,025 67,005
207,348 20,157 187,191 86,272 100,919
7.1
The minimum lease payments has been discounted at implicit interest rates which range from 6.00 % to 18.00% (2009: from 6.00% to 17.64%) per annum to arrive at their present values. The lease rentals are payable in monthly and quarterly installments. In case of any default an additional charge at the rate of 0.1 percent per day shall be payable. Taxes, repairs, replacements and insurance costs are to be borne by the Company. The lease agreements carry renewal and purchase option at the end of the lease term. There are no financial restrictions in lease agreements. These are secured by deposit of Rupees 21.065 million (2009: Rupees 24.841 million) included in long term security deposits, demand promissory notes, personal guarantees and pledge of sponsors' shares in public limited companies.
7.2 Minimum lease payments and present value of minimum lease payments are regrouped as under: 30 June 2010 Minimum lease payments Present value of minimum lease payments 30 June 2009 Present value of minimum lease payments
Minimum lease payments
Due not later than one year Due later than one year but not later than five years
------------------------(Rupees in thousand)---------------------88,922 86,272 85,937 68,025 69,326 155,263 67,005 135,030 118,426 207,348 100,919 187,191
8. DEFERRED TAX This comprises of following : Deferred tax liability on taxable temporary differences in respect of : - Accelerated tax depreciation allowance - Surplus on revaluation of investment Deferred tax asset on deductible temporary differences in respect of: Unused tax losses
329,260 164,613 493,873 335,877 157,996
289,245 156,047 445,292 310,625 134,667
56
57
8.1 The movement in deferred tax assets and liabilities during the year without taking into consideration the off setting balances within the same tax jurisdiction is as follows: 10. ACCRUED MARK-UP
Deferred tax liabilities
Accelerated Surplus on Unrealized tax revaluation gain on derivative depreciation of allowance investment financial instrument Total
NOTE
Deferred tax assets

Unused tax losses Total Net liability (asset)
Long term financing Short term borrowings Liabilities against assets subject to finance lease
119,580 167,594 2,813 289,987
62,793 120,542 1,924 185,259
Balance as at 01July 2008 Charged to other comprehensive income Charged to profit and loss account Balance as at 30 June 2009 Charged to other comprehensive income Charged to profit and loss account Balance as at 30 June 2010
------------------------------------------(Rupees in thousand)---------------------------------------356,607 263,542 72,119 692,268 225,369 225,369 466,899 (107,495) (67,362) 289,245 40,015 329,260 156,047 8,566 164,613 (72,119) (179,614) (67,362) 445,292 8,566 40,015 493,873 85,256 310,625 25,252 335,877 (179,614)
11. SHORT TERM BORROWINGS From banking companies - Secured Short term running finance 11.1 11.2 11.3 2,285,452 2,200,553 1,555,000 29,430 6,070,435 1,253,594 1,968,863 1,580,000 8,014 4,810,471
85,256 (152,618) 310,625 25,252 335,877 134,667 8,566 14,763 157,996
Other short term finances State Bank of Pakistan (SBP) refinances Temporary bank overdraft
NOTE 9. TRADE AND OTHER PAYABLES Creditors Accrued liabilities Advances from customers Workers' profit participation fund Workers' welfare fund Unclaimed dividend Withholding tax payable Payable to employees' provident fund trust Others 9.1 Workers' profit participation fund Balance as on 01 July Add: Provision for the year Add: Interest for the year Less: Payments during the year
2010 2009 (Rupees in thousand) 788,562 151,067 18,593 21,669 7,686 2,681 2,715 47,284 1,040,257 700,490 99,980 32,839 1,254 2,681 2,388 5,138 4,985 849,755
11.1 The running finance facilities sanctioned by various banks aggregate to Rupees 2,390 million (2009: Rupees 1,255 million). The rates of mark-up range from 3.23% to 25% (2009: from 3.63% to 18.50%) per annum. These arrangements are secured by pledge of raw material, charge on current assets of the Company including hypothecation of work-in-process, stores and spares, letters of credit, firm contracts, book debts and personal guarantees of the sponsor directors. 11.2 The other short term finance facilities sanctioned by various banks aggregate to Rupees 3,638 million (2009: Rupees 2,348 million). The rates of mark-up range from 6.63% to 18.00% (2009: from 6.08% to 18.48%) per annum. These arrangements are secured by pledge of raw material, charge on current assets of the Company including hypothecation of work-in-process, stores and spares, letters of credit, firm contracts, book debts and personal guarantees of the sponsor directors. 11.3 The export refinance facilities sanctioned by various banks aggregate to Rupees 1,665 million (2009: Rupees 2,950 million). The rates of mark-up range from 6.50% to 8.50%(2009: 7.50%) per annum. These arrangements are secured by way of charge on current assets of the Company and personal guarantees of the sponsor directors. NOTE 12. CURRENT PORTION OF NON-CURRENT LIABILITIES Long term financing - secured Liabilities against assets subject to finance lease 6 7 700,434 68,025 768,459 830,770 86,272 917,042 2010 2009 (Rupees in thousand)
9.1 31
31
1,254 20,227 188 21,669
1,279 164 189 1,254
9.1.1 The Company retains workers profit participation fund for its business operations till the date of allocation to workers. Interest is paid at prescribed rate under the Companies Profit (Workers Participation) Act, 1968 on funds utilized by the Company till the date of allocation to workers.
58
59
13. CONTINGENCIES AND COMMITMENTS

(12,397) 9,450 (2,947) (369,616) 4,047,897 6,048,099 (2,148,222) 3,899,877 6,552,906 (2,505,009) 4,047,897 (12,748) 11,032 (1,716) (371,618) 6,409,975 (4,418) 3,379 (1,039)
7,660 (1,779) 5,881
7,660 (2,711) 4,949
(6,118) 2,450 (3,668)
Vehicles
------------------------------------------------------------------------------(RUPEES IN THOUSAND)---------------------------------------------------------------------------------
21,176 (10,519) 10,657
(45) 39 (6) (1,345) 14,035
(121) 75 (46) (1,042) 11,999
Office Equipment
26,827 (12,792) 14,035 69,785 (37,941) 31,844 58,250 (45,078) 13,172 30,892 (22,095) 8,797 5,173,748 (2,166,527) 3,007,221 106,732 (39,014) 67,718 899,108 (395,047) 504,061 14,176 (5,522) 8,654 2,425,069 2,425,069
10,657 2,430
23,485 (11,486) 11,999
11,999 3,387
In addition to the above, another appeal for tax year 2003 against order under section 221 dated 24 January 2009, on the disallowance of depreciation expense of Rupees 62.665 million has been filed before Honorable Appellate Tribunal Inland Revenue which is pending adjudication. This is a cross appeal. Although the learned Commissioner Inland Revenue (Appeals) has already annulled the order under section 221 of the Income Tax Ordinance, 2001, vide order dated 30 July 2009, the Taxation Officer has illegally repeated the original assessment. Therefore, an appeal has also been filed before Commissioner Inland Revenue under section 187 of Income Tax Ordinance, 2001 for tax year 2003, the appellate order of which is pending. The revenue involved on account of penalty was Rupees.17.484 million. The Company has strong gounds and is expecting favourable outcome. b) The Company has filed an appeal before the Honorable Appellate Tribunal Inland Revenue under section 122(5A) / 122(1) / 129 of Income Tax Ordinance, 2001 for tax year 2004 which is pending adjudication. The loss for the year has been assessed at Rupees.255.684 million creating refund of Rupees 7.498 million. c). The Company and the tax authorities have filed appeals before different appellate authorities regarding sales tax matters. Pending the outcome of appeals filed by the Company and tax authorities, no provision has been made in these financial statements which on the basis adopted by the authorities would amount to Rupees 33.473 million (2009: 33.473 million), since the Company has strong grounds against the assessments framed by the tax authorities. d) The Company has filed recovery suits in civil courts of Rupees 4.589 million against various suppliers and customers for goods supplied by/ to them. Pending the outcome of the cases, no provision there against has been made in these financial statements since the Company is confident about favourable outcome of the cases. e) Four cases are pending before the Punjab Labour Appellate Tribunal, Shadman 1, Lahore regarding the reinstatement into service of four employees dismissed from their jobs. No provision has been made in these financial statements since the Company is confident about favourable outcome of the cases. f) Guarantees issued by various commercial banks, in respect of financial and operational obligations of the Company, to various institutions and corporate bodies aggregate Rupees 248.962 million as at 30 June, 2010 (2009: Rupees 319.430 million) 13.2 Commitments in respect of: a) Letters of credit for capital expenditure amount to Rupees 38.865 million (2009: Rupees 43.996 million). b) Letters of credit other than for capital expenditure amount to Rupees 325.393 million (2009: Rupees 235.345 million). 2010 2009 (Rupees in thousand) 6,409,975 86,324 6,496,299 4,047,897 92,336 4,140,233
Leased Assets
(32,459) 368,320
(173,260) 60,029 (113,231)
408,248 (78,910) 329,338
(32,226) 279,555
479,689 (111,369) 368,320
Plant & Machinery
363,121 (83,566) 279,555 106,320 (57,302) 49,018
329,338 71,441
368,320 56,692
(4,646) 2,849 (1,797) (8,720) 49,233
6,118 (2,450) 3,668
95,867 (43,315) 52,552
98,419 (49,186) 49,233
Vehicles
(3,278) 2,313 (965) (7,979) 49,018
52,552 7,198
49,233 5,061
(142) 117 (25) (3,175) 32,464
61,949 (31,608) 30,341
67,130 (34,666) 32,464
Furniture & Fixture
(3,275) 31,844
30,341 5,323
32,464 2,655
(45) (45) (6,047) 15,775
54,133 (34,087) 20,046
55,909 (40,134) 15,775
Computer & IT Installations
(4,944) 13,172
20,046 1,821
15,775 2,341
30,582 (20,095) 10,487
(1,046) 9,712
30,853 (21,141) 9,712
10,487 271
Services & Other Equipment
(954) 8,797
9,712 39
Owned Assets
(7,443) 6,409 (1,034) (273,270) 2,951,060
4,520,668 (1,578,682) 2,941,986
4,793,224 (1,842,164) 2,951,060
Plant & Machinery
(9,425) 8,680 (745) (273,014) 3,007,221
2,941,986 284,417
2,951,060 216,689
173,260 (60,029) 113,231
(4,418) 3,379 (1,039)
(2,681) 63,706
Residential & Other Building
72,970 (32,421) 40,549
98,808 (35,102) 63,706
40,549 25,838
(3,912) 67,718
63,706 7,924
(39,839) 518,187
747,738 (312,133) 435,605
870,159 (351,972) 518,187
435,605 122,421
Factory & Other Building
(43,075) 504,061
518,187 28,949
(405) 7,656
12,272 (4,673) 7,599
12,734 (5,078) 7,656
Office Building
7,656 1,442
(444) 8,654
7,599 462
14,836 2,410,233 -
2,425,069
14,836 14,836
14,836 -
14,836
14,836 14,836
14.1 OPERATING FIXED ASSETS
Freehold land
Year ended 30 June 2009 Opening net book value Additions Transfer Cost Accumulated depreciation
Disposals: Cost Accumulated depreciation
Opening net book value Revaluation Additions Transfer: Cost Accumulated depreciation
Disposals: Cost Accumulated depreciation
Year ended 30 June 2010
NOTE 14 PROPERTY, PLANT AND EQUIPMENT Operating fixed assets (Note 14.1) Capital work in progress (Note 14.4) 14.1 14.4
At 30 June 2008 Cost Accumulated depreciation Net book value
Cost Accumulated depreciation Net book value
At 30 June 2010 Cost / revalued amount Accumulated depreciation Net book value
Depreciation Rate (%)
Depreciation charge Closing net book value
Depreciation charge Closing net book value
At 30 June 2009
5 - 10
10
10
30
10
10
20
10
20
a) The Company has filed an appeal before Honorable Appellate Tribunal Inland Revenue, Lahore for tax year 2003 under section 129/132 of Income Tax Ordinance, 2001, which is pending adjudication. The tax loss was restricted to Rupees .27.540 million against declared loss of Rupees 122.933 million.
Total
13.1 Contingencies
(932) 4,949
5,881
4,949 -
(450) 831
1,542 (711) 831
9,275,570 (2,865,595) 6,409,975
3,899,877 521,622
4,047,897 2,410,233 325,179
60
61
Mr Fuad Zafar, R/O House # 27-E, Phase-1, DHA Lahore Cantt
Ghazi Fabrics International Ltd, Lahore
NOTE Bajaj Enterprises, 58-B Room #162- Mozang Road, Lahore 14.3 Depreciation charged during the year has been allocated as follows: Cost of sales Administrative expenses 14.4 CAPITAL WORK IN PROGRESS Civil works and buildings Plant and machinery 28 30
Particulars of purchaser
Maple Leaf Cement Factory Limited
ZahidJee Textile Mills Ltd, Faisalabad
350,778 20,840 371,618 67,593 18,731 86,324
347,202 22,414 369,616 15,897 76,439 92,336
Ghulam Abbas s/o Mulazim Hussain
North Star Textiles, Lahore
Negotiation
Negotiation
Negotiation
Negotiation
Negotiation
Negotiation
Negotiation
Mode of disposal
15. INVESTMENT PROPERTIES The fair value of investment properties comprising land and building situated at Lahore have been determined by Messers Hasib Associates (Private) Limited at Rupees 769.192 million as at 26 June 2008. Fair value of land situated at Rawalpindi has been determined by Messers Asrem (Private) Limited at Rupees 951.643 million as at 20 May 2008. The fair value was determined on the basis of professional assessment of the current prices in an active market for similar properties in the same location and condition. The valuers have certified that there is no material change in fair value during the current financial year and as on the balance sheet date. (Restated) 2010 2009 NOTE (Rupees in thousand) 16. LONG TERM INVESTMENTS Investment in subsidiary companies Quoted Maple Leaf Cement Factory Limited 186,608,808 (2009: 186,608,808) ordinary shares of Rupees 10 each fully paid Equity held 50.13% (2009: 50.13%) Un-quoted Concept Trading (Private) Limited 19,998 (2009:Nil) ordinary shares of Rupees 10 each fully paid Equity held 99.99% (2009:Nil)
--------------( R u p e e s i n t h o u s a n d)-----------
Gain
308
402
1,254
434
1,414
1,676
561
6,049 7,765 1,716
Sale Proceeds
600
419
591
1,567
539
1,617
1,800
632
Net Book Value
292
419
189
313
105
203
124
71
2,947
4,817
1,870
16.1
2,248,970
2,248,970
14.2 DETAIL OF DISPOSAL OF OPERATING FIXED ASSETS
Accumulated Depreciation
557
231
610
2,326
775
1,556
4,023
954
11,032
9,450
849
650
799
2,639
880
1,759
4,147
1,025
12,748
12,397
Cost
16.2
200 2,249,170
2,248,970
Honda City RIY-6720 Model 2002
Agregate of other items of property, plant & equipment with individual book values not exceeding Rupees.50,000
Crosol MK 4.5 card Model 1990
Machine-Drawing ToyodaHara DYH 500-c Complete Model
Suzuki Cultus LED- 840.07
2010
Description
Toyota Corolla LRR-2233
2009
16.1 Based on value in use calculations as at 30 June 2010, there was no impairment loss on investments in subsidiary companies (tested for impairment under IAS 36 "Impairment of Assets"). 16.2 Concept Trading (Private) Limited (Subsidiary Company) was incorporated on 11 March 2010 with authorized share capital of 50,000 shares of Rupees 10 each amounting to Rupees 500,000. Issued, subscribed and paid up capital of the Company is 20,000 ordinary shares of Rupees 10 each amounting to Rupees 200,000. Concept Trading (Private) Limited has not commenced business till 30 June 2010.
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63
NOTE 17. LONG TERM DEPOSITS Security deposits Less: current portion shown under current assets 18. STORES, SPARE PARTS AND LOOSE TOOLS Stores Spare parts Loose tools 18.1
NOTE 21. ADVANCES - considered good Advances to : - Executives - Other employees - Suppliers
2009 2010 (Rupees in thousand) 621 1,040 593,555 595,216 1,579 596,795 2,255 466 299,019 301,740 1,622 303,362
22
41,124 6,237 34,887
44,901 11,284 33,617
Letters of credit 250,003 95,795 345,798 215,516 87,871 560 303,947 22. SECURITY DEPOSITS AND SHORT TERM PREPAYMENTS Current portion of security deposits Short term prepayments 17
18.1 This includes stores in transit of Rupees 14.333 million (2009: Rupees 8.484 million). NOTE 19. STOCK-IN-TRADE Raw material Work-in-process Finished goods 19.1 764,549 891,595 736,969 2,393,113 618,265 546,792 614,769 1,779,826 2009 2010 (Rupees in thousand) 23. OTHER RECEIVABLES Sales tax refundable Custom duty receivable Export rebate Insurance claims Due from subsidiary company (Maple Leaf Cement Factory Limited) Research and development support Draw back of taxes and levies Cotton claim Others
6,237 9,341 15,578
11,284 17,099 28,383
260,161 3,642 47,561 175 23.1 14,987 473 25,808 28,745 20,376 401,928
215,877 3,642 32,302 181 10,657 25,735 13,338 301,732
19.1 This includes raw material in transit of Rupees 55.351 million (2009: Rupees 60.232 million) 2010 2009 (Rupees in thousand) 20. TRADE DEBTS Considered good: Secured (against letters of credit) Unsecured 747,285 581,780 1,329,065 592,941 457,160 1,050,101
23.1 This represents amount receivable against allocation of pool expenses. NOTE 24. SHORT TERM INVESTMENTS Investments at fair value through profit and loss - Held for trading Quoted companies Loss on remeasurement of fair value during the year
20.1 As at 30 June 2010, trade debts of Rupees 568.309 million (2009 : Rupees 225.526 million) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. The ageing analysis of these trade debts is as follows: 2009 2010 (Rupees in thousand) Upto 1 month 1 to 6 months More than 6 months 433,697 116,664 17,948 568,309 190,322 20,427 14,777 225,526
13,611 (5,595) 8,016
13,611 (7,464) 6,147
Available for sale Associated Company - unquoted Security General Insurance Company Limited 6,398,541 (2008 : 6,398,541) Ordinary shares of Rupees 10 each fully paid.Equity held 9.40% (2008 : 9.40%) Surplus on revaluation of investment 24.1 7,000 7,000
627,095 634,095 642,111
594,463 601,463 607,610
64
65
24.1 Fair value per share of Rupees 99.10 (2009: Rupees 94) is calculated by independent valuer on the basis of net assets based valuation method. Security General Insurance Company Limited is associated Company due to common directorship. 24.2 Maple Leaf Cement Factory Limited, a subsidiary of the Company holds 4,570,389 (2009:4,570,389) ordinary shares of Security General Insurance Company representing 6.71% (2009 : 6.71%) equity. 25. CASH AND BANK BALANCES Cash in hand Cash at bank: - On current accounts - On saving accounts 2009 2010 (Rupees in thousand) 961 65,217 12,673 77,890 78,851 721 65,685 13,891 79,576 80,297 28. COST OF SALES Raw materials consumed Cloth and yarn procured and consumed Salaries, wages and other benefits Dyes and chemicals consumed Processing charges Stores, spare parts and loose tools consumed Packing materials consumed Fuel and power 25.1 The balances in current and saving accounts carry interest ranging from 0.40% to 13% (2009: from 0.20% to 12%) per annum. 25.2 The balances in current and deposit accounts include US $ 37,000 (2009: US $ 72,465) 2010 2009 (Rupees in thousand) 552,923 100,000 652,923 551,662 50,000 601,662 Repair and maintenance Insurance Other factory overheads Depreciation 26. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE Land Advance against land Work-in-process Opening stock Closing stock Cost of goods manufactured Finished goods Opening stock Closing stock Cost of sales 28.1 Raw material consumed Opening stock 6,406,061 4,189,295 54,845 43,137 10,693,338 5,452,211 2,971,466 35,222 8,458,899 Add: Purchased during the year Less: Closing stock
NOTE
28.1 28.2
3,347,817 2,464,620 740,125 518,965 12,267 608,508 374,847 619,450 59,445 22,915 39,795
3,192,060 1,405,218 690,336 505,493 22,452 234,522 322,317 453,899 36,086 19,717 36,562 347,202 7,265,864 471,943 (546,792) (74,849) 7,191,015
14.3
350,778 9,159,532 546,792 (891,618) (344,826) 8,814,706
The Company intends to dispose off land located at Raiwind Road and M.M Alam Road, Lahore after final negotiations with its intended buyers. An active programme commenced to locate a buyer at a reason price. During the year ended 30 June 2009, land could not be disposed of due to unusually adverse investment scenario of the country resulting in slump in property market. During the current year, due to continued stressed property market, the company was still unable to liquidate these land at its target price. These events precluded that disposal of land during the year, however, the management considers that these events were beyond its control and remains committed to disposal of these land at a reasonable price. The proceeds of disposal are expected to exceed the carrying amount of the land. 2010 2009 (Rupees in thousand) 27. SALES Export Local Duty drawback Export rebate
614,769 (736,946) (122,177) 8,692,529
622,747 (614,769) 7,978 7,198,993
558,033 3,498,981 4,057,014 709,197 3,347,817
470,160 3,279,933 3,750,093 558,033 3,192,060
Exchange gain due to currency rate fluctuations relating to export sales amounting to Rupees 35.245 million (2009: Rupees 105.328 million) has been included in export sales.
28.2 Salaries, wages and other benefits include provident fund contribution of Rupees 16.813 million (2009: Rupees 15.893 million) by the Company.
66
67
NOTE 29. DISTRIBUTION COST Salaries, wages and other benefits Outward freight and handling Clearing and forwarding Travelling and conveyance Insurance Vehicles' running expenses Electricity, gas and water Postage, telephone and fax Sales promotion and advertisement Commission to selling agents Miscellaneous expenses 29.1
2010 2009 (Rupees in thousand) 39,011 30,549 227,943 17,911 348 3,252 808 2,832 16,726 54,501 3,937 397,818 33,876 28,492 160,317 18,651 405 3,699 679 3,201 17,370 190,877 7,281 464,848 31.1 Auditors' remuneration Statutory audit fee Certifications
2010 2009 (Rupees in thousand) 1,000 265 1,265 750 295 1,045
31.2 Donation includes Rupees 7.882 million paid to Gulab Devi Hospital, Lahore. None of the directors and their spouses have any interest in the donees' fund. NOTE 32. OTHER OPERATING INCOME Income from financial assets: Exchange gain Gain/ (loss) on disposal of investments Gain/ (loss) on remeasurement of fair value of investments at fair value through profit and loss Return on bank deposits Dividend income 2010 2009 (Rupees in thousand)
19,261 1,869 953 425 22,508
78,350 (4,727) (7,464) 2,237 546 68,942
29.1 Salaries, wages and other benefits include provident fund contribution of Rupees 1.284 million (2009: Rupees 1.009 million) by the Company. 30. ADMINISTRATIVE EXPENSES Salaries, wages and other benefits Travelling and conveyance Repairs and maintenance Rent, rates and taxes Insurance Vehicles' running expenses Printing, stationery and periodicals Electricity, gas and water Postage, telephone and fax Legal and professional Security, gardening and sanitation Depreciation Miscellaneous expenses 30.1 93,990 5,587 8,280 9,001 4,600 7,296 4,359 2,589 4,878 4,433 19,813 20,840 9,437 195,103 83,014 4,382 9,743 2,908 4,483 7,099 4,795 1,175 3,987 2,995 18,915 22,414 10,055 175,965
Income from associated company : Dividend income : Security General Insurance Company Limited Income from non-financial assets: Scrap sales Gain on disposal of property, plant and equipment Gain on sale of land classified as held for sale Miscellaneous 12,797 15,996
14.2
14.3
29,175 6,049 8,122 43,346 78,651
30,479 1,870 8,190 1,074 41,613 126,551
30.1 Salaries, wages and other benefits include provident fund contribution of Rupees 2.800 million (2009: Rupees 2.220 million) by the Company. NOTE 31. OTHER OPERATING EXPENSES Auditors' remuneration Donations Workers' profit participation fund Workers' welfare fund Miscellaneous 31.1 31.2 9.1 2010 2009 (Rupees in thousand) 1,265 8,100 20,227 7,686 45 37,323 1,045 21,000 45 22,090
33. FINANCE COST Mark-up/finance charges/ interest on: Long term financing Short term borrowings Liabilities against assets subject to finance lease Loss on cross currency swap Workers' profit participation fund (WPPF) Provident fund Bank charges and commission Exchange loss
9.1
329,679 677,043 21,169 188 2,968 1,031,047 35,248 6,473 1,072,768
397,809 575,378 24,842 196,057 164 322 1,194,572 24,616 41,042 1,260,230
68
69
NOTE 34. PROVISION FOR TAXATION Current year: Current Deferred
36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amounts charged in these financial statements in respect of remuneration including certain benefits to the chief executive, directors and executives of the Company are given below: Chief Executive 2010 2009 Number of persons Managerial remuneration Contribution to provident Fund Housing and utilities Medical Group insurance Club subscription Others Directors 2010 2009 Executives 2010 2009
34.1
83,824 14,763 98,587
55,753 (152,618) (96,865)
31 31 1 1 3 3 -----------------------------------------------( Rupees in Thousand )-----------------------------------4,800 308 84 64 185 5,441 4,800 308 185 73 5,366 5,157 154 87 1,246 92 6,736 4,297 99 87 1,246 59 5,788 44,856 3,005 9,021 2,586 252 6,096 65,816 32,715 2,410 5,458 1,849 122 4,132 46,686
34.1 Provision for current year income tax represents final tax on export sales, minimum tax on local sales and tax on income from other sources under the relevant provisions of the Income Tax Ordinance, 2001.Numeric tax reconciliation has not been presented, being impracticable. 2009 2010 (Rupees in thousand) 376,448 371,618 1,072,768 (6,049) (13,222) (953) (1,869) (1,124,424) 674,317 (536,676) 369,616 1,260,230 (1,870) 4,727 (16,542) (2,237) (8,190) 7,464 423,691 1,500,213
NOTE 35. CASH GENERATED FROM OPERATIONS Profit / (loss) before taxation Adjustment for non-cash charges and other items: Depreciation Finance cost Gain on sale of property, plant and equipment Loss on disposal of investments - at fair value through profit and loss account Dividend income Return on bank deposits Gain on sale of non-current assets classified as held for sale Gain/ (loss) on remeasurement of investments at fair value through profit and loss Working capital changes
The Chief Executive Officer and directors are provided with the Company's maintained vehicles, free medical facilities and residential telephone facilities for both business and personal use. Chief executive is also provided free furnished accommodation alongwith utilities. Executives are provided with the Company's maintained vehicles in accordance with the Company policy. The aggregate amount charged in these financial statements in respect of directors' meeting fee paid to 2 (2009: 2) directors was Rupees 70,000 (2009: Rupees 60,000). 37. TRANSACTIONS WITH RELATED PARTIES The related parties comprise of subsidiaries, associated undertakings, directors of the company and their close relatives, key management personnel and staff retirement fund. Detail of transactions with related parties, other than those which have been specifically disclosed elsewhere in these financial statements are as follows: 2010 2009 (Rupees in thousand) Transaction with Subsidiary Companies Purchase of goods and services Sale of goods and services Purchase of property, plant and equipment Sale of property, plant and equipment Purchase of shares Transaction with Associated Company Dividend income Post employment benefit plan Contribution to provident fund Interest on provident fund
35.1
35.1 Working capital changes (Increase)/ decrease in current assets: Stores, spare parts and loose tools Stock-in-trade Trade debts Advances Security deposits and short term prepayments Other receivables Increase in current liabilities Trade and other payables
(41,851) (613,287) (278,964) (293,433) 12,805 (100,196) (1,314,926) 190,502 (1,124,424)
(13,000) (106,764) 290,359 67,060 (19,269) (7,475) 210,911 212,780 423,691
484 147 1,770 419 200
4,523 1,485 -
12,797
15,996
20,897 2,968
19,122 322
70
71
2010
2009
PROCESSING OF CLOTH : - Rawalpindi Division (Meters in thousand) 41,975 34,653 41,975 30,626
38. EARNINGS / (LOSS) PER SHARE - BASIC AND DILUTED There is no dilutive effect on the basic earning/ (loss) per share which is based on: Profit/ (loss) attributable to ordinary shares Weighted average number of ordinary shares Earnings/ (loss) per share Rupees in thousand Numbers Rupees 277,861 145,526,216 1.91 (439,811) 145,526,216 (3.02)
Capacity at 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) Actual at 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) POWER PLANT: - Rawalpindi Division Annual rated capacity (based on 365 days) Actual generation Main engines
(Mega Watts) 207,787 207,787
2,198 78,080
7,124 64,663
39. PLANT CAPACITY AND ACTUAL PRODUCTION SPINNING: - Rawalpindi Division Spindles (average) installed / worked; 85,680 (Numbers) 85,834 - Raiwind Division
Gas engines
Annual rated capacity (based on 365 days) Actual generation Gas engines Stitching
54,460
54,312
(Kilograms in thousand) 100% Plant capacity converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) Actual production converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) - Gujar Khan Division Spindles (average) installed / worked; 70,848 35,211 (Numbers) 66,068 35,298 37,950 37,945
26,212
28,166
The plant capacity of this division is indeterminable due to multi product plants involving varying processes of manufacturing and run length of order lots. REASONS FOR LOW PRODUCTION Due to stoppage for normal maintenance, doffing, change of spin plans and cloth quality, interruption in gas andelectricity supply.
(Kilograms in thousand) 100% Plant capacity converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts ) Actual production converted into 20s count based on 3 shifts per day for 1,095 shifts (2008: 1,095 shifts) WEAVING: - Raiwind Division Looms installed / worked 204 (Numbers) 204 31,295 26,318 33,313 27,732
Cloth processing units working capacity was limited to actual export / local orders in hand. The generation of power was limited to actual demand.
40. POST BALANCE SHEET EVENT In accordance with the approval of the shareholders in their Extraordinary General Meeting held on 03 May 2010 and subsequent permission granted by the Securities and Exchange Commission of Pakistan (SECP), the Company has, after the reporting period, issued 100,000,000 ordinary shares of Rupees 10 each otherwise than through a right issue to Mercury Management Incorporated, Hutton Properties Limited and Zimpex (Private) Limited in accordance with the agreement dated 10 March 2010 between the three allottees, the Company and Maple Leaf Cement Factory Limited subsidiary company.
(Kilograms in thousand) 100% Plant capacity at 60 picks based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) Actual production converted to 60 picks based on 3 shifts per day for 1,072 shifts (2009: 1,092 shifts) 68,605 68,271 72,568 72,568
72
73
74
41.
41.1 30 June 2010 ----------------------------------------------------------- ( R u p e e s in t h o u s a n d ) ------------------------------------------------------------SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST ADMINISTRATIVE EXPENSES (64,130) (80,364) 1,142,628 130,628 263,489 305,503 1,771 182,962 (55,961) (74,090) (60,939) (118,015) (51,207) (104,989) (70,034) (394,542) (68,797) (461,734) (16,234) (18,129) (57,076) (53,782) (324,508) (392,937) 1,222,992 204,718 381,504 410,492 396,313 644,696 2,000,809 (397,818) (195,103) (592,921) 1,407,888 (3,599,136) (2,844,840) (2,698,019) (2,160,689) (5,078,201) (4,112,288) 2,682,827 1,918,824 (8,692,529) 4,822,128 3,049,558 3,079,523 2,571,181 5,474,514 4,756,984 (2,682,827) (1,918,824) 10,693,338 8,458,899 (7,198,993) 1,259,906 (464,848) (175,965) (640,813) 619,093 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 Spinning Weaving Processing and home textile Elimination of inter-segment transactions Company
SEGMENT INFORMATION
PROFIT BEFORE TAX AND UNALLOCATED INCOME AND EXPENSES UNALLOCATED INCOME AND EXPENSES FINANCE COST OTHER OPERATING EXPENSES OTHER OPERATING INCOME PROVISION FOR TAXATION PROFIT / (LOSS) AFTER TAXATION 41.2
Reconciliation of reportable segment assets and liabilities
(1,072,768) (37,323) 78,651 (98,587) (1,130,027) 277,861
(1,260,230) (22,090) 126,551 96,865 (1,058,904) (439,811)
Spinning Weaving Company Processing and home textile 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 ---------------------------------------------------------------------(R u p e e s in t h o u s a n d)-----------------------------------------------------------------------TOTAL ASSETS FOR REPORTABLE SEGMENT
2,399,058
2,514,724
1,211,488
1,701,352
2,973,709
2,978,474
6,584,255 10,473,044 17,057,299
7,194,550 6,080,989 13,275,539
UNALLOCATED ASSETS
All segment assets are allocated to reportable segments other than those directly relating to corporate and tax assets.
TOTAL LIABILITIES FOR REPORTABLE SEGMENT
689,813
842,797
2,005,937
1,725,080
2,604,786
5,429,033
5,300,536 11,756,763 17,057,299
7,996,910 5,278,629 13,275,539
UNALLOCATED LIABILITIES
All segment liabilities are allocated to reportable segments other than trade and other payables, corporate borrowings and current and deferred tax liabilities.
41.3
41.3.1
41.4
41.3.2
(a) Market risk (i) Currency risk
42. FINANCIAL RISK MANAGEMENT 42.1 Financial risk factors The Company's activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures.
Geographical Information
Europe America Asia, Africa, Australia Pakistan
Revenue from major customers
The Company's revenue from external customers by geographical location is detailed below: 2010 2009 (Rupees in thousand)
The Company's revenue is earned from a large mix of customers.
All non current assets as at reporting date are located and operated in Pakistan.
1,664,667 4,040,326 799,050 4,189,295 10,693,338 1,714,770 3,407,655 365,008 2,971,466 8,458,899
Risk management is carried out by the Company's finance department under policies approved by the Board of Directors. The Company's finance department evaluates and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, other price risk, interest rate risk, credit risk, liquidity risk, use of derivative financial instruments and non derivative financial instruments and investment of excess liquidity.
The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Euro and GBP. Currently, the Company's foreign exchange risk exposure is restricted to bank balances, the amounts receivable / payable from / to the foreign entities. The Company uses forward exchange contracts to hedge its foreign currency risk, when considered appropriate. The Company's exposure to currency risk was as follows:
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies.
75
Cash at banks - USD Trade debts - USD Trade debts - Euro Trade debts - GBP Trade and other payable - USD Net exposure - USD Net exposure - Euro Net exposure - GBP The following significant exchange rates were applied during the year: Rupees per US Dollar Average rate Reporting date rate Rupees per Euro verage rate Reporting date rate Rupees per GBP Average rate Reporting date rate Sensitivity analysis
2010 2009 (Rupees in thousand) 72 37 10,473 11,864 245 832 18 26 30 10,519 11,871 245 832 18 -
Index
Impact on profit/ (loss) after taxation
Impact on statement of other comprehensive income
2010 2009 2010 2009 -------------------------------- (RUPEES IN THOUSAND) -----------------------------------KSE 100 (5% increase) KSE 100 (5% decrease) (iii)Interest rate risk This represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no significant long-term interest-bearing assets. The Company's interest rate risk arises from long term financing, liabilities against assets subject to finance lease, lease finance advance and short term borrowings. Borrowings obtained at variable rates expose the Company to cash flow interest rate risk. Borrowings obtained at fixed rate expose the Company to fair value interest rate risk. At the balance sheet date the interest rate profile of the Companys interest bearing financial instruments was: 2010 2009 (Rupees in thousand) Fixed rate instruments Financial liabilities Long term financing Short term borrowings Liabilities against assets subject to finance lease Floating rate instruments Financial assets Bank balances- saving accounts Financial liabilities Long term financing Short term borrowings Liabilities against assets subject to finance lease Lease finance advance Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of the Company. Cash flow sensitivity analysis for variable rate instruments If interest rate at the year end date, fluctuates by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rupees 65.712 million lower / higher and loss after taxation for the previous year was Rupees 56.458 million higher / lower, mainly as a result of higher / lower interest expense on floating rate borrowings. This analysis is prepared assuming the amounts of liabilities outstanding at balance sheet dates were outstanding for the whole year. 401 (401) 307 (307) -
83.55 85.40 107.92 104.33 132.08 128.66
78.73 81.10 107.74 114.54 126.45 135.05
If the functional currency, at reporting date, had weakened / strengthened by 5% against the USD, Euro and GBP with all other variables held constant, the impact on profit after taxation for the year would have been Rupees 46.633 million, Rupees 3.993 million and Rupees Nil respectively higher / lower and the impact on loss after taxation for the previous year was Rupees 42.655 million, Rupees 1.403 million and Rupees 0.122 million respectively lower / higher, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis. In management's opinion, the sensitivity analysis is unrepresentative of inherent currency risk as the year end exposure does not reflect the exposure during the year. (ii) Other price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instrument traded in the market. The Company is not exposed to commodity price risk. Sensitivity analysis The table below summarises the impact of increase / decrease in the Karachi Stock Exchange (KSE) Index on the Company's profit after taxation for the year and on equity (fair value reserve). The analysis is based on the assumption that the equity index had increased / decreased by 5% with all other variables held constant and all the Company's equity instruments moved according to the historical correlation with the index:
407,742 1,555,000 -
549,141 1,580,000 8,017
12,673 1,920,759 4,515,435 135,030 -
13,891 2,200,200 3,230,471 179,174 35,922
76
77
(b)
Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: 2010 2009 (Rupees in thousand) 607,610 642,111 20,060 41,124 1,050,101 1,329,065 122 141 24,176 20,551 79,576 77,890 1,781,645 2,110,882
The Company's exposure to credit risk and impairment losses related to trade debts is disclosed in Note 20.
Due to the Company's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counter parties on their obligations to the Company. Accordingly the credit risk is minimal. (c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. At 30 June 2010, the Company had Rupees 7.533 million available borrowing limits from financial institutions and Rupees 78.851 million cash and bank balances. Inspite the fact that the Company is in a negative working capital position at the year end, management believes the liquidity risk to be low. Following are the contractual maturities of financial liabilities, including interest payments. The amount disclosed in the table are undiscounted cash flows: Contractual maturities of financial liabilities as at 30 June 2010
Carrying Contractual Amount Cash Flows Non derivative financial liabilities: Long term financing Liabilities against assets subject to finance lease Trade and other payables Accrued mark-up Short term borrowings 6 month or less 6-12 month 1-2 Year More than 2 Years
Investments Deposits Trade debts Accrued interest Other receivables Bank balances
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (If available) or to historical information about counterparty default rate: Rating 2009 2010 Short Term Long term Agency (Rupees in thousand) Banks National Bank of Pakistan Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Faysal Bank Limited Habib Bank Limited MCB Bank Limited NIB Bank Limited The Royal Bank of Scotland Limited My Bank Limited The Bank of Punjab Meezan Bank Limited Silk bank Limited Standard Chartered Bank (Pakistan) Limited United Bank Limited Al-Baraka Islamic Bank Limited Bank Al Habib Limited A-1+ A1+ A1+ A1+ A-1+ A-1+ A1+ A1+ A1+ A2 A1+ A-1 A-3 A1+ A-1+ A-1 A-1+ AAA AA AA AA AA AA+ AA+ AAAA AAAAAAAAA AA+ A AA+ JCR-VIS PACRA PACRA PACRA JCR-VIS JCR-VIS PACRA PACRA PACRA PACRA PACRA JCR-VIS JCR-VIS PACRA JCR-VIS JCR-VIS PACRA 754 32,531 7,822 1,421 4,108 67 9,907 12,313 88 30 540 319 2,945 2,309 133 2,565 38 77,890 4,656 31,292 5,703 2,536 1,872 103 12,611 11,106 76 30 1,763 30 837 2,611 4,350 79,576
------------------------------------ (Rupees in thousand) ------------------------------
2,328,501
2,950,434
542,361 53,450 989,594 185,259 5,796,162 7,566,826
398,510 32,487 471,947 902,944
699,117 45,157 744,274
1,310,446 24,169 1,334,615
135,030 155,263 989,594 989,594 185,259 289,987 6,070,435 6,268,109 9,813,547 10,548,659
Contractual maturities of financial liabilities as at 30 June 2009

Carrying Amount Non derivative financial Liabilities Long term financing Liabilities against assets subject to Lease finance advance Trade and other payables Accrued mark-up Short term borrowings Contractua l Cash Flows 6 month or less 6-12 month 1-2 Year More than 2 Years
------------------------------------ (Rupees in thousand) -----------------------------2,749,341 187,191 35,922 808136 185,259 4,810,471 8,776,320 3,413,720 207,348 36,460 989,594 185,259 4,991,732 9,824,113 506,992 35,963 36,460 989,594 185,259 4,438,253 6,192,521 606,169 52,959 553,479 1,212,607 1,031,773 50,812 1,082,585 1,268,786 67,614 1,336,400
Investments Security General Insurance Company Limited
JCR-VIS
634,095 711,985
601,463 681,039
78
79
The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest rates / mark up rates effective as at 30 June. The rates of interest / mark up have been disclosed in note 6, note 7, and note 11 to these financial statements. 42.2 Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped in to levels 1 to 3 based on the degree to which fair value is observable: Level 1 As at 30 June 2010 Assets Available for sale financial assets As at 30 June 2009 Assets Available for sale financial assets Level 2 Level 3 Total Liabilities as per balance sheet Long term financing Liabilities against assets subject to finance lease Trade and other payables Accrued mark-up Short term borrowings
Financial liabilities at amortized cost (Rupees in thousand) 2,328,501 135,030 989,594 289,987 6,070,435 9,813,547
-----------------------------(Rupees in thousand)----------------------------
634,095
634,095
601,463
601,463 As at 30 June 2009 Assets as per balance sheet Investments Deposits Trade debts Interest accrued Other receivables Cash and bank balances
Through Loans and Available profit and Total receivables for sale loss -----------------------------(Rupees in thousand)----------------------------
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial instruments held by the Company is the current bid price. These financial instruments are classified under level 1 in above referred table. The Company has no such type of financial instruments as on 30 June 2010. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value a financial instrument are observable, those financial instruments are classified under level 2 in above referred table. If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3.The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. The Company has no such type of financial instruments as on 30 June 2010. Through Loans and profit and receivables loss Available for sale Total
20,060 1,050,101 122 24,176 80,297 1,174,756
6,147 6,147
601,463 601,463
607,610 20,060 1,050,101 122 24,176 80,297 1,782,366
Financial liabilities at amortized cost (Rupees in thousand) Liabilities as per balance sheet Long term financing Liabilities against assets subject to finance lease Lease finance advance Trade and other payables Accrued mark-up Short term borrowings 42.4 a) Capital risk management The Companys objectives when managing capital are to safeguard the Companys ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders through repurchase of shares, issue new shares or sell assets to reduce debt. Consistent with others in the industry and the requirements of the lenders, the Company monitors the capital structure on the basis of gearing ratio. This ratio is calculated as borrowings divided by total capital 2,749,341 187,191 35,922 808,136 185,259 4,810,471 8,776,320
-----------------------------(Rupees in thousand)---------------------------As at 30 June 2010 Assets as per balance sheet Investments Deposits Trade debts Interest accrued Other receivables Cash and bank balances
41,124 1,329,065 141 20,551 78,851 1,469,732
8,016 8,016
634,095 634,095
642,111 41,124 1,329,065 141 20,551 78,851 2,111,843
80
81
employed. Borrowings represent long-term financing, liabilities against assets subject to finance lease, lease finance advance and short-term borrowings obtained by the Company as referred to in note 6, note 7and note 11 respectively. Total capital employed includes total equity as shown in the balance sheet plus borrowings. The gearing ratio as at year ended 30 June 2010 and 30 June 2009 is as follows:
PATTERN OF SHAREHOLDING 1. CUIN (Incorporation Number) 2. Name of the Company 3. Pattern of holding of the shares held by the shareholders as at 0002805 KOHINOOR TEXTILE MILLS LIMITED 30.06.2010 Total Shares Held 73,362 310,476 304,401 1,713,151 990,944 547,146 548,833 515,611 353,850 228,179 234,446 297,802 387,153 152,384 290,604 439,734 132,208 217,998 178,214 94,700 495,088 201,227 321,077 110,074 245,000 126,529 133,317 149,999 150,223 160,085 169,838 201,156 208,272 215,000 218,000 246,081 251,293 553,549 293,000 605,291 315,847 338,510
2010 2009 (Rupees in thousand) Borrowings Total equity Total capital employed Gearing Ratio 43. DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorised for issue on September 29, 2010 by the Board of Directors of the Company. 44. CORRESPONDING FIGURES No significant reclassification/ rearrangement of corresponding figures has been made. 45. GENERAL Figures have been rounded off to the nearest thousand of Rupees unless stated otherwise. 8,533,966 3,361,268 11,895,234 72% ,782,925 3,059,341 10,842,266 72%
4. No. of Shareholders 2,628 1,066 406 650 132 45 30 22 13 7 6 7 8 3 5 7 2 3 2 1 5 2 3 1 2 1 1 1 1 1 1 1 1 1 1 1 1 2 1 2 1 1
S i z e From 1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 45,001 50,001 55,001 60,001 65,001 70,001 85,001 90,001 95,001 100,001 105,001 110,001 120,001 125,001 130,001 145,001 150,001 160,001 165,001 200,001 205,001 210,001 215,001 245,001 250,001 275,001 290,001 300,001 315,001 335,001
o f
H o l d i n g To 100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 90,000 95,000 100,000 105,000 110,000 115,000 125,000 130,000 135,000 150,000 155,000 165,000 170,000 205,000 210,000 215,000 220,000 250,000 255,000 280,000 295,000 305,000 320,000 340,000
__________________ CHIEF EXECUTIVE
__________________ DIRECTOR
82
83
S i z e No. of Shareholders 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5,105 From 340,001 395,001 445,001 450,001 480,001 490,001 495,001 520,001 560,001 645,001 690,001 780,001 840,001 875,001 905,001 1,115,001 1,280,001 2,030,001 2,360,001 3,235,001 3,325,001 5,075,001 8,040,001 8,260,001 9,045,001 10,040,001 10,825,001 22,510,001 35,205,001
o f
H o l d i n g To 345,000 400,000 450,000 455,000 485,000 495,000 500,000 525,000 565,000 650,000 695,000 785,000 845,000 880,000 910,000 1,120,000 1,285,000 2,035,000 2,365,000 3,240,000 3,330,000 5,080,000 8,045,000 8,265,000 9,050,000 10,045,000 10,830,000 22,515,000 35,210,000 Total Shares Held 340,584 400,000 447,218 450,216 483,000 988,483 500,000 525,000 560,500 645,500 691,753 784,047 841,200 877,134 905,062 1,116,000 1,283,007 2,031,482 2,362,066 3,238,871 3,326,368 5,077,500 8,040,081 8,261,366 9,045,940 10,040,331 10,827,332 22,510,635 35,205,888 145,526,216 5.2. Associated Companies, undertakings and related parties Zimpex (Private) Limited 5.3 NIT and ICP National Bank of Pakistan, Trustee Deptt. IDBP (ICP UNIT)
Percentage No. of Shareholders Shares Held of Capital
22,510,635
15.4684
2 5.4 Banks, Development Financial Institutions, Non-Banking Financial Institutions 5.5 Insurance Companies 5.6 Modarabas, Leasing and Mutual Funds 5.7 Shareholders holding Ten Percent or more voting interest in the Company refer 5.2 & 5.8 b 5.8 General Public a. Individuals b. Foreign Investor (s) 5.9 Joint Stock Companies 5.10 Public Sector Companies and Corporations 5.11 Executives 5.12 Others Artal Restaurant Int Limited Employees Provident Fund Fikree Development Corporation Limited Hussain Trustees Limited Manage Committee of Tameer-e-Millat Foundation Securities & Exchange Commission of Pakistan The Deputy Administrator. Abandoned Properties The Ida Rieu Poor Welfare Association The Karachi Stock Exchange (Guarantee) Limited-Future Cont. The Okhai Memon Madressah Association Trustees Al-Abbas Sugar Mills Limited Employees Gratuity Fund Trustees Artal Restaurants Intl Employees Provident Fund Trustees Moosa Lawai Foundation Trustees Nestle Pakistan Limited Employees Provident Fund Trustees Nestle Pakistan Limited Managerial Staff Pension United Executers & Trustee Company Limited University of Sindh Grand Total : 21 6 8
3,326,368 18,247 3,344,615 3,627,578 1,305,345 2,245,333
2.2858 0.0125 2.2983 2.4927 0.8970 1.5429
4,944 10 88 1 -
29,723,755 43,575,197 17,082,061 300,405 1,815 2,794 260 506 1 3,045 354 61,425 1 9,075 760 3,751 20,000 20,000 173 596 124,556 145,526,216
20.4251 29.9432 11.7381 0.2064 -
TOTAL
Note : The Slabs not applicable above have not been shown. 5 Categories of Shareholders 5.1 Directors, CEO and their spouses & minor children
No. of Shareholders Percentage of Capital
Shares Held
Mr. Tariq Sayeed Saigol, Chairman/Director Mr. Taufique Sayeed Saigol, Chief Executive/Director Mr. Sayeed Tariq Saigol, Director Mr. Waleed Tariq Saigol, Director Mr. Kamil Taufique Saigol, Director Mr. Zamiruddin Azar, Director Mr. Abdul Hai Mehmood Bhaimia, Director Mrs. Shehla Tariq Saigol, spouse of Mr. Tariq Sayeed Saigol 8
10,040,331 10,827,332 315,847 20,937 2,500 5,930 23,643 450,216 21,686,736
6.8993 7.4401 0.2170 0.0144 0.0017 0.0041 0.0163 0.3094 14.9023
16 5,105
0.0856 100.0000
84
85
Consolidated Financial Statements of Kohinoor Textile Mills Limited
86
87
DIRECTORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENTS The Directors are pleased to present the audited consolidated financial statements of the group for the year ended 30th June, 2010. GROUP RESULTS The Group has earned gross profit of Rs. 5,056 million as compared to Rs. 6,323 million of corresponding year. The group has suffered pre-tax loss of Rs. 2,193 million this year as compared to Rs. 1,454 million during the last year. The overall group financial results are as follows: 2010 2009 (Rupees in thousand) 24,440,066 23,812,751 5,056,138 6,322,818 939,061 3,206,130 3,132,244 4,660,471
AUDITORS' REPORT TO THE MEMBERS We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Kohinoor Textile Mills Limited (the Holding Company) and its subsidiary companies (together referred to as Group) as at 30 June 2010 and the related consolidated profit and loss account, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of Kohinoor Textile Mills Limited. The financial statements of the Subsidiary Companies were audited by other firms of auditors, whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included for such companies, is based solely on the reports of such other auditors. These financial statements are the responsibility of the Holding Company's management. Our responsibility is to express an opinion on these financial statements based on our audit Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements present fairly the financial position of Kohinoor Textile Mills Limited and its subsidiary companies as at 30 June 2010 and the results of their operations for the year then ended. As stated in note 2.1(d)(i) and 2.5 to the consolidated financial statements, the Group has changed its accounting policies and disclosures arising from standards and amendments to published approved accounting standards, with which we concur.
Gross sales Gross profit Profit from operations Financial Charges Maple Leaf Cement Factory Limited
The subsidiary company of Kohinoor Textile Mills Limited has shown gross profit of 21.56% as compared to 32.49% of previous year. ACKNOWLEDGEMENT The Directors are grateful to the Group's members, financial institutions, customers and employees for their cooperation and support. They also appreciate the hard work and dedication of the employees working at various divisions.
RIAZ AHMAD & COMPANY Chartered Accountants Name of engagement partner: Atif Bin Arshad
Lahore: September 29, 2010
Taufique Sayeed Saigol Chief Executive
ISLAMABAD Date: September 29, 2010
88
89
CONSOLIDATED BALANCE SHEET 2010 2009 NOTE (Rupees in thousand) EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorized share capital 370,000,000 ( 2009: 170,000,000) ordinary shares of Rupees 10 each 30,000,000 ( 2009: 30,000,000) preference shares of Rupees 10 each Issued, subscribed and paid up share capital Reserves Shareholders' equity Non controlling interest Equity attributable to equity holders of the Group Surplus on revaluation of property Share deposit money NON-CURRENT LIABILITIES Long term financing Redeemable capital Liabilities against assets subject to finance lease Lease finance advance Long term deposits Employees' benefits Deferred tax CURRENT LIABILITIES Trade and other payables Accrued mark-up Short term borrowings Current portion of non-current liabilities TOTAL LIABILITIES CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND LIABILITIES 18 40,888,068 36,676,598 3 4 5 6 7 8 9 10 11 12 13
AS AT 30 JUNE 2010 NOTE ASSETS NON-CURRENT ASSETS Property, plant and equipment Investment properties Intangible assets Long term loans to employees Long term deposits and prepayments 19 20 21 22 23 27,531,515 1,720,835 1,774 3,293 86,460 29,343,877 24,521,559 1,720,835 7,332 5,666 85,102 26,340,494 2010 2009 (Rupees in thousand)
3,700,000 300,000 4,000,000 1,455,262 1,462,928 2,918,190 2,405,263 5,323,453 3,673,825 1,000,000 4,227,075 8,289,800 767,748 2,739 26,493 157,996 13,471,851 4,439,979 1,211,799 10,131,273 1,635,888 17,418,939 30,890,790
1,700,000 300,000 2,000,000 1,455,262 2,456,202 3,911,464 3,669,866 7,581,330 1,263,592 2,745,185 7,200,000 963,133 35,922 2,580 18,990 204,422 11,170,232 3,193,658 626,453 9,192,793 3,648,540 16,661,444 27,831,676
CURRENT ASSETS Stores, spare parts and loose tools Stock -in- trade Trade debts Loans and advances Due from gratuity fund trust Security deposits and short term prepayments Interest accrued Other receivables Short term investments Taxation recoverable Cash and bank balances
24 25 26 27 42 28 29 30 31 32
2,753,208 2,897,831 2,080,465 863,437 137,402 797 494,916 1,114,449 396,310 152,453 10,891,268
3,240,141 2,430,740 1,732,345 398,158 8,184 171,689 1,105 320,778 1,014,173 236,900 180,229 9,734,442
14 15 16 17
Non-current assets classified as held for sale
33
652,923 11,544,191
601,662 10,336,104
TOTAL ASSETS
40,888,068
36,676,598
The annexed notes form an integral part of these consolidated financial statements.
CHIEF EXECUTIVE
DIRECTOR
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91
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2010
NOTE SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST ADMINISTRATIVE EXPENSES OTHER OPERATING EXPENSES 34 35 2010 2009 (Rupees in thousand) 24,440,066 (19,383,928) 5,056,138 (3,667,408) (388,042) (197,309) (4,252,759) 803,379 135,682 939,061 (3,132,244) (2,193,183) (113,034) (2,306,217) 52,794 (1,315,024) (1,262,230) (1,043,987) 46 (7.17) 23,812,751 (17,489,933) 6,322,818 (2,912,955) (326,873) (60,807) (3,300,635) 3,022,183 183,947 3,206,130 (4,660,471) (1,454,341) 31,546 (1,422,795) 52,794 (516,554) (463,760) (959,035) (6.59)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010
2010 2009 (Rupees in thousand) LOSS AFTER TAXATION OTHER COMPREHENSIVE LOSS Surplus / (deficit) on remeasurement of available for sale investment Deferred tax on remeasurement of available for sale investment 104,708 (27,486) 77,222 77,222 (2,228,995) (737,065) 193,478 (543,587) (571,802) 72,119 (499,683) (1,043,270) (2,466,065) (2,306,217) (1,422,795)
36 37 38
OTHER OPERATING INCOME PROFIT FROM OPERATIONS FINANCE COST LOSS BEFORE TAXATION PROVISION FOR TAXATION LOSS AFTER TAXATION NON CONTROLLING INTEREST Dividend on preference shares Share in loss for the year LOSS AFTER TAXATION AND NON CONTROLLING INTEREST LOSS PER SHARE - BASIC AND DILUTED (Rupees)
39
Adjustment of cross currency interest rate swap Deferred tax on adjustment of cross currency interest rate swap Other comprehensive income / (loss) for the year - net of tax TOTAL COMPREHENSIVE LOSS FOR THE YEAR Total comprehensive loss attributable to : Equity holders of parent Non controlling interest
40
41
(993,274) (1,235,721) (2,228,995)
(1,699,421) (766,644) (2,466,065)
CHIEF EXECUTIVE
DIRECTOR
CHIEF EXECUTIVE
DIRECTOR
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93
(959,035) (959,035) (1,699,421) (1,699,421) (766,644) (2,466,065)
(993,274) (1,235,721) (2,228,995)
(52,478)
5,610,885 4,488,988 10,099,873
3,911,464 3,669,866 7,581,330
(28,882)
Total General Un-appropriated Sub-Total reserves reserve profit /(loss)
(1,043,987) (1,043,987) (993,274)
1,202,463 2,692,954 4,155,623
283,428 1,733,919 2,456,202
Hedging reserves
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term financing Redeemable capital Repayment of long term financing Lease finance advance Short term borrowings - net Repayment of liabilities against assets subject to finance lease Proceeds from share deposit money Redeemable capital Repayment of term finance certificates Long term deposits from stockist - net Dividend paid Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The annexed notes form an integral part of these consolidated financial statements. 625,536 300,000 (420,840) (35,922) 938,480 (175,168) 1,000,000 (3,400) (599) 159 (28,882) 2,199,364 (27,776) 180,229 152,453 913,964 (1,023,619) 35,922 1,828,531 (80,576) (2) (52,539) 1,621,681 708 179,521 180,229
(423,109) (317,277)
Capital reserves
317,277
CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure on property, plant and equipment Payment for non current assets classified as held for sale Long term loans to employees Investments made Return on bank deposits received Proceeds from sale of property, plant and equipment Proceeds from sale of investments Sale of non current assets classified as held for sale Dividend received Net cash used in investing activities
(1,980,444) (51,261) 2,373 (65,775) 6,589 13,644 3,664 22,653 (2,048,557)
(1,840,294) (190,230) 455 (30,225) 12,079 10,143 13,792 25,000 28,259 (1,971,021)
Share holders' Equity Reserves Revenue reserves
1,462,669 1,490,491
(40,000)
722,283 1,450,491
Sub-Total
(740,386)
Fair value reserve
144,919 1,000,473
577,364
628,077
50,713
772,996 1,450,491
50,713
(760,559)
40,000
689,932 1,462,928
CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Finance cost paid Compensated absences paid Workers' Profit Participation Fund paid Funds received/ paid to gratuity fund trust Long term deposits Income taxes paid Net cash generated from / (used in) operating activities
NOTE 43
2,717,867 (2,546,898) (10,021) 8,184 (1,358) (346,357) (178,583)
5,080,447 (4,464,982) (3,744) (25) (2,264) (259,384) 350,048
2,918,190 2,405,263 5,323,453
Total equity
2010 2009 ( Rupees in thousand)
Non controlling Interest
(52,478)
Total
(28,882)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010
Share premium
144,919
Share capital
1,455,262
1,455,262
Dividend paid to non-controlling interest holders
Dividend paid to non-controlling interest holders
Transfer from general reserve
Total comprehensive loss
Total comprehensive loss
1,455,262
144,919
CHIEF EXECUTIVE
DIRECTOR
CHIEF EXECUTIVE
DIRECTOR
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2010
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95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 1. THE GROUP AND ITS OPERATIONS 1.1 Holding Company Kohinoor Textile Mills Limited ("the Holding Company") is a public limited company incorporated in Pakistan under the Companies Act,1913 (now Companies Ordinance, 1984) and listed on the Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the Company is situated at 42-Lawrence Road, Lahore. The Holding Company holds 50.13% (2009: 50.13%) shares of Maple Leaf Cement Factory Limited, 99.99% (2009: Nil) shares of Concept Trading (Private) Limited and indirectly holds 50.12% (2009: Nil) shares of Vital Trading (Private) Limited. The principal activity of the Holding Company is manufacturing of yarn and cloth, processing and stitching the cloth and trade of textile products. 1.2 Subsidiary Companies a) Maple Leaf Cement Factory Limited ("the Subsidiary") was incorporated in Pakistan on 13 April, 1960 under the Companies Act, 1913 (now the Companies Ordinance, 1984) as a public company limited by shares and was listed on stock exchanges in Pakistan on 17 August, 1994. The registered office of the Subsidiary is situated at 42-Lawrence Road, Lahore. The Subsidiary is engaged in production and sale of cement. b) Concept Trading (Private) Limited ('the Subsidiary') was incorporated in Pakistan on March 11, 2010 as a trading concern. The registered office of the Company is situated at 42-Lawrence Road, Lahore. c) Vital Trading (Private) Limited ('the Subsidiary') was incorporated in Pakistan on March 11, 2010 as a trading concern. The registered office of the Company is situated at 42-Lawrence Road, Lahore. 1.3 Basis of consolidation The financial statements of the Subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases. The assets and liabilities of the Subsidiaries have been consolidated on a line by line basis and the carrying value of investment held by the Holding Company is eliminated against Holding Company's share in paid up capital of the Subsidiaries. Material intra-group balances and transactions have been eliminated. Non controlling interest is that part of net results of the operations and of net assets of the Subsidiaries attributable to interests which are not owned by the Holding Company. Non controlling interest is presented as a separate item in the consolidated financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated:
2.1 Basis of Preparation a) Statement of Compliance These consolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. b) Accounting Convention These consolidated financial statements have been prepared under the historical cost convention, except for: modification of foreign currency translation adjustments; revaluation of free hold land at fair value; revaluation of investment properties at fair value; recognition of employee retirement benefits at present value; and measurement at fair value of certain financial assets.
c) Critical accounting estimates and judgments The preparation of consolidated financial statements in conformity with the approved accounting standards require the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Group's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectation of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Group's financial statements or where judgments were exercised in application of accounting policies are as follows: Financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques based on assumptions that are dependent on conditions existing at balance sheet date. Useful lives, patterns of economic benefits and impairments Estimates with respect to residual values, useful lives and pattern of flow of economic benefits are based on the analysis of the management of the Group. Further, the Group reviews the value of assets for possible impairments on an annual basis. Any change in the estimates in the future might affect the carrying amount of respective item of property, plant and equipment, with a corresponding effect on the depreciation charge and impairment. Taxation In making the estimates for income tax currently payable by the Group, the management takes into account the current income tax law and the decisions of appellate authorities on certain issues in the past.
96
97
Provisions for doubtful debts The Group reviews its receivable against any provision required for any doubtful balances on an ongoing basis. The provision is made while taking into consideration expected recoveries, if any. Impairment of investments in associated companies In making an estimate of recoverable amount of the Group's investments in associated companies, the management considers future cash flows. d) Standards and amendments to published approved accounting standards that are effective in current year i) Changes in accounting policies and disclosures arising from standards and amendments to published approved accounting standards that are effective in the current year IAS 1 (Revised) 'Presentation of Financial Statements' (effective for annual periods beginning on or after 01 January 2009).The revised standard prohibits the presentation of items of income and expenses (that is non-owner changes in equity) in the statement of changes in equity, requiring non-owner changes in equity to be presented separately from owner changes in equity in a statement of comprehensive income. As a result the Group presents in the statement of changes in equity all owner changes in equity, whereas all nonowner changes in equity are presented in the statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. IFRS 7 (Amendment) Financial instruments: Disclosures (effective for annual periods beginning on or after 01 January 2009). This amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share. IFRS 8 'Operating Segments' (effective for annual periods beginning on or after 01 January 2009). It introduces the "management approach" to segment reporting. IFRS 8 requires presentation and disclosure of segment information based on the internal reports regularly reviewed by the Group's chief operating decision makers in order to assess each segment's performance and to allocate resources to them. Previously, the Group did not present segment information as IAS 14 limited reportable segments to those that earn a majority of their revenue from sales to external customers and therefore did not require the different stages of vertically integrated operations to be identified as separate segments. Under the management approach, the Group has determined operating segments on the basis of business activities i.e. Spinning, Weaving, Processing, Home Textile and cement. As the change in accounting policy only results in additional disclosures of segment information, there is no impact on earnings per share.
ii) Other amendment to published approved accounting standards that is effective in the current year IAS 23 (Amendment) 'Borrowing Costs' (effective for annual periods beginning on or after 01 January 2009). It requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for its intended use or sale) as part of the cost of that asset. The Group's accounting policy on borrowing cost, as disclosed in note 2.14, complies with the above mentioned requirements to capitalize borrowing cost and hence this change has not impacted the Group's accounting policy. IFRS 3 (Revised) 'Business combinations' (effective from July 1, 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisitions date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non- controlling interest in all the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisitionrelated costs should be expensed. This amendment does not have any effect on the Group's financial statements. IAS 27 (Revised) 'Consolidated and separate financial statements' (effective from July 1,2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in good will or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. This amendment does not have any effect on the Group's financial statements. IAS 28 (Amendment) 'Investment in associates' (effective from January 1, 2009). An investment in associate is treated as a single asset for the purpose of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. This amendment do not have any effect on the Group's financial statements. e) Standards, interpretations and amendments to published approved accounting standards that are effective in current year but not relevant There are other new standards, interpretations and amendments to the published approved accounting standards that are mandatory for accounting periods beginning on or after 01 July 2009 but are considered not to be relevant or do not have any significant impact on the Group's financial statements and are therefore not detailed in these consolidated financial statements. f) Standard and amendments to published approved accounting standards that are not yet effective but relevant Following standard and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 01 July 2010 or later periods:
98
99
IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 01 January 2013). IFRS 9 has superseded the IAS 39 'Financial Instruments: Recognition and Measurement'. It requires that all equity investments are to be measured at fair value while eliminating the cost model for unquoted equity investments. Certain categories of financial instruments available under IAS 39 will be eliminated. Moreover, it also amends certain disclosure requirements relating to financial instruments under IFRS 7. The management of the Group is in the process of evaluating impacts of the aforesaid standard on the Group's financial statements. There are other amendments resulting from annual Improvements projects initiated by International Accounting Standards Board in April 2009 and May 2010, specifically in IFRS 7 'Financial Instruments: Disclosures', IFRS 8 'Operating Segments', IAS 1 'Presentation of Financial Statements', IAS 7 'Statement of Cash Flows', IAS 24 'Related Party Disclosures' and IAS 36 'Impairment of Assets' that are considered relevant to the Group's financial statements. These amendments are unlikely to have a significant impact on the Group's financial statements and have therefore not been analyzed in detail. g) Standards, interpretations and amendments to published approved accounting standards that are not effective in current year and not considered relevant There are other accounting standards, amendments to published approved accounting standards and new interpretations that are mandatory for accounting periods beginning on or after 01 July 2010 but are considered not to be relevant or do not have any significant impact on the Group's financial statements and are therefore not detailed in these consolidated financial statements. 2.2 Employee benefits Holding Company The Holding Company operates an approved funded contribution provident fund covering all of its permanent employees. Equal monthly contributions are made both by the Holding Company and employees at the rate of 8.33 percent of basic salary and cost of living allowance to the fund. The Holding Company's contributions to the fund are charged to profit and loss account. Subsidiary Company - Maple Leaf Cement Factory Limited a) Defined contribution plan The Subsidiary operates a defined contributory approved provident fund for all of its employees. Equal monthly contributions are made both by the Subsidiary and employees at the rate of 10% of the basic salary to the fund. b) Defined benefit plan The Subsidiary operates un-funded gratuity scheme for all workers of the Company who have completed minimum qualifying period of service as defined under the respective scheme. Provisions are made to cover the obligations under the schemes on the basis of actuarial valuation and are charged to income.
The amount recognized in the balance sheet represents the present value of defined benefit obligations as adjusted for unrecognized actuarial gains and losses. Cumulative net unrecognized actuarial gains and losses at the end of previous year which exceeds 10% of the present value of the Companys gratuity is amortized over the average expected remaining working lives of the employees. c) Liability for employees' compensated absences The Subsidiary accounts for the liability in respect of employees' compensated absences in the year in which these are earned. Provision to cover the obligations is made using the current salary level of employees. 2.3 Taxation Current Provision for current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary timing differences arising from difference between the carrying amount of the assets and liabilities in the consolidated financial statements and corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. 2.4 Provisions Provisions are recognized when the Group has a 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 of the amount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimates.
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101
2.5 Property, plant and equipment Holding Company Owned Property, plant and equipment except freehold land and capital work in progress are stated at cost less accumulated depreciation and accumulated impairment losses (if any). Cost of property, plant and equipment consists of historical cost, borrowing cost pertaining to erection/construction period of qualifying assets and other directly attributable cost of bringing the asset to working condition. Freehold land is stated at revalued amount less any identified impairment loss. Capital work in progress is stated at cost less any identified impairment loss. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Holding Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the period in which they are incurred. During the current year, the Holding Company has changed its accounting policy for measurement of freehold land from cost model to revaluation model. Freehold land is now stated at revalued amount less any identified impairment loss. Previously, freehold land was stated at cost less any identified impairment loss. The effect of revaluation of freehold land has been dealt with in accordance with the requirements of International Accounting Standard (IAS) 16 "Property, Plant and Equipment". Had there been no change in this accounting policy, property, plant and equipment would have been lower by Rupees 2,410.233 million. This change in accounting policy has no impact on profit or loss. Depreciation Depreciation on all property, plant and equipment is charged to profit and loss account applying the reducing balance method so as to write off the cost/ depreciable amount of the asset over their estimated useful lives at the rates given in Note 19.1. Depreciation on additions is charged from the month the assets are available for use while no depreciation is charged in the month in which the assets are disposed off. The residual values and useful lives of assets are reviewed by the management, at each financial year end and adjusted if impact on depreciation is significant. Derecognition An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognized. Leased Finance lease Leases where the Holding Company has substantially all the risks and rewards of ownership are classified as finance lease. Asset subject to finance lease are capitalized at the commencement of the lease term at the lower of present value of minimum lease payments under the lease agreements and the fair value of the leased assets, each determined at the inception of the lease.
The related rental obligation, net of finance cost, is included in liabilities against assets subject to finance lease. The liabilities are classified as current and long term depending upon the timing of payments. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The finance cost is charged to profit and loss account over the lease term. Depreciation on assets subject to finance lease is recognized in the same manner as for owned assets. Depreciation of the leased assets is charged to profit and loss account. Subsidiary Company - Maple Leaf Cement Factory Limited Owned Property, plant and equipment, except freehold land and capital work-in-progress, are stated at cost less accumulated depreciation and impairment losses, if any. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and cost of the item can be measured reliably. Freehold land and capital work-in-progress are stated at cost less impairment losses, if any. All expenditure connected with specific assets incurred during installation and construction period are carried under capital work-in-progress. These are transferred to specific assets as and when these are available for use. Cost in relation to certain plant and machinery represents historical cost, exchange differences capitalized upto June 30, 2004 and the cost of borrowings during the construction period in respect of loans and finances taken for the specific projects. Transactions relating to jointly owned assets with Pak American Fertilizers Limited (PAFL), as stated in note 19.4, are recorded on the basis of advices received from the housing colony. All other repair and maintenance costs are charged to income during the period in which these are incurred. Gains / losses on disposal or retirement of property, plant and equipment, if any, are taken to profit and loss account. Depreciation is calculated at the rates specified in note 19.1 on reducing balance method except that straight-line method is used for the plant and machinery and buildings relating to dry process plant after deducting residual value. Depreciation on additions is charged from the month in which the asset is put to use and on disposals upto the month of disposal. The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Leased Finance lease Assets held under finance lease arrangements are initially recorded at the lower of present value ofminimum lease payments under the lease agreements and the fair value of the leased assets.
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Depreciation on leased assets is charged applying reducing balance method at the rates used for similar owned assets, so as to depreciate the assets over their estimated useful lives in view of certainty of ownership of assets at the end of lease term. 2.6 Un-allocated capital expenditure All cost or expenditure attributable to work-in-progress are capitalized and apportioned to buildings and plant and machinery at the time of commencement of commercial operations. 2.7 Investment Properties Land and buildings held for capital appreciation or to earn rental income are classified as investment properties. Investment properties are carried at fair value which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. The valuation of the properties is carried out with sufficient regularity. Gain or losses arising from a change in the fair value of investment properties are included in the profit and loss account currently. 2.8 Intangible assets Intangible assets, which are non-monetary assets without physical substance, are recognized at cost, which comprise purchase price, non-refundable purchase taxes and other directly attributable expenditure relating to their implementation and customization. After initial recognition an intangible asset is carried at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized from the month, when these assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortized over its estimated useful life over which economic benefits are expected to flow to the Group. The useful life and amortization method is reviewed and adjusted, if appropriate, at each balance sheet date. Currently, intangible asset (computer software) is amortised using the straight-line method over a period of three years. Amortisation on additions to intangible assets is charged from the month in which an asset is put to use and on disposal upto the month of disposal. 2.9 Investments Classification of investment is made on the basis of intended purpose for holding such investment. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such designation on regular basis. Investments are initially measured at fair value plus transaction costs directly attributable to acquisition, except for "investment at fair value through profit or loss" which is measured initially at fair value. The Group assesses at the end of each reporting period whether there is any objective evidence that investments are impaired. If any such evidence exists, the Group applies the provisions of IAS 39 'Financial Instruments: Recognition and Measurement' to all investments, except investments in subsidiary companies, which are tested for impairment in accordance with the provisions of IAS 36 'Impairment of Assets'.
a) Investments at fair value through profit or loss Investments classified as held-for-trading and those designated as such are included in this category. Investments are classified as held-for-trading if they are acquired for the purpose of selling in the short term. Gains or losses on investments held-for-trading are recognised in profit and loss account. b) Held-to-maturity Investments with fixed or determinable payments and fixed maturity are classified as held-tomaturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long term investments that are intended to be held to maturity are subsequently measured at amortized cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation, using the effective interest method, of any difference between the initially recognized amount and the maturity amount. For investments carried at amortised cost, gains and losses are recognized in profit and loss account when the investments are derecognized or impaired, as well as through the amortisation process. c) Available-for-sale Investments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity, or changes to interest rates or equity prices are classified as available-for-sale. After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized directly in statement of other comprehensive income until the investment is sold, de-recognized or is determined to be impaired, at which time the cumulative gain or loss previously reported in statement of other comprehensive income is included in profit and loss account. These are sub-categorized as under: Quoted For investments that are actively traded in organized capital markets, fair value is determined by reference to stock exchange quoted market bids at the close of business on the balance sheet date. Unquoted Fair value of unquoted investments is determined on the basis of appropriate valuation techniques as allowed by IAS 39 "Financial Instruments: Recognition and Measurement". Change in Accounting Estimate During the current year ended, the Holding Company has changed the accounting estimate for valuation of its unquoted available for sale investment. Fair value of unquoted, available for sale investment is now determined by using net assets based valuation method. Previously, valuation was carried out using dividend stream method. Effect of this change in accounting estimate is recognized prospectively in accordance with the requirements of International Accounting Standard (IAS) 8 "Accounting Policies, Changes in Accounting Estimates and Errors". Had there been no change in this accounting estimate, short term investments, fair value reserve and deferred taxation would have been lower by Rupees 32.633 million, Rupees 24.067 million and Rupees 8.566 million respectively with no effect on the profit or loss.
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2.10 Inventories Inventories, except for stock in transit and waste stock / rags are stated at lower of cost and net realizable value. Cost is determined as follows: Stores, spare parts and loose tools Useable stores, spare parts and loose tools are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. Stock-in-trade Cost of raw material, work-in-process and finished goods is determined as follows: (i) (ii) For raw materials: For work-in-process and finished goods: Annual average basis. Average manufacturing cost including
2.13 Non-current assets classified as held for sale Non-current assets are classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than continuous use. These are measured at lower of carrying amount and fair value less costs to sell. 2.14 Borrowing costs Interest, mark-up and other charges on long-term finances are capitalized up to the date of commissioning of respective qualifying assets acquired out of the proceeds of such long-term finances. All other interest, mark-up and other charges are recognized in profit and loss account. 2.15 Revenue recognition a) Revenue from local sales is recognized on dispatch of goods to customers while in case of export sales it is recognized on the date of bill of lading. b) Dividend on equity investments is recognized when the Group's right to receive payment is established. c) Profit on deposits with banks is recognized on time proportion basis taking into account the amounts outstanding and rates applicable thereon. 2.16 Foreign currencies These financial statements are presented in Pak Rupees, which is the Groups functional currency. All monetary assets and liabilities denominated in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date, while the transactions in foreign currency during the year are initially recorded in functional currency at the rates of exchange prevailing at the transaction date. All non-monetary items are translated into Pak Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange gains and losses are included in the income currently. 2.17 Financial instruments Financial instruments carried on the balance sheet include investments, deposits, trade debts, advances, interest accrued, other receivables, cash and bank balances, long-term financing, liabilities against assets subject to finance lease, lease finance advance, short-term borrowings, accrued mark-up and trade and other payables etc. Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of instrument. Initial recognition is made at fair value plus transaction costs directly attributable to acquisition, except for financial instrument at fair value through profit or loss which is measured initially at fair value. Financial assets are de-recognized when the Group loses control of the contractual rights that comprise the financial asset. The Group loses such control if it realizes the rights to benefits specified in contract, the rights expire or the Group surrenders those rights. Financial liabilities are de-recognized when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on subsequent measurement (except available for sale investments) and de-recognition is charged to the profit or loss currently. The particular measurement methods adopted are disclosed in the following individual policy statements associated with each item and in the accounting policy of investments. a) Trade and other receivables Trade debts and other receivables are carried at original invoice value less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.
Materials in transit are valued at cost comprising invoice value plus other charges paid thereon. Waste stock / rags are valued at net realizable value. Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessarily to make a sale. 2.11 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and are re-measured to fair value at subsequent reporting dates. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as cash flow hedges. The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the profit and loss account. Amounts accumulated in statement of other comprehensive income are recognized in profit and loss account in the periods when the hedged item will affect profit or loss. 2.12 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at banks on current, saving and deposit accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in values.
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b) Borrowings Borrowings are recognized initially at fair value and are subsequently stated at amortized cost. Any difference between the proceeds and the redemption value is recognized in the profit and loss account over the period of the borrowings using the effective interest method. c) Trade and other payables Liabilities for trade and other amounts payable are initially recognized at fair value, which is normally the transaction cost. 2.18 Impairment a) Financial Assets A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negative effect on the estimated future cash flow of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference between its carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of available for sale financial asset is calculated by reference to its current fair value. 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. b) Non financial assets The carrying amount of assets are reviewed at each balance sheet date for impairment whenever events changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amounts. The resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the surplus on revaluation of that asset. 2.19 Related party transactions Transactions and contracts with related parties are carried out at an arm's length price determined in accordance with comparable uncontrolled price method. 2.20 Segment reporting Segment reporting is based on the operating (business) segments of the Group. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the chief executive officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the chief executive officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those income, expenses, assets, liabilities and other balances which can not be allocated to a particular segment on a reasonable basis are reported as unallocated. The Group has four reportable business segments. Spinning (Producing different quality of yarn using natural and artificial fibers), Weaving (Producing different quality of greige fabric using yarn), Processing and Home Textile (Processing greige fabric for production of printed and dyed fabric and manufacturing of home textile articles) and cement . Transaction among the business segments are recorded at arm's length prices using admissible valuation methods. Inter segment sales and purchases are eliminated from the total. 2.21 Dividend and other appropriations Dividend distribution to the Group's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are declared and other appropriations are recognized in the period in which these are approved by the Board of Directors. 2.22 Off setting of financial assets and liabilities Financial assets and liabilities are set off and the net amount is reported in the financial statements when there is legally enforceable right to set off and the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. 2.23 Equity instruments These are recorded at their face value. 3. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL 2010 2009 Number of shares 1,596,672 26,156,000 26,858,897 38,673,628 52,241,019 145,526,216 1,596,672 26,156,000 26,858,897 38,673,628 52,241,019 145,526,216
Ordinary shares of Rupees 10 each allotted on reorganization of Kohinoor Industries Limited Ordinary shares allotted under scheme of arrangement of merger of Part II of Maple Leaf Electric Company Limited Ordinary shares allotted under scheme of arrangement of merger of Kohinoor Raiwind Mills Limited and Kohinoor Gujar Khan Mills Limited. Ordinary shares of Rupees 10 each issued as bonus shares Ordinary shares of Rupees 10 each issued for cash
2010 2009 (Rupees in thousand) 15,967 261,560 268,589 386,736 522,410 1,455,262 15,967 261,560 268,589 386,736 522,410 1,455,262
3.1 Zimpex (Private) Limited, which is an associated company, held 22,510,635 (2009:22,510,635) ordinary shares of Rupees 10 each at 30 June 2010.
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4. RESERVES NOTE Composition of reserves is as follows: Capital: Share premium Fair value reserve - net of deferred tax Revenue: General reserve Unappropriated profit / (loss) 4.1 4.2 144,919 628,077 772,996 1,450,491 144,919 577,364 722,283 2010 2009 (Rupees in thousand)
SURPLUS ON REVALUATION OF PROPERTY NOTE Investment properties Freehold land 6.1
2010 2009 (Rupees in thousand) 1,263,592 2,410,233 3,673,825 1,263,592 1,263,592
6.1 Freehold land is now stated at revalued amount as a result of change in accounting policy from cost model to revaluation model. The revaluation of freehold land was carried out by Independent valuer M/s ARCH-e'-decon (Evaluators, Surveyors, Architects & Engineers) as at 30 March 2010. The value of land has increased by Rupees 2,410.233 million due to revaluation. NOTE 7 SHARE DEPOSIT MONEY 7.1 2010 2009 (Rupees in thousand) 1,000,000 -
1,450,491 (760,559) 283,428 689,932 1,733,919 1,462,928 2,456,202
4.1 This reserve can be utilized by the Group only for the purposes specified in section 83(2) of the Companies Ordinance, 1984.
7.1 This represents amount received by Subsidiary from sponsors against future issue of shares, as per conditions of restructuring agreements as disclosed in note 8.14 and 9 to these consolidated financial statements. Security and Exchange Commission of Pakistan through its letter June 30, 2010 has allowed the Company to issue 153,846,153 shares at Rupees 6.5 per share at a discount of Rupees 3.50 per share otherwise than right upto extent of Rupees 1.00 billion to Kohinoor Textile Mills Limited, Holding company. 8 LONG TERM FINANCING 2010 2009 (Rupees in thousand) 26,623 107,716 198,803 8,333 65,094 18,055 10,000 156,250 100,000 186,500 543,150 95,500 47,750 477,500 279,750 46,598 139,815 223,200 41,666 113,067 21,666 20,000 187,500 175,000 200,000 568,750 100,000 50,000 500,000 300,000 20,226 34,376
4.2 Fair value reserve - net of deferred tax Balance as at 01 July Add/ (less) : Fair value adjustment on investment in Security General Insurance Company Limited during the year Related deferred tax asset/ liability on investment in Security General Insurance Company Limited Balance as at 30 June
NOTE 577,364 68,763 (18,050) 50,713 628,077 1,000,473 (573,706) 150,597 (423,109) 577,364 Holding company The Bank of Punjab (BOP - 1) NIB Bank Limited (NIB - 1) NIB Bank Limited (NIB - 2) Albaraka Islamic Bank B.S.C (E.C) (AIB) Allied Bank Limited (ABL - 1) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL-1) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL-2) Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL-3) Standard Chartered Bank (Pakistan) Limited (SCB-2) Standard Chartered Bank (Pakistan) Limited Syndicated term finance Allied Bank Limited - Syndicated term finance The Bank of Khyber - Syndicated term finance Pak Libya Holding Company - Syndicated term finance Bank Al Falah Limited - Syndicated term finance Faysal Bank Limited - Syndicated term finance Standard Chartered Bank (Pakistan) Limited (SCB-1) Faysal Bank Limited (FBL) 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.10 8.10 8.10 8.10 8.10
5. NON-CONTROLLING INTEREST Opening balance Add: Share during the year - Hedging reserve - Surplus on revaluation of investment to fair value - Loss for the year Less : Dividend paid on preference shares 3,669,866 4,488,988 26,509 (1,262,230) (1,235,721) (28,882) 2,405,263 (182,406) (120,478) (463,760) (766,644) (52,478) 3,669,866
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NOTE Subsidiary Company Habib Bank Limited (HBL - 1) Habib Bank Limited (HBL - 2) Long term finance facility Syndicated term finance 8.11 8.12 8.13 8.14
8.4 Albaraka Islamic Bank B.S.C (E.C) (AIB) This represents Murabaha finance facility of Rupees 100 million, obtained for construction of buildings. The facility is allowed for a period of four years including a grace period of one year. The facility is repayable in sixteen equal quarterly installments commenced with first payment due at the end of 15th month from the date of disbursement. It is secured by pari passu charge and hypothecation on fixed assets i.e. land and building constructed for ring spinning and stitching. It carries mark up at the rate of 3-years KIBOR plus 2% per annum with floor of 12.75% per annum. 8.5 Allied Bank Limited (ABL-1 ) This represents term finance facility of Rupees 300 million , obtained for import of state of art machinery and is allowed for a period of five years with a grace period of one year. The facility is repayable in sixteen (16) equal quarterly installments commenced after conclusion of grace period. It is secured by first exclusive charge on machinery imported. Facility amounting to Rupees 100 million carries mark up at the rate of 6 months KIBOR plus 1.25% per annum, facility of Rupees 125 million carries mark up at the rate of 6 months KIBOR plus 1.75% per annum and facility of Rupees 75 million carries mark up at the rate of 6 months KIBOR plus 2.50% per annum with no floor and cap. On December 28, 2006 loans amounting to Rupees 124.732 million were converted to LTF-EOP at 7% per annum fixed rate of markup. 8.6 Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 1) This represents the LTF-EOP facility of Rupees 65 million for import of textile machinery and is allowed for a period of five years with a grace period of six months. The facility is repayable in eighteen (18) equal quarterly installments commenced from February 19, 2006. It is secured by first exclusive charge on imported machinery. It carries mark up at a fixed rate of 7% per annum. 8.7 Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 2) This represents a term finance of Rupees 40 million under State Bank of Pakistan (LTF-EOP) scheme at subsidized and fixed rate of mark up of 7% per annum. The financing is for import of warping and sizing machines being part of BMR. This facility for a period of five years with a grace period of one year and is repayable in equal quarterly installments. 8.8 Saudi Pak Industrial and Agricultural Investment Company Limited (SPIAICL - 3) This represents term finance facility of Rupees 250 million obtained for debt reprofiling for a period of five years including grace period of one year. The facility is repayable in 8 equal six monthly installments. It is secured by first pari passu charge by way of hypothecation on all present and future plant and machinery of the Company and by way of mortgage on land measuring 121 acres, 2 kanals and 1 marla, situated at main Peshawar Road, Rawalpindi with 25% margin. Initially ranking charge will be created which will be upgraded within 90 days from the date of disbursement. The facility carries mark up at the rate of 3 months KIBOR plus 170 bps per annum with quarterly repricing effective from March 03, 2008. 8.9 Standard Chartered Bank (Pakistan) Limited (SCB-2) This represents the term finance facility of Rupees 200 million, obtained for the purpose of financing the unwinding cost of cross currency swap deal with the bank and is allowed for a period of two years. The facility is payable in eight equal quarterly installments. It is secured by ranking charge of Rupees 266.666 million on land of Kohinoor Textile Mills Limited situated at Rawalpindi. It carries mark up at the rate of 3-months average KIBOR plus 2.75% per annum with no floor and cap.
580,000 210,519 790,520 1,499,400 5,401,463
955,503 1,500,000 5,197,367 2,459,659 2,737,708 4,794 2,683 7,477 2,745,185
Less: Current portion shown under current liabilities

Other loans - Unsecured
17
1,181,865 4,219,598 4,794 2,683 7,477 4,227,075
Kohinoor Sugar Mills Limited (KSML) Kohinoor Industries Limited (KIL)
8.15 8.16
8.1 The Bank of Punjab - (BOP-1) This represents demand finance facility of Rupees 400 million, obtained for import of state of art machinery and is allowed for a period of four years with a grace period of six months. The loan is repayable in 7 equal half yearly installments commenced after conclusion of grace period. It is secured by bank's exclusive hypothecation charge on machinery imported and personal guarantees of sponsor directors. Facility amounting to Rupees 300 million carries mark up at the rate of 6 months average KIBOR plus 100 basis points (bps) and additional facility of Rupees 100 million carries mark up at the rate of 6 months average KIBOR plus 275 bps with a floor of 5% per annum, payable quarterly. On November 29, 2006 loans amounting to Rupees. 150.431 million were converted to LTF-EOP consisting of Rupees 61.725 million at 6 % per annum and Rupees 88.706 million at 7 % fixed rate of mark up. 8.2 NIB Bank Limited (NIB - 1) This represents LTF-EOP facility of Rupees 157 million obtained for import of textile machinery for a period of three years including a grace period of six months. It is repayable in ten equal quarterly installments. It is secured by first exclusive hypothecation charge on the imported machinery and allied equipment, including installation and local component costs. It carries mark up at fixed rate of 6 % per annum. 8.3 NIB Bank Limited (NIB - 2) This represents a term finance facility of Rupees 300 million under State Bank of Pakistan (LTF-EOP) scheme for a period of five years with a grace period of one year. The financing is for import of 72 Picanol Omni Plus wide width Air Jet Looms and Tying & Knotting machine plus five (5) Gen Set gas generators being part of BMR. It is repayable in equal quarterly installments, commencing after expiry of grace period. The facility is secured against first pari passu charge over fixed assets of Raiwind Division and personal guarantees of the sponsor directors. It carries fixed mark up at the rate of 7% per annum.
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8.10 Syndicated Term Finance Syndicated Finance of Rupees 1.750 billion was arranged through Standard Chartered Bank (Pakistan) limited (SCBL) to swap highly priced loans. Long term facility was arranged and availed in Islamic and conventional mode of financing. Standard Chartered Bank (Pakistan) Limited (Arranger), Allied Bank Limited and Bank of Khyber disbursed Rupees 868.750 million under Islamic mode of financing whereas Bank Alfalah Limited, Faysal Bank Limited and Pak Libya Holding Company disbursed Rupees 850 million under conventional means of financing. Tenor of the loan was 5 years including one year grace period and was repayable in 16 equal quarterly installments. During the year, the Company has entered into supplimental to its syndicated term finance facility agreement where by the repayment schedule of the purchase price has been modified. Now the loan is repayable in twenty four installments within a tenor of six years . It is secured by first pari passu charge over the fixed assets of the Company including surplus land and buildings at Peshawar Road, Rawalpindi. It carries mark-up at 3 months average KIBOR plus 150 bps to be repriced at the end of each quarter. 8.11 Habib Bank Limited (HBL - 1) Original term finance facility amounting to Rupees 1.160 billion (equivalent to Japanese Yens 1.974 billion approximately) was obtained from HBL by Subsidiary, in different tranches as per agreement entered into February 11, 2008, to finance the Waste Heat Recovery Plant. During the current financial year the Subsidiary, under the Long Term Finance Facility - Export Oriented Project (LTFF-EOP) Scheme of State Bank of Pakistan, has entered into restructuring agreement with HBL dated February 18, 2010. As per terms of restructuring agreement HBL has transferred amounting Rupees 580 million to new Long Term Finance Facility (LTFF) as disclosed in note 8.13 to these consolidated financial statements. The remaining principal balance amounting Rupees 580 million is repayable in nine semi annual installments commencing from June 2010. This facility carries mark-up at the rate of 6-months KIBOR plus 1.00%, effective mark up rate ranging from 13.43% to 14.26% (2009: 15.69% to 18.20%) per annum payable on quarterly basis in arrears. The finance facility is secured against first pari passu equitable mortgage/hypothecation charge of Rupees 2.250 billion on all present and future fixed assets of the Subsidiary (including land measuring 2,097 Kanals and 5 Marlas situated at Dadu Khel Pakka Sharki, Mianwali) and personal guarantees of directors of the Subsidiary. 8.12 Habib Bank Limited (HBL - 2) During current financial year, the Subsidiary has obtained this term finance facility having sanctioned limit amounting Rupees 500.000 million from HBL for financing the Waste Heat Recovery Plant. The tenor of this term finance facility is six years including a grace period of one year. The Subsidiary, under the Long Term Finance Facility - Export Oriented Project (LTFF-EOP) Scheme of State Bank of Pakistan, has entered into restructuring agreement with HBL dated February 18, 2010. As per terms of restructuring agreement HBL has transferred amounting to Rupees 210.519 million to new Long Term Finance Facility (LTFF) as disclosed in note 8.13 to these consolidated financial statements. The remaining principal balance of this term finance facility amounting to Rupees 210.519 million is repayable in nine semi annually installments commencing from July 2010. This facility carries mark-up at the rate of 6-months KIBOR plus 1.00% (effective mark-up rate ranging from 12.88% to 20.00%) per annum payable on quarterly basis in arrears. This finance facility is secured against first pari passu hypothecation/mortgage charge of Rupees 2.250 billion on all present and future assets of the Subsidiary (including land measuring 2,097 Kanals and 5 Marlas situated at Dadu Khel Pakka Sharki, Mianwali) and personal guarantees of directors of the Subsidiary Company.
8.13 Long term finance facility This facility has been created under the terms of restructuring agreement with HBL as disclosed in note 8.11 and 8.12 to these consolidated financial statements. Tenor of this LTFF is four and a half years. The principal amount of this LTFF is repayable in nine semi annual installments commencing from June 2010. The facility carries mark-up at the rate of 9.7% per annum payable on quarterly basis in arrears. This finance facility is secured against first pari passu equitable hypothecation/mortgage charge of Rupees 2.250 billion on all present and future fixed assets of the Subsidiary (including land measuring 2,097 Kanals and 5 Marlas situated at Dadu Khel Pakka Sharki, Mianwali) and personal guarantees of the directors of the Subsidiary. 8.14 Syndicated Term Finances The Subsidiary has obtained syndicated term finance facility during the year ended June 30, 2008. During the current financial year the Company has arranged restructuring of syndicated term finance facility and entered into Second Addendum dated March 30, 2010 through lead arranger and investment agent Allied Bank Limited (ABL). The salient terms of this syndicated term finance facility, as per Second addendum, are as follows: - Lead arranger and agent bank Allied Bank Ltd. (ABL) - Lenders Banks and DFIs - Facility amount Rupees 1.500 billion - Tenor 9 Years including Grace period Grace period 2.75 years ; Repayment- 6.25 years - Mark-up rate For half year ended December 2009 at mark up rate 15.4% From December 2009 onwards: 3 months KIBOR plus 100 bps Mark up to increase to 3 months KIBOR plus 170 bps after 5 years or complete settlement of deferred mark up, whichever is later. Restructuring conditions: (a) Mark up due in December 2009 to be paid by the Subsidiary on completion of the restructuring agreement. (b) Accrued mark up from December 2009 to March 2011 will be converted into interest free debt and will be paid in 24 equal quarterly installments starting in March 2012 and ending in December 2017. Token mark up payment of 0.5% of the deferred mark up amount will be paid on installment amount. Accrued mark up from March 2011 to June 2011 will be paid in September 2011. Regular mark up payments will commence from September 2011 and will be payable on due dates.
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- Principal repayment 36 quarterly installments will be paid as per following schedule. First 10 quarterly installments are just token payments. Period March 2010 - June 2012 September 2012 - June 2015 September 2015 - June 2016 September 2016 - June 2017 September 2017 - June 2018 September 2018 - December 2018 - Final maturity December 2018 - Security First pari passu charge over all present and future fixed assets of the Company amounting to Rupees 3.333 billion and pledge of investment in shares of Security General Insurance Company Limited. - Further conditions as per rescheduling (a) PKR 1.000 billion to be injected at the completion of restructuring agreement as sponsor's loan which may be converted into Equity / Preference Shares following regulatory approvals. Preference dividend to be capped at 10% per annum. Please refer to note 7 to these consolidated financial statements. (b) Redeemable Capital Sukuk / Syndicate members would be represented on board by one seat. The process would be initiated right after completion of restructuring agreement and depending upon regulatory formalities the process would be completed as soon as possible but not later than the next elections due in December 2010. The representative shall have a minimum of 10 years of professional experience to add depth to the board. The representative would be the member of the audit committee of the board and would be considered to be its Chairman at the discretion of the board. 2010 2009 (Rupees in thousand)
- Faysal Bank Limited - Pak Libya Holding Company (Private) Limited - MCB Bank Limited - Askari Bank Limited - Arif Habib Bank Limited - Pak Brunei Investment Company Limited - Soneri Bank Limited - HSBC Bank Middle East Limited (formerly The Hong Kong and Shanghai Banking Corporation Limited) 359,856 239,904 149,940 104,958 89,964 89,964 360,000 240,000 150,000 105,000 105,000 90,000 90,000 90,000
2010 2009 (Rupees in thousand) - The Bank of Khyber - Saudi Pak Industrial and Agricultural Investment Company Limited - The Bank of Punjab - First Women Bank Limited - Atlas Bank Limited. - Allied Bank Limited 59,976 59,976 59,976 59,976 29,988 194,922 1,499,400 60,000 60,000 60,000 60,000 30,000 1,500,000
Rupees in million 0.30 37.50 44.50 56.00 70.00 181.00
8.15 Kohinoor Sugar Mills Limited (KSML) A civil suit has been filed by KSML for recovery of disputed liability which is being contested by the Holding Company. 8.16 Kohinoor Industries Limited (KIL) The balance is an old one, un-reconciled, unconfirmed and disputed. 8.17 Current portion of long term liabilities include overdue installments amounting to Rupees 263.696 million (2009: Nil)
9 REDEEMABLE CAPITAL - Secured
NOTE
Islamic Sukuk certificates under musharaka agreement Opening balance Add: Sukuk certificates issued during the year
8,000,000 300,000 8,300,000 3,400 6,800 8,289,800
8,000,000 8,000,000
Less: Sukuk certificates paid during the year Less: Current portion shown under current liabilities
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800,000 7,200,000
The Company has issued Islamic Sukuk Certificates under Musharaka agreement amounting to Rupees 8.000 billion during the year ended June 30, 2008. During the current financial year the Company has arranged restructuring of issued Sukuk Certificates and entered into First Addendum with Investment Agent Allied Bank Limited (ABL). During the year, the Company has issued new Sukuk Certificates (as Bridge Finance) to existing Sukuk lenders amounting to Rupees 300.000 million.
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The salient terms and conditions of secured Sukuk issue of Rupees 8.300 billion made by the Company are detailed below: Allied Bank Limited (ABL) Meezan Bank Limited Balance sheet reprofiling and replacement of conventional debts with Shariah Compliant Financing. Banks, DFIs, NBFIs and any other persons. Rupees 8.000 billion 9 Years including grace period of 2.75 years and repayment is to be made in 6.25 years. Rupees 300.000 million 2 years For half year ended December 2009 at the rate 15.4% From December 2009 onwards: 3 months KIBOR plus 100 basis point per cent (bps) Mark up to increase to 3 months KIBOR plus 170 bps after 5 years or complete settlement of deferred mark-up, whichever is later. (a) Mark up due in December 2009 has been paid by the Company on completion of the restructuring agreement. (b) Accrued mark up from December 2009 to March 2011 will be converted into interest free debt and will be paid in 24 equal quarterly installments starting March 2012 ending December 2017. Token mark up payment of 0.5% of the deferred mark up amount will be paid on the installment amount. Accrued mark up from March 2011 to June 2011 will be paid in September 2011. Regular mark up payments will commence from September 2011 and will be payable on due dates. Base rate is average 3 months KIBOR prevailing on the base rate setting date. 36 quarterly installments will be paid as per following schedule. 1st 10 quarterly installments are just token payments. Period Rupees in million
1.70 200.00 237.50 300.00 375.00 966.50
Rentals are payable quarterly in arrears calculated on a 365 days year basis on the outstanding Musharaka Investment of the investors. The first such rental payment will fell due of six months from the date of first contribution and after rescheduling , after every 3 months. Rentals, during the year, have been calculated at mark-up rates ranging from 13.20% to 15.44% (2009: 14.85% to 17.37%) per annum. The Sukuk have been issued under section 120 "issue of securities and redeemable capital not based on interest" of the Companies Ordinance 1984. The Sukuk Certificates have been registered and inducted into the Central Depository System ("CDS") of the Central Depository Company of Pakistan ("CDC"). First Pari passu charge over all present and future fixed assets of the Company amounting to Rupees 10.667 billion and pledge of investment in shares of Security General Insurance Company Limited. - Transaction structure Allied Bank Limited The facility as approved by Meezan Bank Limited, shariah advisor of the issue, is as follows: (a) Investors (as Investor Co-owners) and the Company (as managing Coowner) have entered into a Musharaka Agreement as partners for the purpose of acquiring Musharaka assets from the Company (acting as Seller) and jointly own these Musharaka assets. (b) Investors have appointed ABL to act as Investor Agent for the Sukuk Issue. (c) Investor co-owners have contributed their share in the Musharaka in cash that has been utilised by managing co-owner for acquiring Musharaka assets. Managing co-owner has contributed its Musharaka share in kind. (d) Upon acquisition of Musharaka assets, Investor Agent and managing coowner have executed Assets Purchase Agreement with the Company (acting as Seller). (e) The Company (as Issuer) has issued Sukuk Certificates to Investors that represent latter's undivided share in the Musharaka assets. (f) Investors have made the usufruct of their undivided share in the Musharaka assets available to the Company against rental payments linked to the rental bench marked. (g The Company will purchase Musharaka share of investors on quarterly basis after expiry of 2.75 years from the rescheduling date. As Sukuks have been induced into Central Depository Company (CDC), transfers are made in accordance with Central Depository Act , 1997 and other applicable CDC regulations.
March 2010 - June 2012 September 2012 - June 2015 September 2015 - June 2016 September 2016 - June 2017 September 2017 - June 2018 September 2018 - December 2018
- Sell Down/ Transferability
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- Further conditions as per rescheduling
(a) PKR 1.000 billion to be injected at the completion of restructuring agreement as sponsor's loan which may be converted into Equity / Preference Shares following regulatory approvals. Preference dividend to be capped at 10% per annum. Please refer note 7 to these consolidated financial statements. (b) To cover partial cash deficit projected in half year ended June 2010, existing Sukuk lenders to disburse 2 years bridging of PKR 300.000 million (as Bridge Finance) simultaneously with the payment of December 2009 mark up. This would be repaid in bullet in 2 years at the rate of 3 months KIBOR plus 100 bps, however, mark up payment would be current and on quarterly basis. It will be secured against ranking charge on fixed assets and specific properties comprising of 393 kanals at Kala Shah Kaku and additional piece of land at Faisalabad. The security outside the Subsidiary will have a minimum value of PKR 400.000 million. (c) Redeemable Capital Sukuk / Syndicate members would be represented on board by one seat. The process would be initiated right after completion of restructuring agreement and depending upon regulatory formalities the process would be completed as soon as possible but not later than the next election due in December 2010. The representative shall have a minimum of 10 years of professional experience to add depth to the board. The representative would be the member of the audit committee of the board and would be considered to be its Chairman at the discretion of the board.
10.3 Minimum lease payments and present value of minimum lease payments are regrouped as under:
2010 Present value Minimum of minimum lease lease payments payments Minimum lease payments 2009 Present value of minimum lease payments
Due not later than one year Due later than one year but not later than five years
--------------------- (Rupees in thousand)--------------------541,505 447,223 483,973 388,881 865,381 1,406,886 767,748 1,214,971 1,117,276 1,601,249 963,133 1,352,014
11. LONG TERM DEPOSITS

These represent interest-free security deposits from stockists and are repayable on cancellation or withdrawal of the dealerships. These are being utilized by the Subsidiary in accordance with the terms of dealership agreements.
12. EMPLOYEES' BENEFITS NOTE Employees' compensated absences Gratuity fund 12.1 42
2010 2009 (Rupees in thousand) 19,629 6,864 26,493 18,990 18,990
10. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE NOTE Minimum lease payments Less: Un-amortized finance charges Less: Security deposits of subsidiary Present value of minimum lease payments Less: Current portion shown under current liabilities 2010 2009 (Rupees in thousand) 1,406,886 161,915 30,000 1,214,971 447,223 767,748 1,601,249 214,505 34,730 1,352,014 388,881 963,133
12.1 These represent amounts payable against un-availed leaves of employees.
13. DEFERRED TAX

This comprises of following : Deferred tax liability on taxable temporary differences in respect of : - Accelerated tax depreciation allowance - Surplus on revaluation of investment Deferred tax asset on deductible temporary differences in respect of: - Lease finances - Unused tax losses - Employees' compensated absences - Minimum tax recoverable against normal tax charge in future years 56,154 2,782,588 4,459 125,398 2,968,599 157,996 63,826 2,818,229 4,547 90,806 2,977,408 204,422 2,844,401 282,194 3,126,595 2,927,122 254,708 3,181,830
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10.1 The present value of minimum lease payments has been discounted at an implicit interest rate ranges from 6.00% to 18.18% (2009: from 4.72% to 18.18%) per annum to arrive at their present value. 10.2 The lease rentals are payable in monthly, quarterly and half yearly installments. In case of any default an additional charge at the rate of 0.1 percent per day shall be payable. Taxes, repairs, replacements and insurance costs are to be borne by the Group. The lease agreements carry renewal and purchase option at the end of the lease term. There are no financial restrictions in lease agreements. These are secured by deposit of Rupees 54.841 million (2009: Rupees 59.571 million) included in long term security deposits, demand promissory notes, personal guarantees and pledge of sponsors' shares in public limited companies.
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13.1 The movement in deferred tax assets and liabilities during the year without taking into consideration the off setting balances within the same tax jurisdiction is as follows:
Deferred tax liability Accelerated tax depreciation allowance Unrealized gain on derivative financial instrument Deferred tax assets Minimum tax recoverable against normal tax charge
14.2 The Group retains workers profit participation fund for its business operations till the date of allocation to workers. Interest is paid at prescribed rate under the Companies Profit (Workers Participation) Act, 1968 on funds utilized by the Group till the date of allocation to workers.
15. ACCRUED MARK-UP NOTE 2010 2009 (Rupees in thousand)
Surplus on revaluation of investment
Total
Lease finances
Unused tax losses
Employees' compensated absences
Total
Net liability/ (asset)
Balance as at July 01, 2008 Charged to other comprehensive income Charged to profit and loss account Balance as at June 30, 2009 Charged to other comprehensive income Charged to profit and loss account Balance as at June 30, 2010
3,328,669 (401,547) 2,927,122 (82,721) 2,844,401
----------------------------------------------------------------Rupees in thousand-------------------------------------------------------------448,187 72,119 3,848,975 132,131 2,976,535 4,536 114,133 3,227,335 (193,479) (72,119) (265,598) (401,547) (68,305) (158,306) 11 (23,327) (249,927) 254,708 3,181,830 63,826 2,818,229 4,547 90,806 2,977,408 27,486 27,486 (82,721) (7,672) (35,641) (88) 34,592 (8,809) 282,194 3,126,595 56,154 2,782,588 4,459 125,398 2,968,599
621,640 (265,598) (151,620) 204,422 27,486 (73,912) 157,996
Long term financing Redeemable capital Short term borrowings Liabilities against assets subject to finance lease
276,739 622,378 261,088 51,594 1,211,799
104,617 237,007 240,698 44,131 626,453
14. TRADE AND OTHER PAYABLES NOTE Creditors Bills payable - secured Accrued liabilities Security deposits, repayable on demand Advances from customers Contractors' retention money Royalty and excise duty payable Workers' profit participation fund Workers' welfare fund Excise duty payable Payable to employees' provident fund trust Unclaimed dividend Withholding tax payable Sales tax payable Others 2010 2009 (Rupees in thousand) 1,736,200 785,705 647,792 41,705 239,813 45,813 69,688 21,669 7,686 717,549 2,831 4,214 12,761 48,846 57,707 4,439,979 1,272,913 837,321 311,536 33,153 170,392 10,376 11,345 1,254 442,106 7,856 4,214 5,163 71,512 14,517 3,193,658 16. SHORT TERM BORROWINGS
From banking companies - Secured Short term running finance Other short term finances State Bank of Pakistan (SBP) refinances Temporary bank overdraft
16.1 16.2 16.3 16.4
6,047,173 2,200,553 1,555,000 328,547 10,131,273
5,244,278 1,968,863 1,580,000 399,652 9,192,793
14.1
16.1 The running finance facilities are sanctioned by various banks aggregate to Rupees 6,152 million (2009: Rupees 5,713 million). The rates of mark-up range from 3.23% to 25.00% (2009: from 7.50% to 18.50%). These arrangements are secured by pledge of raw material, charge on current assets of the Group including hypothecation of work-in-process, stores and spare parts, letters of credit, firm contracts, book debts and personal guarantees of the sponsor directors. 16.2 The other finance facilities are sanctioned by various banks aggregate to Rupees 3,638 million (2009: Rupees 2,348 million). The rates of mark-up range from 6.63% to 18.00% (2009: from 6.08% to 18.48%). These arrangements are secured by pledge of raw material, charge on current assets of the Holding Company including hypothecation of work-in-process, stores and spares, letters of credit, firm contracts, book debts and personal guarantees of the sponsor directors. 16.3 The export refinance facilities sanctioned by various banks aggregate to Rupees 1,665 million (2009: Rupees 2,950 million). The rates of mark-up range from 6.50% to 8.50% (2009: 7.50% per annum). These arrangements are secured by way of charge on current assets of the Holding Company and personal guarantees of the sponsor directors. 16.4 These have arisen due to issuance of cheques for amounts in excess of the balance with banks which will be presented for payment in subsequent period.
14.1
Workers' profit participation fund Balance as on 01 July Add: Provision for the year Add: Interest for the year Less: Payment during the year 1,254 20,227 188 21,669 1,279 164 (189) 1,254
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17. CURRENT PORTION OF NON-CURRENT LIABILITIES NOTE Long term financing - Secured Redeemable capital Liabilities against assets subject to finance leases 18. CONTINGENCIES AND COMMITMENTS 18.1 Contingencies Holding company a) The Company has filed an appeal before Honorable Appellate Tribunal Inland Revenue, Lahore for tax year 2003 under section 129/132 of Income Tax Ordinance, 2001, which is pending adjudication. The tax loss was restricted to Rupees 27.540 million against declared loss of Rupees 122.933 million. In addition to the above, another appeal for tax year 2003 against order under section 221 dated 24 January 2009, on the disallowance of depreciation expense of Rupees 62.665 million has been filed before Honorable Appellate Tribunal Inland Revenue which is pending adjudication. This is a cross appeal. Although the learned Commissioner Inland Revenue (Appeals) has already annulled the order under section 221 of the Income Tax Ordinance, 2001, vide order dated 30 July 2009, the Taxation Officer has illegally repeated the original assessment. Therefore, an appeal has also been filed before Commissioner Inland Revenue under section 187 of Income Tax Ordinance, 2001 for tax year 2003, the appellate order of which is pending. The revenue involved on account of penalty was Rupees 17.484 million. The Company has strong grounds and is expecting favourable outcome. b) The Company has filed an appeal before the Honorable Appellate Tribunal Inland Revenue under section 122(5A) / 122(1) / 129 of Income Tax Ordinance, 2001 for tax year 2004 which is pending adjudication. The loss for the year has been assessed at Rupees 255.684 million creating refund of Rupees 7.498 million. c) The Company and the tax authorities have filed appeals before different appellate authorities regarding sales tax matters. Pending the outcome of appeals filed by the Company and tax authorities, no provision has been made in these financial statements which on the basis adopted by the authorities would amount to Rupees 33.473 million (2009: 33.473 million), since the Company has strong grounds against these assessments framed by the tax authorities. d) The Company has filed recovery suits in civil courts of Rupees 4.589 million against various suppliers and customers for goods supplied by/ to them. Pending the outcome of the cases, no provision there against has been made in these financial statements since the Company is confident about favourable outcome of the cases. e) Four cases are pending before the Punjab Labour Appellate Tribunal, Shadman 1, Lahore regarding the reinstatement into service of four employees dismissed from their jobs. No provision has been made in these financial statements since the Company is confident about favourable outcome of the cases. 8 9 10 2010 2009 (Rupees in thousand) 1,181,865 6,800 447,223 1,635,888 2,459,659 800,000 388,881 3,648,540
f)
Guarantees issued by various commercial banks, in respect of financial and operational obligations of the Company, to various institutions and corporate bodies aggregate Rupees 248.962 million as at 30 June, 2010 (2009: Rupees 319.430 million) The Subsidiary has filed writ petitions before the Lahore High Court (LHC) against the legality of judgment passed by the Customs, Excise & Sales Tax Appellate Tribunal whereby the Company was held liable on account of wrongful adjustment of input sales tax on raw materials and electricity bills; the amount involved pending adjudication before the LHC amounting to Rupees13.252 million. No provision has been made in these consolidated financial statements in respect of the aforementioned matter as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary. The Subsidiary has filed an appeal before the Customs, Central Excise and Sales Tax Appellate Tribunal, Karachi against the order of the Deputy Collector Customs whereby the refund claim of the Subsidiary amounting to Rupees 12.350 million was rejected and the Subsidiary was held liable to pay an amount of Rupees 37.051 million by way of 10% customs duty allegedly leviable in terms of SRO 584(I)/95 and 585(I)/95 dated July 01, 1995. The impugned demand was raised by the Department on the alleged ground that the Subsidiary was not entitled to exemption from payment of customs duty and sales tax in terms of SRO 279(I)/94 dated April 02, 1994. The LHC, upon the Company's appeal, vide its order dated November 06, 2001 has decided the matter in favour of the Subsidiary; however, the Collector of Customs has preferred a petition before the Supreme Court of Pakistan, which is pending adjudication. No provision has been made in these consolidated financial statements in respect of the above stated amount as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary.
Subsidiary company a)
b)
c)
The Federal Board of Revenue (FBR) has filed an appeal before the Supreme Court of Pakistan against the judgment delivered by the LHC in favour of the Subsidiary in a writ petition. The Subsidiary, through the said writ petition, had challenged the demand raised by the FBR for payment of duties and taxes on the plant and machinery imported by the Company pursuant to the exemption granted in terms of SRO 484 (I) / 92 dated May 14, 1992. The FBR, however, alleged that the said plant & machinery could be locally manufactured and duties and taxes were therefore not exempt. A total demand of Rupees 1.387 billion was raised by the FBR out of which an amount of Rupees 269.328 million was deposited by the Subsidiary as undisputed liability. As regards the balance disputed amount, the matter was decided in favour of the Subsidiary as per the judgment of LHC. After preferring the appeal before the Supreme Court of Pakistan, the matter has been referred to ADRC, Islamabad. No provision has been made in these consolidated financial statements in respect of the aforementioned disputed demands aggregating Rupees 1.118 billion as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary.
d)
The Customs Department has filed an appeal before the Supreme Court of Pakistan against the judgment of Sindh High Court, which held that dump trucks were part of plant and machinery and the Tribunal had rightly subjected them to concessionary rate of duty. The Subsidiary had paid excess customs duties amounting Rupees 7.347 million on these trucks. The appeal is pending adjudication before the Supreme Court of Pakistan. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary.
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e) The Subsidiary has filed an appeal before the Supreme Court of Pakistan against the judgment of the Division Bench of the High Court of Sindh at Karachi. The Division Bench, by judgment dated September 15, 2008, has partly accepted the appeal by declaring that the levy and collection of infrastructure cess / fee prior to December 28, 2006 was illegal and ultra vires and after December 28, 2006, it was legal and the same was collected by the Excise Department in accordance with law. The appeal has been filed against the declaration that after December 28, 2006, the Excise Department has collected the infrastructure cess / fee in accordance with law. The Province of Sindh and Excise and Taxation Department has also preferred appeal against the judgment decided against them. The Supreme Court has consolidated both the appeals. The total financial exposure of the Subsidiary involved in the case amounts to Rupees 144.378 million. In the event of an adverse decision in appeal, the guarantees aggregating Rupees 145.700 million furnished by the Company will be encashed by the Government of Sindh. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary. f) Competition Commission of Pakistan (the Commission), vide order dated August 27, 2009, has imposed penalty on 20 cement factories of Pakistan at the rate of 7.5% of the turnover value as disclosed in the last financial statements. The Commission has imposed penalty amounting Rupees 586.187 million on the Company. The Commission has alleged that provisions of section 4(1) of the Competition Commission Ordinance, 2007 have been violated. However, after the abeyance of Islamabad High Court pursuant to the judgment of Hon'ble Supreme Court of Pakistan dated July 31, 2009, the titled petition has become in fructuous and the Subsidiary has filed a writ petition no. 15618/2009 before the Lahore High Court and the next date of hearing is September 16, 2010. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary. g) The Additional Collector, Karachi has issued show cause notice alleging therein that the Subsidiary has wrongly claimed the benefits of SRO No. 575(I)/2006 dated June 05, 2006 on the import of prefabricated buildings structure. Consequently, the Subsidiary is liable to pay Government dues amounting Rupees 5.552 million. The Subsidiary has submitted reply to the show cause notice and currently proceedings are pending before the Additional Collector. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary. h) The custom department has filed an appeal against the judgment dated 19/05/2009 passed in favour of the Subsidiary pursuant to which the Subsidiary is not liable to pay custom duty amount of Rupees 589,998/- relating to import of some machinery vide L/C No. 0176-01-46-518-1201 in terms of SRO 484(1)/92 dated 14/05/1992 and SRO 978(1)/95 dated 04/10/1995. The appeal is pending before the Honourable Lahore High Court. i) The Subsidiary has preferred an appeal against the order in original No. 576/99 dated 18/09/1999 whereby the company was denied the benefit of SRO 484(1)/92 dated 14/05/1992 and SRO 978(1)/95 dated 04-10-1995. Accordingly the demand of Rupees 806,558/- was raised against the Subsidiary. Appeal was dismissed by Central Excise and Sales Tax Tribunal on 19/05/2009. The Subsidiary has filed petition before the Honourable Lahore High Court, which is pending adjudication. A rectification application under section 194 is also pending before the Customs Federal Excise and Sales Tax, Appellate Tribunal beside the customs reference. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary.
j) Through order in original No. 18/2009 dated December 24, 2009 ('ONO'), the Additional Commissioner Inland Revenue, (Legal), Large Taxpayers Unit, Lahore ('ACIR - Legal') finalized the adjudication proceedings in respect of audit conducted by departmental auditors and raised a demand of principal Sales Tax and Federal Excise duty ('FED') aggregating to Rupees 336.738 million along with default surcharge and penalties. The company has preferred appeals against this exparte order under the applicable provisions of Sales Tax Act and Federal Excise Act before Commissioner Inland Revenue, Appeals CIR(A). Such appeals have not yet been taken up for hearing by Commissioner Inland Revenue, Appeals [CIR(A)]. No provision has been made in these consolidated financial statements as the management is confident that the ultimate outcome of this case will be in favour of the Subsidiary. k) The Subsidiary had challenged the levy of Neelum-Jhelum Hydro Power Development Fund for the alleged construction of Neelum-Jhelum Hydro Power Project. The titled petition was disposed off by the Hon'ble Lahore High Court in view of its earlier order, whereby it has been held that the Respondents shall forthwith grant refund/adjustment of the amount charged without authority from the Subsidiary for the period of February 2008 to June 2008. The Company is in the process of filling writ petition before High Court for the remaining period. l) Guarantees issued by various commercial banks, in respect of financial and operational obligations of the Subsidiary, to various institutions and corporate bodies aggregate Rupees 343.179 million as at 30 June 2010 (2009: Rupees 332.363 million). m) Also refer note 31.1 to these consolidated financial statements for contingencies relating to tax matters. Claims n) Claims against the Subsidiary not acknowledged as debt aggregated Rupees 3.750 million as at 30 June 2010 (2009: Rupees 3.750 million). 18.2 Commitments in respect of a) Commitments for capital expenditure other than letter of credit amount to Rupees 178.127 million (2009: Rupees 340.973 million). b) Letters of credit for capital expenditure amount to Rupees 668.696 million (2009: Rupees 678.346 million). c) Letters of credit other than for capital expenditure amount to Rupees 440.577 million (2009: Rupees 367.146 million). d) Bills discounted amounting to Rupees 40.143 million (2009: Rupees 177.854 million) e) Guarantees issued by various commercial banks, in respect of financial and operational obligations of the Subsidiary, to various institutions and corporate bodies aggregate Rupees 343.179 million as at 30 June 2010 (2009: Rupees 332.363 million).
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127
128
2010 2009 (RUPEES IN THOUSAND) 19. 22,875,159 1,646,400 PROPERTY, PLANT AND EQUIPMENT Operating fixed assets (Note 19 .1) Capital work in progress (Note 19.4) Stores, spare parts and loose tools held for capital expenditure 24,246,851 3,226,768 57,896 27,531,515
24,521,559 Owned Assets Leased Assets Furniture & Fixture Vehicles Office Equipment Quarry Equipment Share of Joint Assets Plant & Machinery Vehicles Quarry Equipment Total
19.1 Freehold land ------------------------------------------------------------------------------(RUPEES IN THOUSAND)--------------------------------------------------------------------------------Office Building Factory & Other Building Plant & Machinery Residential & Other Building Services & Other Equipment Computer & IT Installations
OPERATING FIXED ASSETS
At 30 June 2008 Cost Accumulated depreciation Net book value

68,546 68,546 12,272 (4,673) 7,599 4,769,120 (938,450) 3,830,670 72,970 (32,421) 40,549 24,563,212 (6,362,864) 18,200,348 30,582 (20,095) 10,487 54,133 (34,087) 20,046 202,655 (106,326) 96,329 21,176 (10,519) 10,657 180,772 (92,383) 88,389 143,337 (120,562) 22,775 4,395 (3,226) 1,169
1,367,925 (125,533) 1,242,392
7,660 (1,779) 5,881
47,315 (16,464) 30,851
31,546,070 (7,869,382) 23,676,688
Year ended 30 June 2009 Opening net book value Additions Transfer Cost Accumulated depreciation
68,546 (4,868) 3,387 (1,481) (669) 181 (488) 7,599 462 3,830,670 127,609 40,549 25,838 18,200,348 318,547 10,487 271 20,046 1,776 96,329 25,214 10,657 2,430 88,389 14,580 22,775 33,387 1,169 1,471 1,242,392 71,441 5,881 30,851 23,676,688 623,026 (5,537) 3,568 (1,481)
Disposals: Cost Accumulated depreciation Depreciation charge Closing net book value At 30 June 2009 Cost Accumulated depreciation Net book value
68,546 68,546 68,546 2,410,233 7,656 1,442 3,750,191 33,965 63,706 7,924 17,440,245 258,286 9,712 39 15,775 2,341 12,734 (5,078) 7,656 103,253 7,087 4,896,729 (1,146,538) 3,750,191 98,808 (35,102) 63,706 24,869,448 (7,429,203) 17,440,245 30,853 (21,141) 9,712 55,909 (40,134) 15,775 227,042 (123,789) 103,253 23,485 (11,486) 11,999 11,999 3,387 181,245 (98,601) 82,644 82,644 9,008 68,546 (405) 7,656 (208,088) 3,750,191 (2,681) 63,706 (7,443) 6,410 (1,033) (1,076,136) 17,440,245 (1,046) 9,712 (6,047) 15,775 (158) 90 (68) (17,734) 103,253 (121) 75 (46) (1,042) 11,999 (14,107) 9,969 (4,138) (16,187) 82,644
(7,158) 49,004
(129) 2,511
(73,546) 1,240,287
(932) 4,949
(6,170) 24,681
(21,829) 16,544 (5,285) (1,417,301) 22,875,159
176,724 (127,720) 49,004 49,004 -
5,866 (3,355) 2,511 2,511 133
1,439,366 (199,079) 1,240,287 1,240,287 56,692
7,660 (2,711) 4,949 4,949 -
47,315 (22,634) 24,681 24,681 -
32,141,730 (9,266,571) 22,875,159 22,875,159 2,410,233 380,304
Year ended 30 June 2010 Opening net book value Revaluation Additions Transfer: Cost Accumulated depreciation
173,260 (60,029) 113,231 -
6,118 (2,450) 3,668
47,315 (22,891) 24,424
(173,260) 60,029 (113,231)
(6,118) 2,450 (3,668)
(47,315) 22,891 (24,424)
Disposals: Cost Accumulated depreciation Depreciation charge Closing net book value At 30 June 2010 Cost / revalued amount Accumulated depreciation Net book value
2,478,779 2,478,779 5 - 10 5 - 10 14,176 (5,522) 8,654 5 - 10 4,930,694 (1,356,908) 3,573,786 106,732 (39,014) 67,718 25,291,569 (8,554,521) 16,737,048 5 - 20 2,478,779 (444) 8,654 (210,370) 3,573,786 (3,912) 67,718 (9,425) 8,680 (745) (1,073,969) 16,737,048
(954) 8,797
(4,944) 13,172
(216) 127 (89) (17,707) 92,544
(45) 39 (6) (1,345) 14,035
(8,405) 6,040 (2,365) (15,052) 77,903
(5,951) 5,904 (47) (14,472) 58,909
(252) 2,392
(71,465) 1,112,283
(450) 831
(257) -
(24,042) 20,790 (3,252) (1,415,593) 24,246,851
30,892 (22,095) 8,797 10
58,250 (45,078) 13,172 30
233,913 (141,369) 92,544 10
26,827 (12,792) 14,035 10
187,966 (110,063) 77,903 20
218,088 (159,179) 58,909 20
5,999 (3,607) 2,392 10
1,322,798 (210,515) 1,112,283 10 - 20
1,542 (711) 831 20
34,908,225 (10,661,374) 24,246,851 -
Depreciation Rate
19.2 DETAIL OF DISPOSAL OF OPERATING FIXED ASSETS
Description
Accumulated Net Book Value Sale Proceeds Gain Depreciation -----------------------( R u p e e s i n t h o u s a n d)----------------------Cost Toyota Corolla LRR-2233 Honda City RIY-6720 Model 2002 Suzuki cultus Suzuki baleno Toyota corolla Daihatsu cuore Toyota corolla Machine-Drawing ToyodaHara DYH 500-c Complete Model Machine-Drawing ToyodaHara DYH 500-c Complete Model Machine-Drawing ToyodaHara DYH 500-c Complete Model Crosol MK 4.5 card Model 1990 Aggregate of other items of property, plant & equipment with individual book values not exceeding Rupees 50,000 849 799 568 774 1,084 411 1,236 2,639 880 1,759 4,147 8,896 557 610 228 478 895 302 813 2,326 775 1,556 4,023 8,227 292 189 340 296 189 109 423 313 105 203 124 669 600 591 530 580 800 470 950 1,567 539 1,617 1,800 3,600
Mode of disposal
Particulars of purchaser
308 Negotiation 402 Negotiation 190 Negotiation 284 Auctions 361 Auctions 527 Auctions 1,254 Negotiation 434 Negotiation 1,414 Negotiation 1,676 Negotiation 2,931 Negotiation
Mr. Fuad Zafar, R/O House # 27-E, Phase-1, DHA Lahore Cantt Ghulam Abbas s/o Mulazim Hussain Sadaf Latif Zeeshan Ashraf 611 Insurance claim EFU Insurance Co. Dr. Khalid Saifullah contractor North Star Textiles, Lahore Zahid Jee Textile Mills Ltd, Faisalabad Ghazi Fabrics International Ltd, Lahore Bajaj Enterprises, 58-B Room # 1 62- Mozang Road, Lahore Employees of the company
2010 2009
24,042 21,829
20,790 16,544
3,252 5,285
13,644 10,143
10,392 4,858
129
19.3 The Subsidiary has given on lease, land measuring 8 Kanals and 16 Marlas (2009: 6 Kanals and 16 Marlas) to Sui Northern Gas Pipelines Limited at an annual rent of Rupees 4,267 (2009: Rupees 4,267). 19.4 Ownership of the housing colony assets included in the operating fixed assets is shared by the Subsidiary jointly with Pak American Fertilizer Limited in the ratio of 101:245 since the time when both the companies were managed by Pakistan Industrial Development Corporation (PIDC). These assets are in possession of the housing colony establishment for mutual benefits. The cost of these assets at the year-end were as follows: 2010 2009 (Rupees in thousand) 4,105 202 16 273 1,233 170 5,999 19.5 Depreciation charged during the year has been allocated as follows: Cost of sales Administrative expenses 35 37 1,379,838 35,755 1,415,593 1,382,070 35,231 1,417,301 3,990 202 16 273 1,219 166 5,866
19.6.1 Un-allocated capital expenditure - net 2010 2009 (Rupees in thousand) Opening balance Add: Expenditure incurred during the year: Salaries, wages and other benefits Travelling and conveyance Vehicles' running and maintenance Finance cost Legal and professional Communication Insurance expenses Miscellaneous expenses 59,581 5,619 1,328 115 201,620 50 160 5,797 270 274,540 3,367 2,899 1,615 16 51,639 45 59,581
NOTE - buildings - roads and bridge - air strip - plant and machinery - furniture, fixtures and equipment - vehicles
20. INVESTMENT PROPERTIES The fair value of investment properties comprising land and building situated at Lahore have been determined by Messers Hasib Associates (Private) Limited at Rupees 769.192 million as at 26 June 2008. Fair value of land situated at Rawalpindi has been determined by Messers Asrem (Private) Limited at Rupees 951.643 million as at 20 May 2008. The fair value was determined on the basis of professional assessment of the current prices in an active market for similar properties in the same location and condition. The valuers have certified that there is no material change in fair value during the current financial year and as on the balance sheet date. 21. INTANGIBLE ASSETS (computer softwares) NOTE Opening balance 206,579 2,000 1,414 286,080 2,000 2,944 Less: Amortization for the year Book value as at 30 June Gross carrying value Cost Accumulated amortization Book value Amortization rate 23,250 21,476 1,774 33.33% 23,250 15,918 7,332 33.33% 35 2010 2009 (Rupees in thousand) 7,332 (5,558) 1,774 15,082 (7,750) 7,332
19.6 CAPITAL WORK IN PROGRESS Tangible assets Civil works Plant and machinery Un-allocated capital expenditure Advances to suppliers against: Plant and machinery Purchase of land Vehicles Civil works Intangible assets Computer software and consultancy cost 19.6.1 67,593 2,644,753 274,540 17,897 1,250,009 59,581
3,505
3,200,384 26,384 3,226,768
1,505
1,620,016 26,384 1,646,400
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131
22. LONG TERM LOANS TO EMPLOYEES - Secured NOTE House building Vehicles Others Less : Current portion of long term loans to employees 27 2010 2009 (Rupees in thousand) 3,566 1,863 287 5,716 2,423 3,293 5,926 2,860 301 9,087 3,421 5,666
25. STOCK-IN-TRADE NOTE Raw material Packing material Work in process Finished goods 25.1 2010 2009 (Rupees in thousand) 783,595 65,302 983,697 1,065,237 2,897,831 641,577 70,614 915,368 803,181 2,430,740
25.1 This includes raw material in transit of Rupees 55.351 million (2009: Rupees 60.232 million) 26. TRADE DEBTS Considered good: Secured (against letters of credit) Unsecured Less: Provision for doubtful debts 2010 2009 (Rupees in thousand) 1,251,743 855,031 2,106,774 26,309 2,080,465 986,420 745,925 1,732,345 1,732,345
22.1 These loans are secured against charge / lien on employees' retirement benefits and carry interest at the rates ranging from 6% to 12% per annum (2009: 6% to 12% per annum). These loans are recoverable in monthly installments ranging from 30 to 120. No amount was due from directors and chief executive at the year-end (2009: Rupees Nil). 23. LONG TERM DEPOSITS AND PREPAYMENTS NOTE Security deposits Prepayments Less: current portion of long term deposits and prepayments shown under current assets 2010 2009 (Rupees in thousand) 94,093 333 94,426 28 7,966 86,460 24. STORES, SPARES PARTS AND LOOSE TOOLS Stores Spares parts Loose tools Less: Provision for slow moving and obsolete items 24.1 24.2 865,902 1,853,852 38,454 2,758,208 5,000 2,753,208 24.1 This includes stores in transit of Rupees 129.243 million (2009: Rupees 234.884 million) 24.2 This includes spare parts in transit of Rupees 80.540 million (2009: Rupees 22.045 million) 24.3 Stores having carrying value amounting to Rupees 62.423 million (2009: Nil) pledged as security against borrowings. 1,509,872 1,697,133 33,136 3,240,141 3,240,141 96,339 1,333 97,672 12,570 85,102
As at 30 June 2010, trade debts of Rupees 819.745 million (30 June 2009 : Rupees 653.568 million) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. The ageing analysis of these trade debts is as follows: NOTE Upto 1 month 1 to 6 months More than 6 months 27. LOANS AND ADVANCES - Considered good Current portion of long term loans to employees Advances to : - Executives - Other employees - Suppliers 22 2,423 621 7,844 850,970 859,435 Letters of credit 1,579 863,437 3,421 2,255 6,161 368,157 376,573 18,164 398,158 2010 2009 (Rupees in thousand) 593,127 531,245
156,108 70,510 819,745
33,795 88,528 653,568
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133
28. SECURITY DEPOSITS AND SHORT TERM PREPAYMENTS NOTE Current portion of security deposits Margin against letter of credit Margin against bank guarantee Prepayments 23 2010 2009 (Rupees in thousand) 7,966 25,120 31,458 72,858 137,402 12,570 68,163 27,376 63,580 171,689 Available for sale Associated company - Unquoted 30.2 Security General Insurance Company Limited 4,570,389 (2009: 4,570,389) Ordinary shares of Rupees. 10 each fully paid. Equity held: 6.71% (2009: 6.71%) Fair value adjustment NOTE Mutual funds Fair value adjustment
2010 2009 (Rupees in thousand) 16,000 60 16,060 25,000 (3,666) 21,334
5,000
5,000
29. OTHER RECEIVABLES Sales tax refundable Custom duty receivable Export rebate Insurance claims Research and development support Cotton claim Duty drawback of taxes and levies Inland freight subsidy receivable Others
276,958 3,642 47,561 175 473 28,745 25,808 62,060 49,494 494,916
232,674 3,642 32,302 181 25,735 26,244 320,778
447,926 452,926 1,114,449
375,850 380,850 1,014,173
30.1 Fair value per share of Rupees 99.10 (2009: Rupees 94) is calculated by independent valuer on the basis of net assets based valuation method. Security General Insurance Company Limited is associated Company due to common directorship. 30.2 Fair value of the investment as at June 30, 2010 was determined based on the valuation report prepared by the Messers Maqbool Haroon and Company, Chartered Accountants. 30.2.1 These shares are pledged by Subsidiary with Allied Bank Limited as collateral against short term finance facility of Rupees 400 million.
30. SHORT TERM INVESTMENTS

Holding company Investments at fair value through profit and loss - Held for trading Quoted companies Fair value adjustment Available for sale Associated company - Unquoted Security General Insurance Company Limited Equity held 9.40% (2009 : 9.40%) Fair value adjustment Subsidiary company Investments at fair value through profit or loss Quoted Companies Fair value adjustment 12,115 (8,763) 3,352 12,115 (7,736) 4,379 627,095 634,095 594,463 601,463
13,611 (5,595) 8,016
13,611 (7,464) 6,147
2010 2009 (Rupees in thousand) 31. TAXATION RECOVERABLE Opening Balance as 01 July Add : Provision for taxation - Current year - Prior year Tax deducted at source / advance tax 236,900 (186,061) (885) (186,946) 346,356 396,310 97,591 (120,563) 488 (120,075) 259,384 236,900
30.1
7,000
7,000
6,398,541 (2009 : 6,398,541) Ordinary shares of Rupees 10 each fully paid
31.1
a) Income tax assessments of the Subsidiary up till tax year 2009, except for the tax years 2003 and 2006 which have been selected for tax audit, are deemed assessments in terms of section 120(1) of the Income Tax Ordinance, 2001. The tax audit for the tax year 2003 and 2006 have not yet been finalised.
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135
b) Provision for current year, in view of available tax losses, represents minimum tax due on turnover under section 113 and tax deducted at source under section 5,15 and 154 of the Income Tax Ordinance, 2001. c) In consequence of tax audit conducted by income tax department (the Department) for tax year 2003, the Department, vide order dated December 31, 2008, has amended the deemed assessment in respect of tax year 2003 under section 122(5) of the Income Tax Ordinance and the Company's taxable income has been enhanced by Rupees 177.750 million. The Company has preferred an appeal against aforesaid amendment order before the commissioner of Inland Revenue (Appeals), which was disposed off through order dated November 1, 2009.Through such order, while CIR(A) upheld the departmental contentions on certain issues, a substantial relief was extended, reducing the taxable income for the year by an amount of Rupees 107 million as against the additions towards taxable income aggregating to Rupees 173 million contested by the Subsidiary. The Subsidiary has preferred further appeal before the Appellate Tribunal Inland Revenue (ATIR) against the order of CIR(A) against the disallowances confirmed by him through order. Subsidiary's appeal is pending for hearing by ATIR. d) Additional Commissioner Inland Revenue passed an order u/s 122(5A) and made additions of Rupees 21.600 million in Company's taxable income and raised a tax demand Rupees 1.900 million against the Subsidiary. The Subsidiary has preferred an appeal before Commissioner Inland Revenue (Appeals) against the above addition in taxable income which relates to the admissibility of initial allowance on exchange loss capitalized under section 76(5) of the Income Tax Ordinance. The Subsidiary has also challenged the inclusion of 'scrap sales' and 'profit on sale of fixed assets' in turnover for the purpose of computing minimum tax liability under section 113 of the Income Tax Ordinance. e) The Deputy Commissioner (Adjudication) has passed an order in original no. 42/2009 dated August 08, 2008 for late filing of return and delayed deposit of dues for the tax period October 2009 against the Subsidiary, raising demand Rupees 34,420 being default surcharge u/s 34 and Rupees 1,500 being penalty u/s 33(5) of Sales Tax Act 1990 and Rupees 148,894 being default surcharge u/s 8 and Rupees 7,444,666 being penalty u/s 19(1) of Federal Excise Act 2005. f) The Deputy Commissioner (Adjudication) has passed an order in original no. 51/2009 dated October 10, 2009 for late filing return and delayed deposit of dues for the tax period November 2008 against the Company, raising demand Rupees 158,675 being default surcharge u/s 34 and Rupees 3,500 being penalty u/s 33(5) of Sales Tax Act, 1990 and Rupees 453,427 being default surcharge under section 8 and Rupees 7,809,004 being penalty u/s 19(1) of Federal Excise Act 2005. In reference to above both orders appeals are pending before the Appellate Tribunal of Inland Revenue. g) The Department has initiated proceedings under section 161 and 205 of the Ordinance against the Company in respect of tax years 2003 to 2007.The Company has challenged initiation of the aforementioned proceedings by filing a writ petition before the Lahore High Court, which, vide order dated 30 December, 2008 has granted stay of proceedings in respect of tax year 2003. The main petition is pending adjudication before the court. h) Numerical reconciliation between the average tax rate and applicable tax rate has not been presented in these financial statements as the Subsidiary is chargeable to minimum tax under section 113 of the Income Tax Ordinance, 2001.
i) Tax losses available for carry forward to Subsidiary as at June 30, 2010 aggregated Rupees 10.424 billion (2009: Rupees 7.959 billion). 2010 2009 (Rupees in thousand) 32. CASH AND BANK BALANCES Cash in hand Cash at bank: - On current accounts - On saving accounts 2,141 93,010 57,302 150,312 152,453
5,710 95,262 79,257 174,519 180,229
32.1 The balances in current and saving account carry interest ranging from 0.40% to 13% (2009: From 0.20% to 12%) per annum. 32.2 The balances in current and deposit accounts include US $ 37,000 (2009: US $ 72,465). 33. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE Land Advance against land
552,923 100,000 652,923
551,662 50,000 601,662
The Company intends to dispose off land located at Raiwind Road and M.M Alam Road, Lahore after final negotiations with its intended buyers. An active programme commenced to locate a buyer at a reasonable price. During the year ended 30 June 2009, land could not be disposed off due to unusually adverse investment scenario of the country resulting in slump in property market. During the current year, due to continued stressed property market, the company was still unable to liquidate these land at its target price. These events precluded that disposal of land during the year, however, the management considers that these events were beyond its control and remains committed to disposal of these land at a reasonable price. The proceeds of disposal are expected to exceed the carrying amount of the land. 34. SALES NOTE Export Local - net of sales tax and excise duty Duty drawback Rebate 34.1 2010 2009 (Rupees in thousand) 13,234,879 11,107,205 54,845 43,137 24,440,066 11,937,475 11,840,054 35,222 23,812,751
34.1 Local sales are exclusive of sales tax amounting to Rupees 1,349.218 million (2009: Rupees 1,708.158 million) and excise duty amounting to Rupees 1,618.793 million (2009: Rupees 1,901.663 million).
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137
35. COST OF SALES NOTE Raw materials consumed Cloth and yarn procured and consumed Salaries, wages and other benefits Dyes and chemicals consumed Processing charges Stores, spare parts and loose tools consumed Packing materials Fuel and power Repair and maintenance Insurance Other factory overheads Depreciation Amortization Work-in-process Opening stock Closing stock Cost of goods manufactured Finished goods Opening stock Closing stock Cost of sales 35.1 Raw material consumed Opening stock Add: Purchases Less: Closing stock 581,345 4,070,306 4,651,651 728,243 3,923,408 484,086 3,754,426 4,238,512 581,345 3,657,167 35.1 35.2 2010 2009 (Rupees in thousand) 3,923,408 2,464,620 1,056,915 518,965 12,267 1,119,658 1,460,026 7,351,678 151,766 67,432 202,182 1,379,838 5,558 19,714,313 3,657,167 1,405,218 991,885 505,493 22,452 696,619 1,364,752 7,402,291 123,841 57,897 157,585 1,382,070 7,750 17,775,020 687,683 (915,368) (227,685) 17,547,335 745,779 (803,181) (57,402) 17,489,933
36. DISTRIBUTION COST NOTE Salaries, wages and other benefits Outward freight and handling Clearing and forwarding Travelling and conveyance Insurance Vehicles' running expenses Electricity, gas and water Postage, telephone and fax Sales promotion and advertisement Commission to selling agents Miscellaneous expenses 36.1
2010 2009 (Rupees in thousand) 73,637 3,118,158 227,943 26,685 348 8,057 808 6,247 23,732 171,202 10,591 3,667,408 62,565 2,299,401 160,317 24,460 405 7,795 679 5,267 24,308 299,280 28,478 2,912,955
19.5 21
36.1 Salaries, wages and other benefits include provident fund contribution of Rupees 2.176 million (2009: Rupees 2.053 million) and employee benefits (gratuity) amounting to Rupees 0.230 million (2009: Rupees 0.085 million). 37. ADMINISTRATIVE EXPENSES NOTE Salaries, wages and other benefits Travelling and conveyance Repairs and maintenance Rent, rates and taxes Insurance Vehicles' running expenses Printing, stationery and periodicals Electricity, gas and water Postage, telephone and fax Legal and professional Security, gardening and sanitation Provision for doubtful debts Provision for slow moving and obsolete items Depreciation Miscellaneous expenses 37.1 2010 2009 (Rupees in thousand) 164,365 16,234 12,745 9,133 4,600 17,979 13,193 2,589 10,624 16,105 19,813 26,309 5,000 35,755 33,598 388,042 153,428 16,617 13,734 3,049 4,483 17,216 11,503 1,175 10,824 12,437 18,915 35,231 28,261 326,873
915,368 (983,720) (68,352) 19,645,961 803,181 (1,065,214) (262,033) 19,383,928
19.5
35.2 Salaries, wages and other benefits include provident fund contribution of Rupees 28.225 million (2009: Rupees 24.351 million) and employee benefits (gratuity) amounting to Rupees 5.386 million (2009: Rupees 1.536 million).
138
139
37.1 Salaries, wages and other benefits include provident fund contribution of Rupees 4.970 million (2009: Rupees 4.545 million) and employee benefits (gratuity) amounting to Rupees 1.276 million (2009: Rupees 0.421 million). 38. OTHER OPERATING EXPENSES NOTE Auditors' remuneration Donations Workers' profit participation fund Workers' welfare fund Miscellaneous 38.1 38.2 14.1 14 2010 2009 (Rupees in thousand) 2,610 14,502 20,227 7,686 152,284 197,309 1,850 43,543 15,414 60,807
40. FINANCE COST NOTE Mark-up/finance charges/ interest on: Long term financing Redeemable capital Short term borrowings Liabilities against assets subject to finance lease Provident fund Workers' Profit Participation Fund (WPPF) Bank charges and commission Loss on cross currency swap Exchange loss
2010 2009 (Rupees in thousand) 540,266 1,151,738 1,164,673 87,177 2,968 188 2,947,010 129,883 13,970 41,381 3,132,244 668,611 1,311,908 1,134,648 119,445 322 164 3,235,098 115,208 830,747 479,418 4,660,471
14.1
38.1 Auditors' remuneration: Statutory audit fee Certifications 2,060 550 2,610 1,300 550 1,850
38.2 Donations include Rupees 13.882 million paid to Gulab Devi hospital, Lahore. None of the directors and their spouses have any interest in the donees' fund. 39. OTHER OPERATING INCOME Income from financial assets: Exchange gain Gain/ (loss) on disposal of investments Gain/ (loss) on remeasurement of fair value of investments at fair value through profit and loss account Return on bank deposits Dividend income Income from associated company: Dividend income : Security General Insurance Company Limited Income from non-financial assets: Scrap sales Gain on disposal of property, plant and equipment 19.2 Gain on sale of land classified as held for sale Miscellaneous NOTE 2010 2009 (Rupees in thousand) 19,261 3,664 1,869 6,281 715 31,790 21,938 57,860 10,392 13,702 81,954 135,682 78,350 (3,330) (13,200) 12,306 837 74,963 27,422 41,523 4,858 8,190 26,991 81,562 183,947
41. PROVISION FOR TAXATION Current year Current Deferred Prior year Current 186,061 (73,912) 112,149 885 113,034 120,563 (151,621) (31,058) (488) (31,546)
41.1 Provision of current year income tax represents final tax on export sales, minimum tax on local sales and tax on income from other sources under the relevant provisions of the Income Tax Ordinance, 2001. Numeric tax reconciliation has not been presented, being impracticable. 42. EMPLOYEE BENEFITS - Gratuity The future contribution rates of this scheme include allowance for deficit and surplus. Projected unit credit method, based on the following significant assumptions, is used for valuation of this plan: - discount rate - expected return on plan assets - expected rate of growth per annum in future salaries - average expected remaining working life time of employees 2010 12% 12% 11% 10 years 2009 12% 12% 11% 10 years
140
141
The amounts recognized in the balance sheet are as follows: Fair value of plan assets Present value of defined benefit obligation Benefits payable to outgoing Members (Deficit)/ surplus Unrecognized actuarial (gain)/ loss Net asset/ (liability) as at 30 June Net asset/ (liability) as at 01 July, Charged to profit and loss account Payments to fund during the year Amount paid to the Subsidiary Net asset/ (liability) as at 30 June Movement in the present value of defined benefit obligation is as follows: Present value of defined benefit obligation as at 01 July Current service cost Interest cost Benefits paid Actuarial (gain)/ loss Present value of defined benefit obligation as at 30 June Movement in the fair value of plan assets is as follows: Fair value of plan assets as at 01 July Expected return on plan assets Contributions Benefits paid Payment to outgoing members Actuarial (loss) / gain Fair value of plan assets as at 30 June Actual return/ (loss) on plan assets as at 30 June Plan assets comprise of: Defence Saving Certificates (including accrued interest less zakat) National Investment Trust Units Cash at bank Term deposit receipts - KASB Bank Benefit payments due, but not paid
2010 2009 (Rupees in thousand) 43,201 (77,070) (33,869) 27,005 (6,864) 8,184 (6,864) 1,929 (10,113) (6,864) 47,997 (60,082) (12,085) 20,269 8,184 9,768 (2,042) 458 8,184 Charged to profit and loss are as follows: Current service cost Interest cost Expected return on plan assets Acturial losses charge
2010 2009 (Rupees in thousand) 3,987 7,210 (5,759) 1,426 6,864 3,328 6,080 (7,366) 2,042
Comparison of present value of defined benefit obligation The fair value of plan assets and the surplus or deficit of gratuity fund for five years is as follows:
2010 2009 2008 2007 2006 ----------------------- Rupees in thousand ----------------------Present value of defined benefit obligation Fair value of plan assets
(77,070) 43,201 (33,869) 7,750 (412)
(60,082) 47,997 (12,085) 3,216 (17,140)
(50,663) 61,382 10,719 (1,653) (6,697)
(46,512) 60,785 14,273 (3,825) 2,603
(45,937) 100,830 54,893 12,381 7,007
60,082 3,987 7,210 (1,959) 7,750 77,070 47,997 5,759 1,929 (1,959) (10,113) (412) 43,201 5,348 17,886 1,914 23,431 (30) 43,201
50,663 3,328 6,080 (3,205) 3,216 60,082 61,382 7,366 458 (4,069) (17,140) 47,997 (9,774) 24,778 20,777 2,442 47,997
(Deficit)/ surplus Experience adjustment on obligation Experience adjustment on plan assets
The Subsidiary's policy with regard to actuarial gains / losses is to follow the minimum recommended approach under IAS 19: "Employee Benefits". The latest actuarial valuation of the gratuity scheme has been carried out on 30 June 2010. 43. CASH GENERATED FROM OPERATIONS 2010 2009 (Rupees in thousand) (2,193,183) (1,454,341)
Loss before taxation Adjustment for non-cash charges and other items: Depreciation Amortization of intangible assets Provision for doubtful debts Provision for slow moving and obsolete items Finance cost Gain on sale of fixed assets (Gain) / Loss on sale of investments
Loss on remeasurement of investments

Gain on sale of land classified as held for sale
1,415,593 5,558 26,309 5,000 3,132,244 (10,392) (3,664) 70,207 -
1,417,301 7,750 4,660,471 (4,858) 3,330 13,200 (8,190)
142
143
NOTE Employees' compensated absences Provision for employee benefits Dividend income Return on bank deposits Working capital changes 43.1 Working capital changes (Increase) / decrease in current assets: Stores, spare parts and loose tools Stock-in-trade Trade debts Loans and advances Gratuity fund trust Security deposits and short term prepayments Other receivables Increase/ (decrease) in current liabilities Trade and other payables
2010 2009 (Rupees in thousand) 10,661 6,864 (22,653) (6,281) 281,604 2,717,867 6,046 (28,259) (12,306) 480,303 5,080,447
The Chief Executive Officer and directors are provided with the Company's maintained vehicles, free medical facilities and residential telephone facilities for both business and personal use. Chief executive is also provided free furnished accommodation alongwith utilities. Executives are provided with free use of company maintained vehicles in accordance with the Group policy. The aggregate amount charged in the financial statements in respect of directors' meeting fee paid to 4 (2009: 4) directors was Rupees 205 thousand (2009: Rupees 190 thousand). 45. TRANSACTIONS WITH RELATED PARTIES The related parties comprise of subsidiaries, associated undertakings, directors of the Group and their close relatives, key management personnel and staff retirement fund. Detail of transactions with related parties, other than those which have been specifically disclosed elsewhere in these consolidated financial statements are as follows: 2010 2009 (Rupees in thousand) Associated company Dividend income Share deposit money received Post employment benefits plan Contribution to provident fund Interest on provident fund Funds received from gratuity fund 21,938 1,000,000 23,823 2,968 15,048 2010 (1,043,987) 145,526,216 (7.17) 27,422 30,949 322 1,584 2009 (959,035) 145,526,216 (6.59)
43.1
481,933 (467,091) (374,429) (481,821) 34,287 (161,926) (969,047) 1,250,651 281,604
376,550 (323,726) 351,481 71,620 1,584 (93,283) 25,829 410,055 70,248 480,303
44. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amount charged in the financial statements for the year for remuneration including certain benefits to the chief executive, directors and executives of the Group is as follows:
Chief Executive Directors Executives 2010 2009 2010 2009 2010 2009 2 2 5 5 61 63 ----------------( Rupees in thousand )--------------9,337 691 504 467 64 185 11,248 9,337 691 466 383 185 73 11,135 11,412 377 1,992 1,362 92 15,235 9,791 262 1,701 1,258 59 13,071 72,529 5,325 26,575 3,086 252 6,096 113,863 64,113 4,608 24,170 2,441 122 4,132 99,586
46. LOSS PER SHARE - BASIC AND DILUTED

There is no dilutive effect on the basic loss per share which is based on: Loss attributable to ordinary shares Rupees in thousand Weighted average number of ordinary shares Loss per share 47. PLANT CAPACITY AND ACTUAL PRODUCTION SPINNING: - Rawalpindi Division Spindles (average) installed / worked; 100% Plant capacity converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts). Actual production converted into 20s count based on 3 shifts per day for 1,095 shifts (2009:1,095 shifts). Numbers Rupees
Number of persons
Managerial remuneration Contribution to provident fund Housing and utilities Medical Group insurance Club subscription Others
(Numbers) 85,680 85,834
(Kilograms in thousand) 37,950 35,211 37,945 35,298
144
145
2010 - Gujar Khan Division Spindles (average) installed / worked;
2009 (Numbers)
70,848
66,068
- Raiwind Division Annual rated capacity (based on 365 days) Actual generation Gas engines STITCHING:
54,460 26,212
54,312 28,166
(Kilograms in thousand) 100% Plant capacity converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts). Actual production converted into 20s count based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts). WEAVING: - Raiwind Division Looms installed / worked (Numbers) 204
33,313 31,295
27,732 26,318
The plant capacity of this division is indeterminable due to multi-product plants involving varying processes of manufacturing and run length of order lots. 2010 2009
(Metric tons in thousand) CEMENT: Clinker: Annual rated capacity (Based on 300 days) Annual production for the year REASONS FOR LOW PRODUCTION - Due to stoppage for normal maintenance, doffing, change of spin plans and cloth quality, interruption in gas and electricity supply. - Cloth processing units working capacity was limited to actual export / local orders in hand. (Meters in thousand) - The generation of power was limited to actual demand. 41,975 34,653 41,975 30,626 - Shortfall in production of cement was mainly due to break-down in cement mills and market 48. POST BALANCE SHEET EVENT (Mega Watts) 207,787 207,787 In accordance with the approval of the shareholders in their Extraordinary General Meeting held on 03 May 2010 and subsequent permission granted by the Securities and Exchange Commission of Pakistan (SECP), the Holding Company has, after the reporting period, issued 100,000,000 ordinary shares of Rupees 10 each otherwise than through a right issue to Mercury Management Incorporated, Hutton Properties Limited and Zimpex (Private) Limited in accordance with the agreement dated 10 March 2010 between the three allottees, the Holding Company and Maple Leaf Cement Factory Limited Subsidiary Company. 3,690 3,130 3,690 3,137
204
(Square meters in thousand) 100% Plant capacity at 60 picks based on 3 shifts per day for 1,095 shifts (2009: 1,095 shifts). Actual production converted to 60 picks based on 3 shifts per day for 1,072 shifts (2009: 1,092 shifts). PROCESSING OF CLOTH : - Rawalpindi Division Capacity at 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) Actual at 3 shifts per day for 1,095 shifts (2009: 1,095 shifts) POWER PLANT: - Rawalpindi Division Annual rated capacity (based on 365 days) Actual generation Main engines Gas engines 2,198 78,080 7,124 64,663 72,568 68,605
84,875 68,271
146
147
148
49.
49.1 30 June 2010 ----------------------------------------------------------- ( R u p e e s in t h o u s a n d ) ------------------------------------------------------------SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST ADMINISTRATIVE EXPENSES (16,234) (64,130) (80,364) 1,142,628 130,628 263,489 305,503 1,708 182,962 (407,137) 2,463,897 (18,129) (55,961) (74,090) (57,076) (60,939) (118,015) (53,782) (51,207) (104,989) (324,508) (70,097) (394,605) (392,937) (68,797) (461,734) (3,269,590) (192,876) (3,462,466) (2,448,236) (150,779) (2,599,015) 4,822,128 (3,599,136) 1,222,992 3,049,558 (2,844,840) 204,718 3,079,523 (2,698,019) 381,504 2,571,181 (2,160,689) 410,492 5,474,514 (5,078,201) 396,313 4,756,984 (4,112,288) 644,696 13,747,212 (10,691,883) 3,055,329 15,359,777 (10,296,865) 5,062,912 (2,683,311) 2,683,311 (1,924,749) 1,924,749 24,440,066 (19,383,928) 5,056,138 (3,667,408) (388,042) (4,055,450) 1,000,688 23,812,751 (17,489,933) 6,322,818 (2,913,084) (326,744) (3,239,828) 3,082,990 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 Spinning Weaving Processing and home textile Cement Elimination of inter-segment transactions Group 30 June 2009
SEGMENT INFORMATION
PROFIT BEFORE TAX AND UNALLOCATED INCOME AND EXPENSES UNALLOCATED INCOME AND EXPENSES FINANCE COST OTHER OPERATING EXPENSES OTHER OPERATING INCOME PROVISION FOR TAXATION PROFIT / (LOSS) AFTER TAXATION 49.2
Reconciliation of reportable segment assets and liabilities
(3,132,244) (197,309) 135,682 (113,034) (3,306,905) (2,306,217) Spinning Weaving Group Processing and home textile Cement 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 30 June 2010 30 June 2009 ---------------------------------------------------------------------(R u p e e s in t h o u s a n d)------------------------------------------------------------------------
(4,660,471) (60,807) 183,947 31,546 (4,505,785) (1,422,795)
TOTAL ASSETS FOR REPORTABLE SEGMENT
2,399,058
2,514,724
1,211,488
1,701,352
2,973,709
2,978,474
23,830,834
23,401,059
30,415,089 10,472,980 40,888,069
30,595,609 6,080,989 36,676,598
UNALLOCATED ASSETS
All segment assets are allocated to reportable segments other than those directly relating to corporate and tax assets.
TOTAL LIABILITIES FOR REPORTABLE SEGMENT
689,813
842,797
2,005,937
1,725,080
2,604,786
5,429,033
23,830,834
23,401,059
29,131,370 11,756,699 40,888,069
31,397,969 5,278,629 36,676,598
UNALLOCATED LIABILITIES
49.3 49.3.1 The Group's revenue from external customers by geographical location is detailed below:
All segment liabilities are allocated to reportable segments other than trade and other payables, corporate borrowings and current and deferred tax liabilities. Geographical Information 2010 2009 (RUPEES IN THOUSAND) Europe America Asia, Africa, Australia Pakistan 1,664,667 4,040,326 7,627,868 11,107,205 24,440,066 1,714,770 3,407,655 6,850,272 11,840,054 23,812,751
49.3.2 49.4 The Group's revenue is earned from a large mix of customers.
All non current assets as at reporting date are located and operated in Pakistan. Revenue from major customers
(a) Market risk (i) Currency risk
50.1 Financial risk factors
50. FINANCIAL RISK MANAGEMENT
Cash at banks - USD Trade debts - USD Trade debts - Euro Trade debts - GBP 2010 2009 (Amounts in thousand) 37 17,770 832 9,119 1,003 10,667 7,341 1,056 4,884 72 15,388 245 18 11,163 1,168 17,200 11,879 80 1,226 725,520
Risk management is carried out by the Group's finance department under policies approved by the Board of Directors. The Group's finance department evaluates and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, other price risk, interest rate risk, credit risk, liquidity risk, use of derivative financial instruments and non derivative financial instruments and investment of excess liquidity.
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies.
The Group is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Euro, GBP and Yen. Currently, the Group's foreign exchange risk exposure is restricted to bank balances, the amounts receivable / payable from / to the foreign entities. The Group uses forward exchange contracts to hedge its foreign currency risk, when considered appropriate. The Group's exposure to currency risk was as follows:
Trade and other payable - USD Trade and other payable - Euro Trade and other payable - Yen Finance lease liability - USD Outstanding Letters of credit - USD Outstanding Letters of credit - Euro Outstanding Letters of credit -Yen
149
2010 2009 (Amounts in thousand) Net exposure - USD Net exposure - Euro Net exposure - GBP Net exposure - Yen The following significant exchange rates were applied during the year: Rupees per US Dollar Average rate Reporting date rate Rupees per Euro Average rate Reporting date rate Rupees per GBP Average rate Reporting date rate Rupees per Yen Average rate Reporting date rate Sensitivity analysis If the functional currency, at reporting date, had weakened / strengthened by 5% against the USD, Euro, GBP and Yen with all other variables held constant, the impact on loss after taxation for the year would have been Rupees 39.890 million, Rupees 6.416 million, Rupees NIL and Rupees 0.236 million (30 June 2009: Rupees 31.069 million, Rupees 12.302 million, Rupees 0.122 million and Rupees 31.473 million) respectively higher / lower, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis. In management's opinion, the sensitivity analysis is unrepresentative of inherent currency risk as the year end exposure does not reflect the exposure during the year. (ii) Other Price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instrument traded in the market. The Group is not exposed to commodity price risk. 83.78 85.60 112.10 104.58 132.08 128.66 0.9241 0.9662 78.81 81.10 107.87 114.54 126.45 135.05 0.7867 0.8475 9,320 1,227 4,884 7,662 2,149 18 742,720
Sensitivity analysis The table below summarises the impact of increase / decrease in the Karachi Stock Exchange (KSE) Index on the Group's loss after taxation for the year and on equity (fair value reserve). The analysis is based on the assumption that the equity index had increased / decreased by 5% with all other variables held constant and all the Group's equity instruments moved according to the historical correlation with the index: Index Impact on loss after taxation 2010 2009 Impact on statement of other comprehensive income 2010 2009
--------------------- (RUPEES IN THOUSAND) ---------------------
KSE 100 (5% increase) KSE 100 (5% decrease)

(iii) Interest rate risk
1,371 (1,371)
1,593 (1,593)
This represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has no significant long-term interest-bearing assets. The Group's interest rate risk arises from long term financing, redeemable capital, liabilities against assets subject to finance lease, lease finance advance and short term borrowings. Borrowings obtained at variable rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rate expose the Group to fair value interest rate risk. At the balance sheet date the interest rate profile of the Groups interest bearing financial instruments was: 2010 2009 (Amounts in thousand) Fixed rate instruments Financial Assets Loans to employees Bank Balances at PLS account Financial liabilities Long term financing Short term borrowings Liabilities against assets subject to finance lease 407,742 3,201,896 549,141 2,942,000 8,017 5,429 44,629 8,786 65,366
150
151
Floating rate instruments Financial assets Bank balances- saving accounts Financial liabilities Long term financing Redeemable capital Short term borrowings Liabilities against assets subject to finance lease Lease finance advance Fair value sensitivity analysis for fixed rate instruments
2010 2009 (Amounts in thousand)
Holding Company
Short Term Rating Long term 2010 Agency 2009
12,673 5,001,198 8,296,600 6,929,377 1,214,971 -
13,891 4,655,703 8,000,000 6,250,793 1,343,997 35,922
Banks National Bank of Pakistan Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Faysal Bank Limited Habib Bank Limited MCB Bank Limited NIB Bank Limited The Royal Bank of Scotland Limited My Bank Limited The Bank of Punjab Meezan Bank Limited Silkbank Limited Standard Chartered Bank (Pakistan) Limited United Bank Limited Al-Baraka Islamic Bank Limited Bank Al Habib Limited Subsidiary Companies Total bank balance of Rupees 72.422 million (2009: Rupees 94.943 million) placed with banks have a short term credit rating of at least A1+ (2009: A1+). 2010 2009 (Amounts in thousand) Group's investments Rating Security General Insurance Company Limited United Composite Islamic Fund Faysal Saving Growth Fund NAFA Government Securities Liquid Fund Noman Abid Reliance Inome Fund Alfalah GHP cash fund Fauji Cement Company Limited Highnoon Laboratories Limited A N/A N/A N/A AM 3AM 3 N/A N/A 1,087,021 982,313 12,800 4,267 4,267 14,053 2,008 539 2,744 1,106,364 1,003,647 A-1+ A1+ A1+ A1+ A1+ A-1+ A1+ A1+ A1+ A2 A1+ A-1 A-3 A1+ A-1+ A-1 A-1+ AAA AA AA AA AA AA+ AA+ AAAA AAAA+ AAAA AA+ A AA+ JCR-VIS 754 PACRA 32,531 PACRA 7,822 PACRA 1,421 PACRA 4,108 JCR-VIS 67 PACRA 9,907 PACRA 12,313 PACRA 88 PACRA 30 PACRA 540 JCR-VIS 319 JCR-VIS 2,945 PACRA 2,309 JCR-VIS 133 JCR-VIS 2,565 PACRA 38 77,890 4,656 31,292 5,703 2,536 1,872 103 12,611 11,106 76 30 1,763 30 837 2,611 4,350 79,576
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect loss of the Group. Cash flow sensitivity analysis for variable rate instruments If interest rate at the year end date, fluctuates by 1% higher / lower with all other variables held constant, loss after taxation for the year would have been Rupees 214.421 million (30 June 2009: Rupees 202.864 million) lower / higher, mainly as a result of higher / lower interest expense on floating rate borrowings. This analysis is prepared assuming the amounts of liabilities outstanding at balance sheet dates were outstanding for the whole year. (b) Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: 2010 2009 (Amounts in thousand) Investments Deposits Trade debts Accrued Interest Other receivables Loans and advances Bank balances 1,114,449 125,551 2,106,774 797 49,669 264,219 150,312 3,811,771 1,014,173 98,874 1,732,345 1,105 37,082 5,695 174,519 3,063,793
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (If available) or to historical information about counterparty default rate:
152
153
The Group's exposure to credit risk and impairment losses related to trade debts is disclosed in Note 26.
Subsidiary Company
Due to the Group's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counterparties on their obligations to the Group. Accordingly the credit risk is minimal. Non derivative financial liabilities: Long term financing Redeemable capital Liabilities against assets subject to finance lease Long term deposits Trade and other payables Accrued mark-up Short term borrowings
Carrying Amount
Contractual Cash Flows
Less than one year
1 to 5 Years
More than 5 Years
----------------------------- (Rupees in thousand) -------------------------
(c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. At 30 June 2010, the Group had Rupees 4,313.53 million available borrowing limits from financial institutions and Rupees 152.453 million cash and bank balances. Inspite the fact that the Group is in a negative working capital position at the year end, management believes the liquidity risk to be low. Following are the contractual maturities of financial liabilities, including interest payments. The amount disclosed in the table are undiscounted cash flows: Contractual maturities of financial liabilities as at 30 June 2010: Holding Company
3,080,439 4,527,362 8,296,600 13,959,857 1,079,941 1,203,843 2,739 2,739
718,231 2,413,858 1,395,273 283,820 6,231,669 7,444,368 429,186 774,657 2,739 -
2,642,912 2,642,912 2,642,912 921,812 921,812 921,812 4,060,838 4,060,838 4,060,838
20,085,281 27,319,363 9,056,799 9,422,923 8,839,641 Contractual maturities of financial liabilities as at 30 June 2009 Holding Company
Carrying Amount
6 months or less
6-12 months
1-2 Years
More than 2 Years
Carrying Amount
6 months or less
6-12 months
1-2 Years
More than 2 Years
---------------------------------- (Rupees in thousand) -------------------------------------------------------------- (Rupees in thousand) -----------------------------
Non derivative financial liabilities: Long term financing Liabilities against assets subject to finance lease Trade and other payables Accrued mark-up Short term borrowings 2,328,501 2,950,434 135,030 989,594 289,987 155,263 989,594 185,259 542,361 53,450 989,594 185,259 398,510 32,487 471,947 902,944 699,117 1,310,446 45,157 24,169 -
Non derivative financial liabilities: Long term financing Liabilities against assets subject to finance lease Lease finance advance Trade and other payables Accrued mark-up Short term borrowings 2,749,341 3,413,720 187,191 35,922 808,136 185,259 207,348 36,460 808,136 185,259 506,992 35,963 36,460 808,136 185,259 606,169 1,031,773 1,268,786 52,959 553,479 50,812 67,614 -
6,070,435 6,268,109 5,796,162 9,813,547 10,548,659 7,566,826
4,810,471 4,991,732 4,438,253
744,274 1,334,615
8,776,320 9,642,655 6,011,063 1,212,607 1,082,585 1,336,400
154
155
Subsidiary Company
Carrying Amount
Less than one year
1 to 5 Years
More than 5 Years
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value a financial instrument are observable, those financial instruments are classified under level 2 in above referred table. If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3.The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The Group has no such type of financial instruments as on 30 June 2010. 50.3 Financial instruments by categories
Loans and receivables Through profit or loss Available for sale Total
----------------------------- (Rupees in thousand) -------------------------
Non derivative financial liabilities: Long term financing Redeemable capital Liabilities against assets subject to finance lease Long term deposits Trade and other payables Accrued mark-up Short term borrowings 2,455,503 3,365,222 662,012 2,703,210 8,000,000 11,646,716 2,035,200 9,611,516 1,164,823 2,580 1,359,171 2,580 390,321 968,850 2,580 -
1,675,984 1,675,984 1,675,984 441,194 441,194 441,194 4,382,322 4,831,813 4,831,813
18,122,406 23,322,680 10,036,524 13,286,156
The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest rates / mark up rates effective as at 30 June. The rates of interest / mark up have been disclosed in note 8, note 9 and note 10 to these financial statements. 50.2 Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped in to levels 1 to 3 based on the degree to which fair value is observable: Level 1 As at 30 June 2010 Assets Available for sale financial assets As at 30 June 2009 Assets Available for sale financial assets Level 2 Level 3 Total
As at 30 June 2010 Assets as per balance sheet Investments Deposits Trade debts Accrued interest Other receivables Loans and advances Cash and bank balances
------------------- (Rupees in thousand) -----------------
125,551 2,106,774 797 49,669 264,219 152,453 2,699,463
27,428 1,087,021 1,114,449 125,551 - 2,106,774 797 49,669 - 264,219 - 152,453 27,428 1,087,021 3,813,912
Financial liabilities at amortized cost (Rupees in thousand)
1,087,021
- 1,087,021
982,313
982,313
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial instruments held by the Group is the current bid price. These financial instruments are classified under level 1 in above referred table. The Group has no such type of financial instruments as on 30 June 2010.
Liabilities as per balance sheet Long term financing Redeemable capital Liabilities against assets subject to finance lease Lease finance advance Short term borrowings Trade and other payables Accrued mark-up
5,408,940 8,296,600 1,214,971 10,131,273 3,632,506 1,211,799 29,896,089
156
157
Loans and receivables
Through profit or loss
Available for sale
Total
balance sheet plus borrowings. The gearing ratio as at year ended 30 June 2010 and 30 June 2009 is as follows: 2010 2009 Rupees in thousands
As at 30 June 2009 Assets as per balance sheet Investments Deposits Trade debts Other receivables Loans and advances Cash and bank balances
98,874 1,732,345 37,082 5,695 180,229 2,054,225
31,860 31,860
982,313 1,014,173 98,874 1,732,345 37,082 5,695 180,229 982,313 3,068,398
Borrowings Total equity Total capital employed Gearing Ratio 51. FINANCIAL RISK MANAGEMENT
25,051,784 5,323,453 30,375,237 82.47%
23,785,573 7,581,330 31,366,903 75.83%
These financial statements were authorised for issue on September 29, 2010 by the Board of Directors of the Holding Company. 52. CORRESPONDING FIGURES No significant reclassification/ rearrangement of corresponding figures has been made. 53. GENERAL Figures have been rounded off to the nearest thousand of Rupees unless stated otherwise.
Financial liabilities at amortized cost (Rupees in thousand)
Liabilities as per balance sheet Long term financing Redeemable capital Liabilities against assets subject to finance lease Lease finance advance Short term borrowings Trade and other payables Accrued mark-up
5,204,844 8,000,000 1,352,014 35,922 9,192,793 2,484,030 626,453 26,896,056
50.4 Capital risk management The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders through repurchase of shares, issue new shares or sell assets to reduce debt. Consistent with others in the industry and the requirements of the lenders, the Group monitors the capital structure on the basis of gearing ratio. This ratio is calculated as borrowings divided by total capital employed. Borrowings represent long-term financing, redeemable capital, liabilities against assets subject to finance lease, lease finance advance and short-term borrowings obtained by the Group as referred to in note 8, note 9 and note 10 respectively. Total capital employed includes total equity as shown in the
CHIEF EXECUTIVE
DIRECTOR
158
159
KOHINOOR TEXTILE MILLS LIMITED

42-LAWRENCE ROAD, LAHORE
PROXY FORM
I/We of being a member of KOHINOOR TEXTILE MILLS LIMITED hereby appoint
(NAME)
of or failing him/her
(NAME)
another member of the Company
of
another member of the Company
(being a member of the Company) as my/our proxy to attend and vote for and on my/our behalf, at the Annual General Meeting of the Company to be held at its Registered Office, 42-Lawrence Road, Lahore on Saturday, October 30, 2010 at 3:00 p.m. and any adjournment thereof.
As witnessed given under my/our hand(s)
day of
2010.
1. Witness: Signature: Name: Address:
Affix Revenue Stamps of Rs. 5/
Signature of Member 2. Witness: Signature: Name: Address: Shares Held Shareholder's Folio No. CDC A/c No. CNIC No. ________________________________________________________________________________________________ Notes: 1. Proxies, in order to be effective, must be reached at the Companys Registered Office, not less than 48 hours before the time for holding the meeting and must be duly stamped, signed and witnessed.
2. CDC Shareholders, entitled to attend and vote at this meeting, must bring with them their National
Identity Cards/Passports in original to prove his/her identity, and in case of Proxy, must enclose an attested copy of his/her NIC or Passport. Representatives of corporate members should bring the usual documents required for such purpose.
Fold Here
Fold Here
Fold Here
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AFFIX CORRECT POSTAGE
The Company Secretary Kohinoor Textile Mills Limited 42-Lawrence Road, Lahore. Phone No's: (042) 36302261 - 62

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Annual Report 2010