Annual Financial Statment 2010 corel 9 - Chenab · PDF fileDirectors’ Report to the...

Contents

01

Cash Flow Statement.

Statement of Changes in Equity

Notes to the Financial Statement

Pattern of Shareholding (Ordinary Shares).

Pattern of share holding (Preference Shares).

Form of Proxy

20

22

23

50

52

53

Company Information.

Vision and Mission Statement.

Financial Highlights.

Notice of Annual General Meeting

Directors’ Report to the Members

Statement of Compliance with the Codeof Corporate Governance.

Review Report on Compliance withthe Code of Corporate Governance.

Auditors’ Report to the Members

Balance Sheet

Profit & Loss Account

02

03

04

05

06

11

13

14

16

18

Statement of Comprehansive Incom 19

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Company Information

Chief Executive Officer Mian Muhammad Latif Director s

Mian Muhammad Javaid Iqbal Mr. Muhammad Naeem Mr. Muhammad Faisal Latif Mr. Muhammad Farhan Latif Mr. Muhammad Rizwan Latif Mr. Muhammad Zeeshan Latif

Bankers/Financial Institutions (In Alphabetic Order)

Allied Bank Limited Atlas Bank Limited Askari Bank Limited AlBaraka Islamic Bank, B.S.C. (E.C) Bank Alfalah Limited Citibank, N.A. Faysal Bank Limited First Credit & Investment Bank Limited First Punjab Modaraba Habib Bank Limited Habib Metropolitan Bank Limited KASB Bank Limited National Bank of Pakistan NIB Bank Limited Orix Investment Bank (Pakistan) Limited Pak Oman Investment Company Ltd. Pak Kuwait Investment Company (Pvt.) Ltd. Pak Libya Holding Company (Pvt.) Ltd. Saudi Pak Commercial Bank Limited Saudi Pak Industrial & Agricultural Investment Company (Pvt.) Ltd.Standard Chartered Bank (Pakistan) Limited The Bank of Punjab United Bank Limited

Company Secretary/ Chief Financial Officer

Mr. Muhammad Arshad

Audit CommitteeMr. Muhammad Farhan Latif - ChairmanMr. Muhammad Rizwan Latif - Membe rMr. Muhammad Zeesha n L a t i f - Member

AuditorsAvais Hyder Liaquat Nauman Chartered Accountants

Legal AdvisorCh. Shahid Mehmood (Advocate)

Registered OfficeNishatabad, Faisalabad. Tel:041-8754472-8 Fax:041-8752400, 8752700

E-mail [email protected]

Website Addresswww.chenabgroup.com

Works-Spinning Unit - Toba Tek Singh. -Weaving Unit - Kharianwala, District, Sheikhupura. -Weaving Unit - Shahkot, District, Nankana sah ib.-Weaving Unit - Gatti, Faisalabad. -Weaving Unit - Khurrianwala, Faisalabad. -Processing & Stitching Units - Nishatabad, Faisalabad.

Vision

To be a competitive and customer focused organization with continuing commitment to excellence and standards.

Mission Statement

To be the business house of first choice for customers.

To be a change leader.

To produce innovative, relevant and cost effective products.

Setting and maintaining high standards.

To earn profits by achieving optimum level of production by using state of the art technologies.

To provide ideal working conditions to employees and to take care in their career planning and reward them according to their skill and responsibility.

To meet social and cultural obligations towards the society being a patriotic and conscientious corporate citizens.

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Financial Highlight

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2010 2009 2008 2007 2006 2005Operational performance

(Rupees'000)

Sales-net 8,857,796 9,091,378 8,506,911 8,161,233 6,957,562 5,863,108

Cost of sales 9,055,287 7,107,004 6,827,606 6,613,983 5,389,463 4,707,025

Gross profit (197,491) 1,984,374 1,679,305 1,547,250 1,568,099 1,156,083

Operation (loss) / profit (630,845) 1,472,588 1,117,616 996,406 953,013 654,165 Loss/Profit before taxtion (1,939,628) (13,730) (15,294) 160,439 216,078 232,622 Loss/Profit after taxtion (2,027,969) (96,663) (95,791) 74,782 150,165 186,245

Financial position

Property,Plant and equipment 11,855,461 7,389,014 7,035,076 7,168,721 5,953,381 4,732,200 Intangible asset - - - - 1,625 3,250 Capital work in progress - 4,965 577,962 287,246 153,566 141,300 Long term deposits 19,736 20,988 22,224 22,849 - -

Fixed capital expenditure 11,875,197 7,414,967 7,635,262 7,478,816 6,108,572 4,876,750

Total assets 19,386,318 16,941,257 16,287,102 14,982,858 14,174,127 10,056,662

Current assetStore,spare parts and

stocks in trade 3,726,497 5,829,472 5,618,142 5,093,303 4,833,445 3,636,398 Other current assets 3,767,204 3,633,466 2,973,840 2,345,492 3,104,244 1,454,078 Cash and cash equivalents 17,420 63,352 59,858 65,247 127,866 89,436

Total 7,511,121 9,526,290 8,651,840 7,504,042 8,065,555 5,179,912

Current liabilities

Short term bank borrowing 7,436,954 7,129,404 6,880,563 5,473,669 4,971,835 3,604,661 Currant portion of long term

loans/morabaha 870,414 624,996 1,041,770 782,047 1,218,606 180,000 Other current liabilities 2,827,932 2,618,726 2,147,931 2,109,275 1,718,840 1,213,476

Total 11,135,300 10,373,126 10,070,264 8,364,991 7,909,281 4,998,137

Net working capital (3,624,179) (846,836) (1,418,424) (860,949) 156,274 181,775 Long term loans/Finance lease,

morabaha 2,322,499 2,717,133 2,296,571 2,550,142 2,228,194 2,310,856

Shareholder's equity 556,878 2,493,877 2,589,955 2,759,138 2,745,372 2,367,700 16,892,722 16,265,376 14,982,857 14,174,127 10,056,663

Profiability analysisGross profit to sale (%) (2.23) 21.83 19.74 18.96 22.54 19.72 Loss/Profit befor tax to sales (%) (21.90) (0.15) (0.18) 1.97 3.11 3.97 Loss/Profit after tax to sales (%) (22.89) (1.06) (1.13) 0.92 2.16 3.18 Return on Investment (%) (10.46) (0.57) (0.59) 0.50 1.06 1.85 Return on equity (%) (364.17) (3.88) (3.70) 2.71 5.47 7.87 Earnings per share(Rupees) (0.83) (0.83) (0.83) 0.01 0.67 1.25

Financial analysisCurrent ratio(time) 0.67 0.92 0.86 0.90 1.02 1.04 Debt to equity (time) 5.73 1.34 1.29 1.21 1.26 1.05 Total Debt to Total Assets 0.16 0.20 0.20 0.22 0.24 0.25 Total Debt to Fixed Assets 0.27 0.45 0.44 0.45 0.56 0.51

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Notice of Annual General Meeting

thNotice is hereby given that 26 Annual General Meeting of the shareholders of the thCompany will be held at 11.00 A.M. on Tuesday the 30 November, 2010 at the

Registered office of the Company at Nishatabad, Faisalabad to transact the following business:- 1 To confirm the minutes of the last meeting.

2 To consider and approve the Annual Audited Financial Statements of the Company for the year ended June 30, 2010 together with Directors and Auditors Reports thereon.

3 To appoint Auditors for the next financial year 2010-2011 and to fix their

remuneration. The Retiring Auditors, M/s. Avais Hyder Liaquat Nauman, Chartered Accountants, Faisalabad being eligible, offer themselves for re-appointment.

4 To transact any other business with the permission of the Chair.

BY ORDER OF THE BOARD

FAISALABAD (MUHAMMAD ARSHAD) NOVEMBER 08, 2010 COMPANY SECRETARY

NOTES:

1 The Share Transfer Books of Ordinary/Preference Shares of the Company will

remain closed from November 22, 2010 to November 30, 2010 (both days inclusive). Transfers received in order by Company’s Registrar, M/s. Consulting One (Pvt.) Ltd, 478-D, Peoples Colony, Faisalabad upto close of business hours on November 21, 2010 will be considered in time.

2 A member entitled to attend and vote at the meeting may appoint a proxy to attend

and vote instead of him/her at the meeting. Proxies must be deposited at the Company’s Registered Office not less than 48 hours before the time for holding the meeting. A proxy must be a member of the company.

3 Shareholders whose shares are deposited with Central Depository Company

(CDC), or their Proxies are requested to bring their original National Identity Cards (CNICs) or Passports alongwith the Participants ID numbers and their account numbers at the time of attending the Annual General Meeting for verification.

4 All other members should bring their Original National Identity Cards for

identification purpose.

5 The shareholders are requested to notify the company immediately the change in their address, if any.

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Directors’ Report to the Members

The directors are obliged to place before you report and audited accounts of the company for the year ended June 30, 2010.

Sales Revenue

Sales revenue for the year under report was earned at Rs.8.857 billion as compared with Rs.9.091 billion achieved during the preceding year.

Financial Results and Reasons For Loss

The company has sustained a financial loss of Rs.2.027 billion during the year under report. Your company is passing through a difficult period for the first time in its history on account of many national/international factors. The prices of raw material had gone manifold and this increase could not be absorbed in the sale prices of the products despite best efforts by the management.

The frequent shut down of gas/electricity under the garb of load management by the authorities concerned had also adversely affected the productivity and quality of the products.

The banks did not extend financial support to the company to meet additional working capital requirements arisen out of rise in prices of raw material, resulting in shortage of working capital leading to the low productivity, mitigating requisite profit margins.

However, the financial results for the year ended June 30, 2010 with comparative figures are as under:-

2010 (Rupees)

2009 (Rupees)

Sales 8,857,795,931 9,091,378,530 Cost of sales 9,055,286,804 7,107,003,527 Gross (loss) profit (197,490,873) 1,984,375,003 Other operating income 135,668,917 1,390,367 Operating loss (profit) (61,821,956) 1,985,765,370 Selling and distribution expenses 363,687,892 307,434,207 Administrative expenses 198,245,997 197,356,419 Other operating expenses 7,087,892 6,995,759 Finance cost 1,308,783,863 1,487,708,495 1,877,805,644 1,999,494,880 Loss before taxation (1,939,627,600) (13,729,510) Provision for taxation 88,341,710 82,933,342

Loss for the year

--------------------- (2,027,969,310) ============

--------------------- (96,662,852)

============ Earnings per share – Basic (17.63)

============ (0.84)

============

(Rupees)

The board of directors of the company has recommended the following appropriations:- - Transfer from preference shares redemption reserve to general reserve. 342,857,1423

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Dividend On Preference Shares There being financial loss to the company, the payment of dividend on non voting cumulative preference shares has been deferred till the availability of sufficient profits for appropriation. Non Payment Of Debt Obligations

Due to heavy financial losses affecting liquidity position of the company adversely, the management has not been able to discharge its debt obligations towards its financial institutions. In order to regularize the financial affairs, restructuring of financial facilities have been applied for, which is under process with the financial institutions.

Future Prospects

Future profitability of the company depends upon availability of raw material at economical prices, uninterrupted supply of gas and electricity and availability of additional working capital from the banks at reasonable rate of mark up to cope with sky high prices of raw material.

Strong demand for Pakistani textile products has emerged in the international market in view of recent duty free access to EU market but this opportunity can be availed if the Govt. of Pakistan provides a comprehensive package for the revival of value added textile industry.

Auditors’ Observations

(i) On Ggoing Concern Assesment

On the basis of existing conditions and future judgments about the outcome of the events, the management has prepared a comprehensive plan to continue the entity as a going concern. Presently the company is facing liquidity problems due to additional requirement of working capital because of significant increase in the prices of raw material. Steps are being taken to change the operational strategy to achieve the optimum level of plant utilization. The repayment terms of loans are being renegotiated with the lenders keeping in view the future cash flows, profits and other relevant forecasts. Request s alhreaavdey been made to the concerned financial institutions to provide additional working capital. The sponsors shall also be contributing interest free loan to the company.

In view of the above the management is confident that it will be successful in its efforts and company will be able to continue as a going concern. (ii) Redemption Of Non Voting Cumulative Preference Shares Of The Company

In order to discharge preference shares obligation either in cash or by issuing ordinary shares in terms of prospectus upon receiving notices from the investors, a proposal was given to them for conversion of their preference shares into ordinary shares through EOGM on seeking legal opinion from one of the reputed law firms in the country which proposal was not accepted by the investors. Consequently, in the EOGM held on May 19, 2010 the shareholders unanimously postponed adoption of resolutions regarding conversion of preference shares into ordinary shares etc till satisfactory negotiation of the matter with the concerned investors and this matter is still going on and has not been finalized as yet.

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(iii) Past Due Trade Debts

The management is also actively following up the recovery of past due trade debts and is fully confident that keeping in view the past history of the customers, all past due trade debts will be recovered in full.

Corporate Social Responsibility

Your company fully understands its corporate responsibility towards the society and fulfills it by providing financial support to its deserving employees, contributing considerable amount to the national exchequer, applying solution for energy conservation and environment protection. The company has provided healthy safe and learning working environment to its employees and encourages attendance in the training courses, seminars, workshops and conferences both within country and abroad. The company lends regular support to the special persons by providing them jobs best suited to them. It also so fafeprprenticeship to fresh graduates in all the relevant departments on regular basis to elevate their professional and technical skills. Your company has also installed environment friendly gas based four power plants at all operational units with a view to reduce power cost and has also installed first waste water treatment plant in the city resulting in energy conservation and improvement in the environment.

Pattern of shareholding The pattern of shareholding as at June 30, 2010 including the information under the code of corporate governance for ordinary and non voting cumulative preference shares are annexed. Election Of Directors The board of directors in its meeting held on August 11, 2010 had fixed the number of directors as seven pursuant to section 178(1) of the Companies Ordinance, 1984. Consequently, in the election of directors held on September 18, 2010, seven directors who filed their consent for directorship were re-elected as directors for next term of three years. The board appreciated the services of retiring directors namely, Mst. Shahnaz Latif and Mst. Tehmina Yasmin who did not file their consent for re-election.

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Board Meetings

During the year under review six board meetings were held. Attendance by each director is appended below:-

S.NO. NAME OF DIRECTOR NO OF MEETINGS ATTENDED

1 Mian Muhammad Latif 6 2 Mian Muhammad Javaid Iqbal 6 3 Mr. Muhammad Naeem 6

4 Mr. Muhammad Faisal Latif 5 5 Mr. Muhammad Farhan Latif 6 6 Mr. Muhammad Rizwan Latif 4 7 Mr. Muhammad Zeeshan Latif 6

8 Mst. Shahnaz Latif 5 9 Mst. Tehmina Yasmin 6

Leaves of absence were granted to the directors who could not attend the meetings.

Audit Committee

The board of directors in compliance to the code of corporate governance has constituted an audit committee consequent upon re-election of directors as below:-

(1) Muhammad Farhan Latif. - Chairman (Non Executive) (2) Muhammad Rizwan Latif. - Member (Non Executive) (3) Muhammad Zeeshan Latif. - Member (Non Executive)

The meetings of the audit committee were held atleast once every quarter prior to approval of interim and final results of the company. The meetings were also attended by the CFO, Head of Internal Audit and External Auditors as and when it was required.

Code Of Corporate Governance As required by the Code of Corporate Governance, directors are pleased to report that:- (i) The financial statements prepared by the management of the company present fairly its state

of affairs, the results of its operations, cash flows and changes in equity. (ii) Proper books of accounts of the company have been maintained.

(iii) Appropriate accounting policies have been consistently applied in preparation of financial

statements and any changes in accounting policies have been disclosed in the financial statements. The accounting estimates are based on reasonable and prudent judgment.

(iv) International Accounting/Financial Reporting Standards, as applicable in Pakistan have been

followed in preparation of financial statements. (v) The system of internal control is sound and has been effectively implemented and monitored.

(vi) Going concern issue is separately explained. (vii) There has been no material departure from the best practices of corporate governance as

detailed in the listing regulations of the Karachi Stock E (viii) Key operating and financial data for the last six years is annexed.

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(ix) Reasons for not declaring dividend are disclosed. (x) There are no statutory payments on account of taxes, duties, levies and charges which are

outstanding as on June 30, 2010 except for those disclosed in the financial statements.

(xi) No material changes and commitments affecting the financial position of your company have occurred between the end of the financial year to which this balance sheet relates and the date of the Directors’ Report.

Auditors The External Auditors, M/s. Avais Haider Liaquat Nauman, Chartered Accountants, Faisalabad retire and being eligible offer themselves for re-appointment. The Audit Committee and the Board has also recommended their re-appointment as External Auditors of the Company for the next financial year 2010-2011. Acknowledgement The board of directors places on record its appreciation for the support of the shareholders, government agencies, financial institutions and customers. The board would also like to express their appreciation for the services and dedicated efforts being continuously rendered by all the employees of the company and hope that they will continue with these efforts in future also. For and on behalf of

BOARD OF DIRECTORS FAISALABAD (MIAN MUHAMMAD LATIF) November 08, 2010 CHIEF EXECUTIVE

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Statement of Compliance

With best practices of the code of Corporate Governance

This statement is being presented to the comply with the Code of Corporate Governance contained in listing regulations of Karachi Stock Exchange for the purpose of establishing a framework whereby a listed Company is managed in compliance with best practices for good Corporate Governance.Company has applied the principles contained in the Code in the followingmanner:

1. The Company encourages representation of independent non-executive directors, director representing minority interests on its Board of Directors. However, at present the Board includes four executive and ivf e non-executive directors and no director representing minority shareholder.

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 directors of the Company are registered as tax payers and none of them has defaulted in payment of any loan to banking company, a DFI or an NBFI.

4. During the year, no causal vacancy occurred in the Board of Directors.

5. The Company has prepared a ‘Statement of Ethics and Business Practices’ which has been

signed by all directors and employees of the Company.

6. The Board has developed a vision io/ nm sistastement, 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 decision 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 leasto nce 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 members have not attended any orientation course during the year.

10. The appointment of Company Secretary, CFO and Head of Internal Audit, including their emunerationand terms and conditions of employment, as recommended by the CEO is approved by the Board.

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.

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

approval of the Board.

13. The CEO, Directors and Executives do not hold any interest in the shares of the Company other than that 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 of three members, all of whom are non-executive directors.

16. The meetings of the Audit Committee as required by the Code, were held at least once every

quarter prior to approval of interim and finrael sults of the Company and as required by the Code. The terms of reference of the Committee have been formed and communicated to the Committee for compliance.

17. The Board has set-up an effective internal audit function with employees who are considered

suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they are involved in the internal audit function on a full time basis. The Internal Audit Department reports to the Audit Committee.

18. The statutory auditors of the Company have confirmed that they have been given a

satisfactory rating under the Quaylit 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 the Institute of Chartered Accountants of Pakistan.

19. The statutory auditors or the person 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 er gard.

20.

21.

The related party transactions and pricing methods have been placed before the Audit Committee and approved by the Board of Directors. The transactions were made on terms equivalent to those that prevail in arm’s length transactions.

We confirm that all other material principles contained in the Code have been complie d with.

(MIAN MUHAMMAD LATIF) Chief Executive Officer

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Avais Hyder Liaquat NaumanChartered Accountants

Avais Hyder Liaquat NaumanAvais Hyder Liaquat Nauman

478-D, Peoples Colony No.1

Faisalabad - Pakistan

Telephone : (92-41) 854 1165, 854 1965

Telefax : (92-41) 854 2765

E-mail : [email protected]

Avais Hyder Liaquat Nauman is a correspondent

independent accounting and consulting firms.

firm of International, an affiliation ofRSM

Lahore

Other offices at:

: (92-42) 3587 2731/2/3

: (92-21) 3565 5975/6

: (92-51) 211 4096/7/8

: (92-91) 527 7205/527 8310

: (92-81) 282 9809

Karachi

Islamabad

Peshawar

Quetta

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 for the year ended June 30, 2010 prepared by the Board of Directors of Chenab Limited (the Company) to comply with the Listing Regulation No. 35 of the Karachi Stock Exchange, 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 have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls. Further, Sub Regulation (xiii a) of Listing Regulations 35 of the Karachi Stock Exchange requires the Company to place before the Board of Directors for their consideration and approval of 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 June 30, 2010. Date: Novemver 08, -2010 AVAIS HYDER LIAQUAT NAUMAN

Faisalabad CHARTERED ACCOUNTANTS

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AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Chenab Limited as at June 30, 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 change in accounting policy as stated in Note 2.1.1 to the annexed financial statements 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

Avais Hyder Liaquat NaumanChartered Accountants

Avais Hyder Liaquat Nauman

year were in accordance with the objects of the company;

Avais Hyder Liaquat Nauman

478-D, Peoples Colony No.1

Faisalabad - Pakistan

Telephone : (92-41) 854 1165, 854 1965

Telefax : (92-41) 854 2765

E-mail : [email protected]

Avais Hyder Liaquat Nauman is a correspondent

independent accounting and consulting firms.

firm of International, an affiliation ofRSM

Lahore

Other offices at:

: (92-42) 3587 2731/2/3

: (92-21) 3565 5975/6

: (92-51) 211 4096/7/8

: (92-91) 527 7205/527 8310

: (92-81) 282 9809

Karachi

Islamabad

Peshawar

Quetta

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(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 June 30, 2010 and of the loss, its comprehensive loss, 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.

Without qualifying our opinion, we draw attention to the following matters;

(i) The company has incurred operating losses of Rs. 1,919.532 million and current liabilities have exceeded its current assets by Rs. 3,624.179 million. These conditions alongwith other matters as set forth in Note 1.3 indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, the validity of which is dependent on the successful outcome of matters stated in Note 1.3.

(ii) Trade debts of Rs. 829.883 million apraest due as disclosed in Note 37.2.1. The ultimate outcome of actions taken by the company for recovery can not presently be determined and no provision for doubtful debts, that may result, has been made in these financial statements.

AVAIS HYDER LIAQUAT NAUMAN CHARTERED ACCOUNTANTS Engagement Partner:- Syed Ali Adnan Tirmizey

Dated: November 08, 2010 Place: Faisalabad

Avais Hyder Liaquat Nauman InternationalChartered Accountants

RSM

Note

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital

120,000,000 ordinary shares

of Rs.10/- each

80,000,000 cumulative preference

shares of Rs.10/- each

Issued, subscribed

and paid up capital

Cumulative preference shares

Capital reserves

Revenue reserves

SURPLUS ON REVALUATION OF

PROPERTY, PLANT AND EQUIPMENT

NON-CURRENT LIABILITIES

Long term financing

Liabilities against assets

subject to finance lease

Deferred liability

Staff retirement gratuity

CURRENT LIABILITIES

Trade and other payables

Interest / markup payable

Short term borrowings

Current portion of :

Long term financing


subject to finance lease

Provision for taxation - income tax

CONTINGENCIES

AND COMMITMENTS

2010 2009

1,150,000,000

800,000,000

526,409,752

(1,919,532,120)

5,209,204,302

2,254,543,238

67,955,648

162,437,191

2,080,254,632

572,015,274

7,436,953,608

870,413,512

87,275,444

-

1,200,000,000 1,200,000,00

800,000,000 800,000,00

1,150,000,000

800,000,000

526,409,752

17,466,944

556,877,632 2,493,876,696

1,159,681,490

2,605,783,508

111,349,515

197,439,911

2,484,936,077 2,914,572,934

2,126,296,779

350,914,058

7,129,403,676

624,996,458

58,581,487

88,388,024 82,933,342

11,135,300,494 10,373,125,800

19,386,318,505 16,941,256,92

0

0

-

0

Rupees Rupees

The annexed notes form an Itergral par of these financial statements.

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Balance SheetsAs at june 30, 2010

(MUHAMMAD NAEEM)DIRECTOR

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

Long term deposits

-Annual R

eport

2010(MIAN MUHAMMAD LATIF)

CHIEF EXECUTIVE OFFICER

Rupees Rupees

2010 2009

11,855,461,204 7,393,978,991

20,988,313 11,875,197,114 7,414,967,304

19,386,318,505 16,941,256,920

178,506,493

128,805,315

20,313,478

136,617,136

1,235,107,734

2,491,388,714

1,354,236,610

4,475,234,871

3,125,515,062

140,213,315

41,763,282

131,097,073

194,877,637

63,351,766

7,511,121,391 9,526,289,616

17,420,372

19,735,910

3,302,963,149

Cash and bank balances

Government

Other receivables

Deposits and prepayments

Stores, spares and loose tools

CURRENT ASSETS

Stock in trade

Trade debts

Loans and advances

Tax refunds due from

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The annexed notes form an integral part of these finacial statements.


2010

(MIAN MUHAMMAD LATIF)


2009Note Rupees Rupees

25 8,857,795,931Sales 9,091,378,53026 9,055,286,804Cost of sales 7,107,003,527

(197,490,873)Gross (loss) / profit 1,984,375,003

27 135,668,917Other operating income 1,390,367 (61,821,956) 1,985,765,370

28 363,687,892Selling and distribution expenses 307,434,20729 198,245,997Administrative expenses 197,356,419

7,087,89230Other operating expenses 6,995,759 31 1,308,783,863Finance cost 1,487,708,495

1,877,805,644 1,999,494,880(1,939,627,600)Loss before taxation (13,729,510)

32 88,341,710Provision for taxation 82,933,342

Loss for the year (2,027,969,310) (96,662,852)

(17.63)36Earnings per share- Basic and diluted (0.84)

Profit and Loss Accountfor the year ended June 30,2010

Statement of Comprehensive Incomefor the year ended June 30,2010

2010 2009Note Rupees Rupees

(2,027,969,310)(Loss) for the year (96,662,852)

Other comprehensive income for the year

Incremental depreciation on 90,970,2467revalued assets for the year 584,198

(1,936,999,064) (96,078,654 )Total comprehensive income / (loss) for the year





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Cash Flow Statementfor the year ended June 30,2010

2010 2009Rupees Rupees

a) CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (1,939,627,600) (13,729,510) Adjustments for: Depreciation on property, plant and equipment 281,930,252 283,375,733 Provision for staff retirement gratuity 70,366,985 62,976,129 Finance cost 1,308,783,863 1,487,708,495 Balances (written back) / written off - net (130,114,872) 361,100

Operating cash flows before working capital changes (408,661,372) 1,820,691,947

Changes in working capital

(Increase) / decrease in current assets

Stores, spares and loose tools 119,128,876 (178,694,119)

Stock in trade 1,983,846,157 (32,634,773)

Trade debts (177,447,087) (696,474,242)

Loans and advances 13,661,091 11,050,222

Deposits and prepayments 22,702,207 (9,940,175)

Other receivables 2,571,029 14,538,561

Tax refunds due from Government 10,519,404 21,865,019 1,974,981,677 (870,289,507)

Increase in current liabilities

Trade and other payables 8,325,047 430,225,503

1,983,306,724 (440,064,004)

Cash generated from operations 1,574,645,352 1,380,627,943

Income tax paid (87,100,200) (83,625,362)

Finance cost paid (1,083,318,789) (1,404,492,585) Staff retirement gratuity paid (25,095,324) (35,549,721)

Net cash generated from / (used in) operating activities 379,131,039 (143,039,725)

b) CASH FLOWS FROM INVESTING ACTIVITIES

Additions in property, plant and equipment (611,664,212) (71,284,749)

Proceeds from disposal of property, plant and equipment 3,938,931 4,610,411 Long term deposits - 1,235,250

Net cash (used in) investing activities (607,725,281) (65,439,088)

-Annual R

eport

2010(MUHAMMAD NAEEM)

DIRECTOR(MIAN MUHAMMAD LATIF)




c) CASH FLOWS FROM FINANCING ACTIVITIES

Long term financing obtained 155,660,000 388,528,001 Repayment of:

Long term financing (261,483,216) (401,031,684) Liabilities against assets subject to finance lease (19,063,768) (24,364,094)

Increase in short term borrowings - net 307,549,932 248,841,145 Dividend paid - (747)

Net cash generated from financing activities 182,662,948 211,972,621

Net (decrease) / increase in cash and cash equivalents (a+b+c) (45,931,294) 3,493,808

Cash and cash equivalents at the beginning of the year 63,351,766 59,857,958

Cash and cash equivalents at the end of the year 17,420,472 63,351,766

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Balance as at July 01, 2008 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 76,432,834 37,112,764 2,589,955,350

Total comprehensive income / (loss) for the year - - - - - - (96,078,654) (96,078,654)

Balance as at June 30, 2009 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 76,432,834 (58,965,890) 2,493,876,696

Total comprehensive income / (loss) for the year -

- - - - - (1,936,999,064) (1,936,999,064)

Balance as at June 30, 2010 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 76,432,834 (1,995,964,954) 556,877,632

Revenue reservesCapital reserves

-------------------------------------------------------------------------------Rupees ------------------------------------------------------------------------------

Cumulative

preference

shares

Premium on

issue of

ordinary

shares

Unappropriated

profit /

(accumulated

loss)

Merger

reserve

Issued,

subscribed

and paid up

capital

Share capitalPreference

shares

redemption

reserve

General

reserve

Total

Statement of Changes in Equityfor the year ended June 30,2010

23

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Notes to the Financial Statementsfor the year ended June 30,2010

1. STATUS AND ACTIVITIE S

1.1

1.2

1.3

1.4

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

2.1.1

-

Chenab Limited (the Company) is incorporated as a public limited company under the Companies Ordinance,1984 and is listed on Karachi Stock Exchange. The registered office of the Company is situated at Nishatabad,Faisalabad. The principal business of the Company is export of all kinds of value added fabrics, textile made-ups, casual and fashion garments duly processed. The cloth processing unit is located at Nishatabad, DistrictFaisalabad, and stitching units are located at Nishatabad, District Faisalabad and Shorkot Road, District TobaTek Singh. Weaving units are located at Sheikhupura Road, Khurrianwala, District Faisalabad, Jhumra Road,Gatti, District Faisalabad, Sheikhupura Road, Kharrianwala, District Sheikhupura and Shahkot, District NankanaSahib. Spinning unit is located at Shorkot Road, District Toba Tek Singh, in the province of Punjab.

These financial statements have been prepared in accordance with the requirements of the CompaniesOrdinance, 1984 (the Ordinance) and directives issued by the Securities and Exchange Commission ofPakistan and approved accounting standards as applicable in Pakistan. Approved accounting standardscomprise of such International Accounting Standards (IASs) / International Financial Reporting Standards(IFRSs) as notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance ordirectives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of thesestandards, the requirements of the Ordinance or the requirements of the said directives take precedence.

The following new and revised standards are effective and mandatory for financial statements for theperiods beginning on or after July 1, 2009 and therefore, have been applied in preparing these financialstatements.

Standards, amendments to standards and interpretations becoming effective in current period

Pursuant to schemes of arrangement approved by the Honourable Lahore High Court, Lahore, assets, liabilitiesand reserves of Faisal Weaving (Private) Limited, Latif Weaving (Private) Limited and Chenab Finishing(Private) Limited were merged with the Company with effect from December 31, 1998 and assets, liabilities andreserves of Chenab Fibers Limited were merged with the Company with effect from April 01, 2003.

These financial statements are presented in Pak Rupee, which is the Company's functional and presentationcurrency.

The Company has incurred operating losses of Rs. 1,919.532 million. The Company’s current liabilities exceedits current assets by Rs. 3,624.179 million. The Company has not redeemed preference shares on exercise ofput options for two consecutive years by holders of preference shares due to tight cash flow situation. TheCompany has not been able to comply with terms of certain loan agreements. The management of theCompany is taking steps for extension and rescheduling of credit facilities obtained from banks and financialinstitutions to improve the liquidity position of the Company. The lead banker of the Company has agreed tocontinue its financial support and restructure long term loans and provide additional working capital, the otherbanks and financial institutiosnhave agreed to follow the lead banker. The sponsor directors have also ensuredtheir continued financial support and inject further funds in the ensuing years to improve the liquidity position ofthe Company. In addition, steps are also being taken to improve the operation of the Company to cut down thelosses.Despite severe competitive pressure in the market, the Company has desired level of customer demandboth locally and in the export market. The management plans to start toll manufacturing to achieve optimum levelof plant utilization. The management is confident that it will be successful in its efforts and hence the Company willbe able to continue as a going concern.

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-

-

-

2.1.2

2.1.3

-

2.2 Basis of preparation

These financial statements have been prepared under the "historical cost convention" except: -

- revaluation of certain property, plant and equipment.- recognition of employee retirement benefits at present value.

The following amendment to IAS 1 (Amendment), ‘Presentation of Financial Statements’ will be effectivefor the accounting periods beginning on or after January 1, 2010.

IAS 23 (Revised), 'Borrowing costs' requires an entity to capitalise the borrowing costs directlyattributable to the acquisition, construction or production of a qualifying asset as part of the cost of thatasset. The option of immediately expensing these borrowing costs has been removed. The currentpolicy of the Company is in line with the requirements of this amendment, therefore, there is no impacton operating results for the year.

IFRS 7, ‘Financial instruments: Disclosures’, introduces new disclosures relating to financial instrumentsand does not have any impact on the classification and measurement of the Company’s financialinstruments. The application of IFRS 7 has resulted in additional disclosures in the Company’s financialstatements, and, there is no impact on operating results for the year.

Standards, amendments to standards and interpretations becoming effective in current year but

not relevant

Standards, amendments to standards and interpretations becoming effective in future periods

IAS 1 (Revised), ‘Presentation of financial statements’ prohibits the presentation of items of income andexpenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. It requires ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement ofcomprehensive income. Total comprehensive income may be presented in either a single statement ofcomprehensive income (effectively combining bothinthceome statemen t and all non-owner changes inequity in a single statement) or in an income statement and a separate statement of comprehensiveincome.

The Company has preferred to present two statements; a profit and loss account (income statement)and a statement of comprehensive income. Comparative information has also been re-presented inconformity with the revised standard. As this change only impacts presentation aspects, there is noimpact on operating results for the year.

There are certain new standards, amendments and interpretations that are mandatory for accountingperiods of the Company beginning on or after July 1, 2009 but are considered not to be relevant to theCompany's operations, therefore, not disclosed in the financial statements.

The amendment provides clarification that the potential settlement of a liability by the issuer of equity isnot relevant to its classification as current or non-current. By amending the definition of current liability,the amendment permits a liability to be classified as non-current (provided that the entity has anunconditional right to defer settlement by transfer of cash or other assets for at least 12 months after theaccounting period) notwithstanding the fact that the entity could be required by the counterparty to settlein shares at any time. It is not expected to have a material impact on the Company’s financialstatements.

There are other amendments to the standaarnddsinterpretation s that are effective from different futureperiods but are considered not to be relevant to the Company's operations, therefore, not disclosed inthese financial statements.

Standards, amendments to standards and interpretations becoming effective in future periods

but not relevant

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eport

2010

The principal accounting policies adopted are set out below:

2.3 Leases

2.4

2.5

2.6 Provisions

2.7 Provision for taxation

Current

Deferred

Provisions are recognised when the Company has a present, legal or constructive obligation as a result of pastevent and it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate of the amount can be made. However, provisions are reviewed at eachbalance sheet date and adjusted to reflect the current best estimate.

Trade and other payables

Liabilities for trade and other payables are measured at cost which is the fair value of the consideration to bepaid in future for goods and services received, whether billed to the Company or not.

The Company operates a defined benefit plan - unfunded gratuity scheme covering all permanent employees.Provision is made annually on the basis of actuarial recommendation to cover the period of service completedby employees using Projected Unit Credit Method. Cumulative unrecognised net actuarial gains and losses thatexceed ten percent of present value of defined benefit obligation are amortised over the expected averageremaining working lives of participating employees.

Provision for current taxation is based on income taxable at the current tax rates after taking into account taxrebates and tax credits available under the law.

Deferred tax asset is recognised for all deductible temporary differences and carry forward of unused taxlosses, if any, to the extent that it is probable that taxable profit will be available against which such temporarydifferences and tax losses can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period whenthe asset is realised or the liability is settled, based on tax rates that have been enacted or substantivelyenacted at the balance sheet date.

Deferred tax is provided using the liability method for all temporary differences at the balance sheet datebetween tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

Asset held under finance lease is recognised as asset of the Company at its fair value at the inception of thelease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessoris included in the balance sheet as liability against asset subject to finance lease. The liability is classified ascurrent and non current depending upon the timing of payment. Lease payments are apportioned betweenfinance charges and reduction of the liability against asset subject to finance lease so as to achieve a constantrate of interest on the remaining balance of the liability. Finance charges are charged to profit and loss account,unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance withthe Company's general policy on borrowing costs.

Staff retirement benefits

The amount recognised in the balance sheet represents the present value of defined benefit obligation asadjusted for unrecognised actuarial gains and losses.

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2.8 Dividend and other appropriations

2.9 Property, plant and equipment

Gains or losses on disposal of property, plant and equipment are included in current income.

Assets subject to finance lease

2.10 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which areassets that necessarily take a substantial period of time to get ready for their intended use, are added to thecost of those assets, until such time as the assets are substantially ready for their intended use. Investmentincome earned on the temporary investment of specific borrowings pending their expenditure on qualifyingassets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit and loss account in the period in which these are incurred.

In view of certainty of ownership of the assets at the end of the lease period, assets subject to finance lease arestated at cost less accumulated depreciation. These assets are depreciated over their expected useful lives onthe same basis as owned assets except building under lease which is depreciated on straight line basis over itslease term of 61 years.

Property, plant and equipment except land and capital work in progress are stated at cost / revaluation lessaccumulated depreciation and impairment in value, if any. Land is stated at revalued amount. Capital work inprogress is valued at cost.

Depreciation is charged to income applying the reducing balance method at the rates specified in the property,plant and equipment note, except plant and machinery and electric installations. Plant and machinery isdepreciated applying the unit of production method subject to minimum charge of Rs. 100 millio n to coverobsolescence and electric installations are depreciated applying the straight line method over their economicserviceable life taken at 25 years.

Maintenance and normal repairs are charged to income as and when incurred. Major renewals andimprovements are capitalised.

When parts of an item of property, plant and equipment have different useful lives, they are recognised asseparate items of property, plant and equipment.

Dividend is recognised as a liability in the period in which it is approved. Appropriations of profits are reflected inthe statement of changes in equity in the period in which such appropriations are made.

In respect of additions and disposals during the year, depreciation is charged from the month of acquisition orcapitalisation and up to the month preceding the month of disposal respectively.

All expenditure connected with specific assets incurred during installation and construction period are carriedunder capital work in progress. These are transferred to specific assets as and when these assets are availablefor use.

Surplus arising on revaluation is credited to surplus on revaluation of property, plant and equipment. Thesurplus on revaluation of property, plant and equipment to the extent of incremental depreciation charged on therelated assets is transferred to unappropriated profit / (accumulated loss) through statement of comprehensiveincome. Surplus realised on disposal of revalued asset is transferred to unappropriated profit / (accumulatedloss) through statement of comprehensive income.

Assets' residual values, if significant and their useful lives are reviewed and adjusted, if appropriate, at eachbalance sheet date.

27

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2.11

2.12 Stores, spares and loose tools

2.13 Stock in trade

Raw materialWork in processFinished goods

Wastes are valued at net realisable value.

2.14 Trade debts and other receivables

2.15 Cash and cash equivalents

2.16

2.17

Average cost

Stock in trade except wastes are valued at lower of cost and net realisable value. Cost is determined as follows:

Other particular recognition methods adopted by the Company are disclosed in the individual policy statementsassociated with each item of financial instruments.

Transactions in currencies other than Pak Rupee are recorded at the rates of exchange prevailing on the datesof transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreigncurrencies are retranslated at the rates prevailing on the balance sheet date except where forward exchangecontracts have been entered into for repayment of liabilities, in that case, the rates contracted for are used.

Average manufacturing cost

Impairment

Where impairment loss subsequently reverses, the carrying amount of the asset is increased to the revisedrecoverable amount but limited to the carrying amount that would have been determined had no impairmentloss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately inprofit and loss account, unless the relevant asset is carried at a revalued amount, in which case the reversal ofthe impairment loss is treated as a revaluation increase.

These are valued at moving average cost less allowances for obsolete or slow moving items, if any. Items intransit are valued at cost comprising invoice value and other charges incurred thereon.

The Company assesses at each balance sheet date whether there is any indication that assets except deferredtax assets may be impaired. If such indication exists, the carrying amounts of such assets are reviewed toassess whether they are recorded in excess of their recoverable amounts. Where carrying values exceed therespective recoverable amounts, assets are written down to their recoverable amounts and the resultingimpairment loss is recognised in profit and loss account, unless the relevant asset is carried at a revaluedamount, in which case the impairment loss is treated as a revaluation decrease. The recoverable amount is thehigher of an asset's fair value less cost to sell and value in use.

Average manufacturing cost

Net realisable value represents the estimated selling price in the ordinary course of business less estimatedcost of completion and estimated cost to make the sales. Average manufacturing cost consists of directmaterials, labour and a proportion of manufacturing overheads.

Trade debts are carried at original invoice amount less an estimate made for doubtful receivables based onreview of outstanding amounts at the year end. Balances considered bad are written off when identified. Otherreceivables are recognised at nominal amount which is fair value of the consideration to be received in future.

Exchange differences are included in current income. All non-monetary items are translated into Pak Rupee atexchange rates prevailing on the dates of transactions.

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractualprovisions of the instrument and de-recognised when the Company loses control of the contractual rights thatcomprise the financial assets and in case of financial liabilities when the obligation specified in the contract isdischarged, cancelled or expired.

Foreign currency translation

Cash and cash equivalents are carried in the balance sheet at cost. For the purfploowsestoaftecmasehnt,cash and cash equivalents consist of cash in hand, balances with banks, highly liquid short term investmentsthat are convertible to known amount of cash and are subject to insignificant risk of change in value.

Financial instruments

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2.18 Offsetting of financial asset and financial liability

2.19

2.20 Related party transactions

2.21 Critical accounting estimates and judgments

3. Issued, subscribed and paid up capital

200920102010Rupees Rupees

35,985,702359,857,020 359,857,020

73,869,559738,695,590 738,695,590

5,144,739

51,447,390 51,447,390 115,000,000 1,150,000,000 1,150,000,000

3.1

4. Cumulative preference shares

200920102010Rupees Rupees

80,000,000800,000,000 800,000,000of Rs. 10/- each fully paid in cash.

A financial asset and a financial liability is off-set and the net amount reported in the balance sheet, if theCompany has a legal enforceable right to set-off the transaction and also intends either to settle on a net basisor to realise the asset and settle the liability simultaneously.

Significant areas requiring the use of management estimates in these financial statements relate to the usefullife of depreciable assets, provision for doubtful receivables and slow moving inventory and staff retirementgratuity. However, assumptions and judgments made by management in the application of accounting policiesthat have significant effect on the financial statements are not expected to result in material adjustment to thecarrying amounts of assets and liabilities in the next year.

Ordinary shares of Rs. 10/- each issued asfully paid bonus shares.

Revenue recognition

Sales are recorded on dispatch of goods.

Revenue is measured at the fair value of the consideration received or receivable and represents amountsreceivable for goods and services provided in the normal course of business.

Ordinary shares of Rs. 10/- each issued asfully paid under scheme of arrangement foramalgamation.

2009

5,144,739

Number of shares

115,000,000

Cumulative preference shares 80,000,000

35,985,702 Ordinary shares of Rs. 10/- each fully paidin cash.

73,869,559

The preparation of financial statements in conformity with IASs / IFRSs requires management to makejudgments, estimates and assumptions that affect the application of policies and reported amounts of assetsand liabilities, income and expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable under the circumstances, the results ofwhich form the basis of making judgments about carrying values of assets and liabilities that are not readilyapparent from other sources. Actual results may differ from these estimates.

Number of shares2009

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

6,603,556 (2009: 4,889,000) ordinary shares of Rs. 10/- each fully paid in cash are held by an associatedundertaking of the Company.

Transactions with related parties are priced on arm’s length basis. Prices for these transactions are determinedon the basis of comparable uncontrolled price method, which sets the price by reference to comparable goodsand services sold in an economically comparable market to a buyer unrelated to the seller.

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4.1

a) 75% of market value of shares or

b) 75% of book value (break up value) or

c) face value of shares

4.2

4.3


5. Capital reserves

120,000,000Premium on issue of ordinary shares 120,000,00063,552,6105.1Merger reserve 63,552,610

342,857,1425.2Preference shares redemption reserve 342,857,142526,409,752 526,409,752

5.1 It represents book difference of capital under schemes of arrangement for amalgamation.

5.2

The holders of 55,080,498 cumulative preference shares called upon to convert preference shares into ordinaryshares due to non-redemption of part of their holding on exercise of put option for two consecutive years. TheCompany in its Extra Ordinary General Meeting held on May 19, 2010 proposed resolution to issue 41,842,392new ordinary shares to preference shareholders who have called upon to convert their shares, as perconversion formula laid down in the Prospectus and Articles of Association of the Company. In view of thereservations by the investors regarding conversion formula, the meeting unanimously decided to defer thecarrying of resolution till amicable resolution of matter with the consensus of the investors. The matter ofamicable resolution is in process.

This represents reserve created for redemption of cumulative preference shares as per terms of the issue. Theappropriation to the reserve was made on straight line basis over the term of cumulative preference shares. Noappropriation has been made since 2008 due to insufficient profits.

The preference shareholders will have right (put option) to get the shares redeemed in part to a maximum onethird of their holding in one put exercise on yearly basis after expiry of four years from the last date of publicsubscription of cumulative preference shares within put exercise period. The put exercise period means twoweeks from the instrument year, commencing on September 25.

The preference shares are non-voting, cumulative and redeemable. These are listed on Karachi StockExchange (Guarantee) Limited. The holders are entitled to cumulative preferential dividend at 9.25% per annumon the paid up value of preference shares. In case profits in any year are insufficient to pay preferentialdividend, the dividend will be accumulated and payable in next year.

In case the Company fails to redeem cumulative preference shares upon exercise of put option by the holdersfor any two consecutive years, the holders will be entitled to convert the cumulative preference shares intoordinary shares at a price equal to lower of:

The Company has also option (call option) to redeem cumulative preference shares in multiples of 10% uptototal value after the end of fourth year from the last date of public subscription of preference shares.

The cumulative preference shares have been classified as part of equity capital in accordance with the termsand conditions of issue, taking into consideration the classification of share capital asninthdeicavtaerdioui sprovisions of the Companies Ordinance, 1984. Further the contradictions between classification of share capitalin the various provisions of the Companies Ordinance, 1984 and International Accounting Standards is pendingfor clarification before the Securities and Exchange Commission of Pakistan.

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6. Revenue reserves

76,432,834General reserve 76,432,834 (Accumulated loss) / unappropriated profit

(58,965,890)Opening balance 37,112,764 (1,936,999,064)Total comprehensive loss for the year (96,078,654)(1,995,964,954) (58,965,890)(1,919,532,120) 17,466,944

7. SURPLUS ON REVALUATION OF

PROPERTY, PLANT AND EQUIPMENT

1,159,681,490Opening balance 1,160,265,6884,140,493,058Surplus on revaluation carried out during the year - 5,300,174,548 1,160,265,688

Incremental depreciation on revalued assets (90,970,246)for the year transferred to Comprehensive Income (584,198)

5,209,204,302 1,159,681,490

7.1

2010 2009

Note Rupees Rupees8. Long term financing

SecuredUnder mark up arrangements

From banking companies Fixed assets finance 8.1 239,227,233 239,227,233

Demand finances 8.1 392,660,000 412,730,985 Term finances 8.1 1,119,227,170 1,159,419,170 Long term finances 8.1 377,543,131 458,432,230

From financial institutions Term finances 8.1 562,860,533 571,454,283 Long term finances 8.1 78,434,506 92,862,979 Not subject to mark up

From financial institution Term finance 8.2 58,351,091 -

2,828,303,664 2,934,126,880 Less : Current portion

9,360,862 198,937,964 7 Installments due 671,475,548 545,635,596 Payable within one year 870,413,512 624,996,458

1,957,890,152 2,309,130,422Unsecured - From directors and associate 8.3 296,653,086 296,653,086

2,254,543,238 2,605,783,508

This represents surplus on revaluation of freehold land, building on freehold land and plant and machinery.Revaluation of freehold land on market value, building on freehold land and plant and machinery on depreciatedreplacement values was carried out by independent valuers M/S Inspectorates Corporation International(Private) Limited as at June 30, 1997, by M/S Bahauddin Siddiqui and Associates as at December 31, 1998, byM/S Empire Enterprises as at June 30, 2007 and by M/S Consultancy Support & Services as at December 31,2009. Revaluation of freehold land on market value was also carried out by independent valuer M/S BFA(Private) Limited as at May 19, 2006. Revaluation of electric installation and generator on depreciatedreplacement values carried out by independent valuer M/S Consultancy Support & Services as at December 31,2009.

31

-Annual R

eport

2010

8.1

Balance Number of Payment Commencement Ending Markup

Rupees installments rests date date rate

Fixed assets

finance 239,227,233 10 Half yearly 30-Sep-10 31-Mar-15

Demand finances

I 91,660,000 4 (un-equal) Quarterly 7-May-14 07-Nov-15

III 75,000,000 15 Quarterly 26-Jun-10 26-Dec-13

IV 146,000,000 10 Half yearly 30-Sep-10 31-Mar-15

V 80,000,000 10 26-Sep-10 26-Dec-12Quarterly

392,660,000

Term finances

I 48,048,000 48 Monthly 01-Jul-07 01-Jun-11

II 193,745,409 20 Quarterly 30-Sep-10 30-Jun-15

III 106,250,000 60 Monthly 01-Oct-09 01-Sep-14

IV 475,000,000 20 Quarterly 30-Sep-10 30-Jun-15

with a floor of 11% p.a

V 121,000,000 10 3 Months KIBOR + 3% p.aQuarterly 30-Sep-10 31-Dec-12


VI 130,000,000 60 1 Month KIBOR + 0.5% p.aMonthly 01-Nov-09 01-Oct-14

VII 45,183,761 16 3 Months KIBOR + 3% p.aQuarterly 30-Jun-10 31-Mar-14

1,119,227,170

Long term finances

III 21,430,684 13 Quarterly 28-Jan-07 28-Jan-11

IV 87,672,332 20 Quarterly 30-Sep-07 30-Jun-13

V 56,250,000 24 Quarterly 31-Dec-07 30-Sep-13

VII 40,000,000 8 Half yearly 20-Jun-07 20-Dec-10

VIII 38,433,163 14 Quarterly 01-Jan-07 31-Jan-11

IX 118,636,588 20 Quarterly 31-Dec-06 30-Sep-12

X 15,120,364 24 Quarterly 28-Mar-10 28-Dec-15

377,543,131

From financial institutions:

Term finances

I 300,000,000 20 Quarterly 01-Mar-11 01-Dec-15

II 93,750,000 60 Monthly 23-Jan-11 23-Dec-15with a floor of 10% p.a and rebate

of 6% p.a during the grace period

III 47,916,667 60 Monthly 27-Jan-11 27-Dec-15with a floor of 10% p.a and rebate

of 6% p.a during the grace period

IV 37,500,000 8 1-Mar-11 1-Dec-12 6 Months KIBOR + 3% p.aQuarterly

V 48,537,616 12 Quarterly 29-Jul-11 29-Apr-14

VI 17,578,125 16 6 Months KIBOR + 3% p.aQuarterly 29-Apr-09 29-Jan-13

VII 17,578,125 16 6 Months KIBOR + 3% p.aQuarterly 29-Apr-09 29-Jan-13

562,860,533

Long term finances

II 3,090,689 36 Monthly 9-Jan-07 09-Dec-09

III 12,586,745 48 Monthly 28-Apr-07 28-Mar-11

IV 24,381,000 9 Half yearly 31-Dec-07 31-Dec-12

V 12,179,477 13 Quarterly 31-Mar-07 28-Feb-10

VI 18,888,895 13 Quarterly 31-Mar-07 28-Feb-11

VII 7,307,700 13 Quarterly 31-Mar-07 31-Mar-11

78,434,506

SBP rate + 2% p.a

3 Months KIBOR + 2.5% p.a

6 Months KIBOR + 3% p.a



SBP rate + 2% p.a

SBP rate + 2% p.a

SBP rate + 2% p.a

SBP rate + 2% p.a

SBP rate + 2% p.a

SBP rate + 2% p.a

The terms of repayment of certain term finances have been revised. The terms of repayment of all finances are


as under;



From banking companies:

1 Month KIBOR + 0.5% p.a

SBP rate + 2% p.a



SBP rate + 2% p.a





SBP rate + 2% p.a

SBP rate + 2% p.a

SBP rate + 2% p.a

Nature of loans

SBP rate + 2% p.a

32

-Chenab L

imite

d

8.2

8.3


9. Liabilities against assets subject tofinance lease

169,931,002Opening balance 176,885,3444,363,858Grace period markup 17,409,752

174,294,860 194,295,096(19,063,768)Paid / adjusted during the year (24,364,094)155,231,092 169,931,002

Shown under current liabilities(33,300,250)Installments due (8,608,926) (53,975,194)Payable within one year (49,972,561)(87,275,444) (58,581,487)

67,955,648 111,349,515

These represent plant and machinery and generators acquired under separate lease agreements.

Rupees

113,372,74456,453,819 14,952,531

184,779,094

(12,683,535)(16,864,467)(29,548,002)155,231,092

The effective rate of mark up ranges from 7% to 17.26% per annum (2009: 6% to 20.18% per annum).

Financial charges

The purchase option is available to the Company on payment of last installment and surrender of deposit at the end ofthe lease period. The terms of repayment of a lease have been revised during the year.

2013

The future minimum lease payments to which the Company is committed as at June 30, 2010 are as under:

The loans are secured against first charge over fixed assets of the Company ranking pari pasu with the chargescreated in respect of export and running finances (Refer Note 13.2) and murabaha finances (Refer Note 13.3).These are further secured by personal guarantee of directors of the Company.

Allocated to future periodsPayable

Year ending June 30,

The principal plus financial charges are payable over the lease period in 48, 54, 60, and 72 monthly and 9 half yearlyinstallments. The liability representsethtotal minimum lease payments discounted at 14.84% to 16.34% per annum(2009: 13.90% to 17.43% per annum) being the interest rates implicit in leases.

20112012

It is interest free. Directors' loan of Rs. 196.617 million (2009: Rs. 196.617 million) is subordinated to fixedassets finance and term finances III and VII from banking companies and term finances IV, V, VI and VII fromfinancial institutions. Terms of repayment have not been decided so far.

Mark up of Rs. 58.351 million outstanding as at November 30, 2009 has been converted into term finance IX. Itis repayable in 4 equal quarterly installments commenced from September 01, 2010 and ending on June 01,2011. It is not subject to mark up. The securities are disclosed in Note 8.1.

33

-Annual R

eport

2010

Reconciliation of minimum lease payments and their present value is given below:

Due within one year 113,372,744 87,275,444 83,996,542 58,581,487

Due after one year but not later than five years 71,406,350 67,955,648 129,912,442 111,349,515

Rupees 184,779,094 155,231,092 213,908,984 169,931,002

10. Staff retirement gratuity

10.1

2010 2009

Note Rupees Rupees

10.2 Balance sheet reconciliation as at June 30,

157,621,721Present value of defined benefit obligation 192,850,9234,815,470Cumulative net unrecognised actuarial gain 4,588,988

162,437,191 197,439,911

10.3 Movement in net liability recognised

197,439,911Opening balance 170,046,54070,366,98510.4Charge for the year 62,976,129

(50,746,918)Paid / adjusted during the year (35,549,721)(54,622,787)Benefits due but not paid (33,037) 162,437,191Balance at June 30, 197,439,911

10.4 Charge for the year

47,224,874Service cost 43,121,223 23,142,111Interest cost 19,854,906 70,366,985 62,976,129

2010 2009

10.5 Principal actuarial assumptions

12% Per annum 12% Per annumDiscount factor used 11% Per annum 11% Per annumExpected rate of increase in salaries

Expected average remaining working 6 years6 yearslives of participating employees

Present value of minimum

leasepayments

General description

Minimum lease

payments

2010

Minimumlease

payments

Present value of minimum lease

payments

2009

The scheme provides terminal benefits for all employees of the Company who attain the minimum qualifyingperiod of service as defined in the scheme. Annual charge is based on actuarial valuation, carried out as atJune 30, 2010 using Projected Unit Credit Method.

34

-Chenab L

imite

d

10.6 Trend information

2010 2009 2008 2007 2006-----------------------------------------------Rupees----------------------------------------------------

Present value of definedbenefit obligation 157,621,721 192,850,923 165,457,552 145,285,915 125,200,650

Experience adjustment on 226,482obligation - 2,162,585 (628,975) (314,892)


11. Trade and other payables

11.1 1,313,179,423 1,310,066,093Creditors 456,151,546 412,267,627Accrued liabilities219,438,926 14,788,06111.2Advance from customers

Capital expenditure payable - 4,526,703 71,108,046 367,802,277Bills payable7,087,892Workers' welfare fund 6,634,659

366,071Unclaimed dividend 366,071 8,176,403Withholding tax payable 5,620,271

Other 4,746,325 4,225,017 2,080,254,632 2,126,296,779

11.1 It includes Rs. 3,773,661/- ( 2009: Nil ) payable to an associated undertaking.

11.2 It includes Rs. 49,533,484/- ( 2009: Rs. 515,875/- ) advance from associated undertakings.


12. Interest / markup payable

Interest / mark up payable on secured:255,641,726 175,708,375Long term financing

6,160,76212,683,535Liabilities against assets subject to finance lease 303,690,013 169,044,921Short term borrowings572,015,274 350,914,058

13. Short term borrowings

SecuredUnder mark up arrangements

From banking companies13.2 6,465,918,000Export finances 6,225,832,616

-Finance against imported merchandise 27,749,293 375,258,31313.2Finance against trust receipts 77,829,515 421,043,18813.2Running finance 337,799,96172,000,00013.3Murabaha finances 80,000,000

102,734,107 380,192,29113.4Cash finances 7,436,953,608 7,129,403,676

35

-Annual R

eport

2010

13.1

13.2

13.3

13.4


14. CONTINGENCIES AND COMMITMENTS

Contingencies

In respect of bank guarantees issued on behalf of the Company

136,745,000Sui Northern Gas Pipelines Limited for supply of gas 125,146,800

Collector of Customs against demand of custom duty on humidification plant.1,920,000 The Company has claimed exemption from the duty. 1,920,000

200,000District Government against imposition of license fee 200,000

-Foreign customers to secure fulfillment of contractual obligations 84,934,602

Demand of custom duty and sales tax not46,458,052 acknowledged in view of pending appeals 4,541,043

Demand of wealth tax not acknowledged in view of pending appeals 1,016,400 -

Claim of workers' welfare fund not acknowledged.233,247 claiming exemption from levyThe Company is -

Post dated cheques issued in favour of Collector of Customs 29,369,301for release of goods imported for re-export 40,558,770

Demands of Employees' Old Age Benefits Institution, Punjab Employees' Social Security Institution are not

15,452,641acknowledged in view of pending litigations 11,392,635

Demand of tax on vehicle not acknowledged in view of pending litigation - 200,000

Commitments

2,148,130Under letters of credit for raw material and stores 56,062,884

These are secured against joint pari passu charge over current assets, lien on import / export documents andsecond charge over current and fixed assets of the Company. These are further secured by personal guarantee

of directors of the Company. Certain export and running finances are further secured against first charge over

fixed assets of the Company ranking pari pasu with the charges created in respect of long term financing (Refer

Note 8.1) and murabaha finances (Refer Note 13.3). Export finance of Rs. 269.50 million is also secured

against equitable mortgage of personal properties of directors and an associate.

The effective rate of mark up ranges from 7.50% to 16.34% per annum (2009: 7.50% to 19.15% per annum).

The aggregate unavailed short term borrowing facilities available to the Company are Rs. 221.546 million(2009: Rs. 660.349 million).

These are secured against pledge of stocks and by personal guarantee of directors of the Company.

These are secured against first charge over fixed assets of the Company ranking pari pasu with the chargescreated in respect of long term financing (Refer Note 8.1) and export and running finances (Refer Note 13.2).These are further secured by personal guarantee of directors of the Company.

2010

2009

Note

Rupees

Rupees

15.

Pro

pert

y, p

lan

t an

d e

qu

ipm

en

t

15.1

11,8

55,4

61,2

04

Opera

ting a

ssets

7,3

89,0

14,3

59

-15.6

Capital w

ork

in p

rogre

ss

4,9

64,6

32

11,8

55,4

61,2

04

7,3

93,9

78,9

91

15.1

Op

era

tin

g a

ssets

At

Ju

ly 0

1, 2008

Cost / re

valu

ation

1,2

31,2

94,3

99

1,1

80,6

39,3

67

3,9

93,0

76,7

64

212,4

13,1

36

245,0

77,8

88

73,1

01,8

01

38,6

72,5

06

78,4

65,4

00

75,0

36,2

40

5

25,2

48

7,1

28,3

02,7

49

7 ,4

05,2

00

345,8

36,8

33

85,3

00,0

00

438,5

42,0

33

7,5

66,8

44,7

82

Accum

ula

ted d

epre

cia

tion

-

(4

7,0

84,4

46)

(1

58,5

38,5

37)

(51,6

91,5

33)

(91,9

32,0

65)

(30,7

34,9

08)

(9

,597,1

01)

(3

4,7

18,5

57)

(39,1

87,4

63)

(

402,7

45)

(463,8

87,3

55)

(1

,094,5

96)

(5

3,7

77,8

23)

(13,0

08,2

50)

(6

7,8

80,6

69)

(531,7

68,0

24)

-

Net book v

alu

e1,2

31,2

94,3

99

1,1

33,5

54,9

21

3,8

34,5

38,2

27

160,7

21,6

03

153,1

45,8

23

42,3

66,8

93

29,0

75,4

05

43,7

46,8

43

35,8

48,7

77

122,5

03

6,6

64,4

15,3

94

6

,310,6

04

292,0

59,0

10

72,2

91,7

50

370,6

61,3

64

7,0

35,0

76,7

58

Year

en

ded

Ju

ne 3

0, 2009

Openin

g n

et book v

alu

e1,2

31,2

94,3

99

1,1

33,5

54,9

21

3,8

34,5

38,2

27

160,7

21,6

03

153,1

45,8

23

42,3

66,8

93

29,0

75,4

05

43,7

46,8

43

35,8

48,7

77

1

22,5

03

6,6

64,4

15,3

94

6 ,3

10,6

04

292,0

59,0

10

72,2

91,7

50

370,6

61,3

64

7,0

35,0

76,7

58

65,0

90

Additio

ns

-

49,8

64,4

10

3,6

68,0

30

-577,9

84

10,4

00

785,8

95

60,2

10

-

55,0

32,0

19

-

-

-

-55,0

32,0

19

T

ransfe

r fr

om

capital w

ork

in p

rogre

ss

-

577,7

37,5

09

7,1

23,4

33

-

-2,0

30,7

84

-

-

- -

586,8

91,7

26

-

-

-

-586,8

91,7

26

Tra

nsfe

r fr

om

leased a

ssets

:-

Cost

-

-

-

- -

-

- -

109,8

63,7

19

-(1

09,8

63,7

19)

-

(109,8

63,7

19)

-

A

ccum

ula

ted d

epre

cia

tion

-

-

-

-

- -

-

- -

(19,7

67,2

87)

-

19,7

67,2

87

-

19,7

67,2

87

-

-

-

90,0

96,4

32

-

-

- -

-

- -

90,0

96,4

32

-(9

0,0

96,4

32)

-

(9

0,0

96,4

32)

-

Tra

nsfe

r to

leased a

ssets

:-

Cost

-

-

-

- -

-

- -

-

--

-

-

Accum

ula

ted d

epre

cia

tion

-

-

-

-

- -

-

- -

-

--

-

-

-

-

-

-

-

- -

-

- -

-

--

-

-

Dis

posals

:-

Cost

-

-

-

- -

-(1

2,7

80,5

24)

-

(12,7

80,5

24)

-

-

-

-

(12,7

80,5

24)

Accum

ula

ted d

epre

cia

tion

-

-

-

-

- -

-8,1

70,1

13

-

8,1

70,1

13

-

-

-

-8,1

70,1

13

-

-

-

-

-

- -

-(4

,610,4

11)

-

(4,6

10,4

11)

-

-

-

-

(4,6

10,4

11)

-S

urp

lus o

n r

evalu

ation

-

-

-

-

-

--

-

-

-

-

--

-D

epre

cia

tion c

harg

e

(5

8,8

22,7

39)

(1

64,7

77,0

76)

(8,5

71,3

57)

(15,3

14,5

82)

(4,4

00,4

28)

(2,9

07,7

14)

(4

,426,1

97)

(6

,684,8

02)

(

12,2

50)

(265,9

17,1

45)

(1

21,3

97)

(10,1

08,0

16)

(7,2

29,1

75)

(17,4

58,5

88)

(283,3

75,7

33)

Clo

sin

g n

et book v

alu

e1,2

31,3

59,4

89

1,6

52,4

69,6

91

3,8

16,8

45,4

26

155,8

18,2

76

137,8

31,2

41

40,5

75,2

33

26,1

78,0

91

40,1

06,5

41

24,6

13,7

74

110,2

53

7,1

25,9

08,0

15

6

,189,2

07

191,8

54,5

62

65,0

62,5

75

263,1

06,3

44

7,3

89,0

14,3

59

-

-

-

-

-

- -

-

At

Ju

ly 0

1, 2009

Cost / re

valu

ation

1,2

31,3

59,4

89

1,7

58,3

76,8

76

4,1

59,9

28,3

26

216,0

81,1

66

245,0

77,8

88

75,7

10,5

69

38,6

82,9

06

79,2

51,2

95

62,3

15,9

26

5

25,2

48

7,8

67,3

09,6

89

7 ,4

05,2

00

235,9

73,1

14

85,3

00,0

00

328,6

78,3

14

8,1

95,9

88,0

03

Accum

ula

ted d

epre

cia

tion

-

(1

05,9

07,1

85)

(343,0

82,9

00)

(60,2

62,8

90)

(107,2

46,6

47)

(3

5,1

35,3

36)

(1

2,5

04,8

15)

(3

9,1

44,7

54)

(37,7

02,1

52)

(

414,9

95)

(741,4

01,6

74)

(1

,215,9

93)

(4

4,1

18,5

52)

(20,2

37,4

25)

(6

5,5

71,9

70)

(806,9

73,6

44)

Net book v

alu

e1,2

31,3

59,4

89

1,6

52,4

69,6

91

3,8

16,8

45,4

26

155,8

18,2

76

137,8

31,2

41

40,5

75,2

33

26,1

78,0

91

40,1

06,5

41

24,6

13,7

74

110,2

53

7,1

25,9

08,0

15

6

,189,2

07

191,8

54,5

62

65,0

62,5

75

263,1

06,3

44

7,3

89,0

14,3

59

-

-

Year

en

ded

Ju

ne 3

0, 2010

Openin

g n

et book v

alu

e1,2

31,3

59,4

89

1,6

52,4

69,6

91

3,8

16,8

45,4

26

155,8

18,2

76

137,8

31,2

41

40,5

75,2

33

26,1

78,0

91

40,1

06,5

41

24,6

13,7

74

1

10,2

53

7,1

25,9

08,0

15

6 ,1

89,2

07

191,8

54,5

62

65,0

62,5

75

263,1

06,3

44

7,3

89,0

14,3

59

-A

dditio

ns

-

513,1

91,6

41

87,9

46,3

53

-

412,2

95

43,5

03

2

,200,0

03

350,0

00

-

604,1

43,7

95

-

-

-

-604,1

43,7

95

Tra

nsfe

r fr

om

capital w

ork

in p

rogre

ss

-

7,9

58,3

46

-

-

-

- -

-

- -

7,9

58,3

46

-

-

-

-7,9

58,3

46

Tra

nsfe

r fr

om

leased a

ssets

:-

Cost

-

-

-

- -

-

- -

24,7

05,0

00

-(2

4,7

05,0

00)

-

(2

4,7

05,0

00)

-

Accum

ula

ted d

epre

cia

tion

-

-

-

-

- -

-

- -

(4,4

46,9

00)

-

4,4

46,9

00

-4,4

46,9

00

-

-

-

20,2

58,1

00

-

-

- -

-

- -

20,2

58,1

00

-(2

0,2

58,1

00)

-

(2

0,2

58,1

00)

-

Dis

posals

:-

Cost

-

-

-

- -

-(8

,676,4

54)

-

(8,6

76,4

54)

-

-

-

-

(8,6

76,4

54)

A

ccum

ula

ted d

epre

cia

tion

-

-

-

-

- -

-4,7

37,5

23

-

4,7

37,5

23

-

-

-

-4,7

37,5

23

-

-

-

-

-

- -

-(3

,938,9

31)

-

(3,9

38,9

31)

-

-

-

-

(3,9

38,9

31)

Surp

lus o

n r

evalu

ation

954,3

01,7

61

429,2

42,4

03

2,3

72,5

72,9

77

72,9

15,5

96

311,4

60,3

21

-

-

-

- -

4,1

40,4

93,0

58

-

-

-

-

4,1

40,4

93,0

58

-D

epre

cia

tion c

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e

(7

4,0

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(1

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03)

(9,1

99,8

69)

(14,5

91,9

26)

(4,0

77,2

21)

(2,6

20,7

09)

(4

,164,5

81)

(4

,525,4

09)

(

11,0

25)

(273,5

68,5

19)

(1

21,3

97)

(5,2

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78)

(3

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(8,6

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04)

(2

82,2

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23)

Clo

sin

g n

et book v

alu

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85,6

61,2

50

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64

6,5

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39,5

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307,4

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56

434,6

99,6

36

36,9

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61,8

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234,2

07,3

40

11,8

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61,2

04

-

-

-

- -

-

- -

Annual ra

te o

f depre

cia

tion (

%)

4-

-

05

10

10

10

20

10

-

-

05

2010

2009

Note

Rupees

Rupees

15.2

Depre

cia

tion for

the y

ear

Cost of goods m

anufa

ctu

red

26.1

270,8

87,6

99

269,3

44,7

70

A

dm

inis

trative e

xpenses

29

11,3

21,7

24

14,0

30,9

63

282,2

09,4

23

283,3

75,7

33

15.3

has b

een a

llocate

d a

s u

nder:

-

-

24,7

05,0

00

(4,4

46,9

00)

To

tal

Co

mp

an

y o

wn

ed

Un

der

lease

Off

ice

eq

uip

men

t

Facto

ry

eq

uip

men

tG

en

era

tors

Su

b t

ota

lE

lectr

ic

insta

llati

on

sG

en

era

tors

Veh

icle

s

Bu

ild

ing

on

freeh

old

lan

dS

ub

to

tal

Fu

rnit

ure

an

d

fixtu

res

Sig

n

bo

ard

s

Pla

nt

an

d

mach

inery

Bu

ild

ing

During

the

year,

the

managem

ent

has

changed

its

depre

cia

tion

meth

od

of

pla

nt

and

machin

ery

from

"str

aig

ht

line

meth

od"

to"u

nit

of

pro

duction

meth

od"

and

has

revis

ed

the

estim

ate

of

usefu

llife

of

genera

tors

under

IAS

16"

Pro

pert

y,pla

nt

and

equip

ment"

.T

he

above

mentioned

revis

ions

have

been

accounte

dfo

ras

change

inaccounting

estim

ate

sin

accord

ance

with

the

requirem

ents

of

IAS

-8"A

ccounting

Policie

s,

Changes

inaccounting

estim

ate

sand

Err

ors

".A

ccord

ingly

the

effect

of

change

inaccounting

estim

ate

shas

been

recognis

ed

pro

spectively

inth

epro

fit and loss a

ccount of th

e c

urr

ent year. H

ad there

been n

o c

hange in this

accounting e

stim

ate

, th

e loss for

the y

ear

and c

arr

yin

g v

alu

e o

f pro

pert

y, p

lant and e

quip

ment w

ould

have b

een h

igher

by R

s.6

5.5

78 m

illion a

nd e

quity w

ould

have b

een low

er

by R

s.6

5.5

78 m

illion.

-

Pla

nt

an

d

mach

inery

-

-

-

109,8

63,7

19

(19,7

67,2

87)

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

Ru

pees--

----

----

----

----

----

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----

----

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----

----

----

----

Fre

eh

old

lan

d

36

-Chenab L

imite

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Balance SheetsAs at june 30, 2010

37

-Annual R

eport

2010

15.4

Freehold land 85,698,753 - 85,698,753

Building on freehold land 2,113,027,714 532,184,918 1,580,842,796

Plant and machinery 5,541,796,729 1,277,279,208 4,264,517,521

Electric installations 304,027,519 69,228,523 234,798,996 245,077,888Generators 114,138,209 130,939,679

8,289,628,603 1,992,830,858 6,296,797,745

Freehold land 85,698,753 - 85,698,753

Building on freehold land 2,105,069,368 466,620,433 1,638,448,935

Plant and machinery 5,003,900,088 1,187,054,662 3,816,845,426

7,194,668,209 1,653,675,095 5,540,993,114

15.5

Written Saledown value proceeds

Vehicles (Sold under

Company policy) 872,993 521,375 351,618 351,618 Mr. Akbar Hussain (Employee)

496,663 306,792 189,871 189,871 Mr. Azam Ali Abid (Employee)

865,064 434,454 430,610 430,610 Mr. Ahmer Rasheed (Ex-employee)

978,500 604,426 374,074 374,074 Mr. Mohammad Yaqub (Employee)

503,339 196,414 306,925 306,925 Mr.Mohammad Imran (Employee)

346,770 184,019 162,751 162,751 Mr. Anjum Farooq (Employee)

386,490 304,156 82,334 82,334 Mr. Mohammad Asif (Employee)

860,564 455,755 404,809 404,809 Sheikh Javaid Islam (Ex -employee)

892,871 356,553 536,318 536,318 Major Talib Hussain (Employee)

1,039,200 677,392 361,808 361,808 Mr. Liaquat Aki chohan (Employee)

879,000 416,763 462,237 462,237 Mr. Ghulam Rasool (Employee)

555,000 279,424 275,576 275,576 Mr. Tariq Ameen (Employee)

2010 Rupees 8,676,454 4,737,523 3,938,931 3,938,931

2009 Rupees 12,780,524 8,170,113 4,610,411 4,610,411

15.6 Capital work in progress

The following is a statement of capital work in progress:

- - - - - - - - - - - - - - - - - - - - R u p e e s - - - - - - - - - - - - - - - - - -

Balance as at July 1, 2008 569,757,053 7,123,433 1,081,962 577,962,448

12,945,088Additions - 948,822 13,893,910

Transfer to operating assets (577,737,509) (7,123,433) (2,030,784) (586,891,726)

Balance as at June 30, 2009 4,964,632 - - 4,964,632

2,993,714Additions - - 2,993,714

Transfer to operating assets (7,958,346) - - (7,958,346)

Balance as at June 30, 2010 - - - -

Description Cost

Civil workPlant and machinery

ParticularsAccumulated

depreciation

TotalFactory

equipment

- - - - - - - - - R u p e e s - - - - - - - - - - -

CostAccumulated

depreciation

Had there been no revaluation, related figures of freehold land, building on freehold land and plant and machinery at June 30, 2010 would havebeen as follows:

Accumulated

depreciationDescription

2010

Written down

valueCost

2009

Detail of disposal of property, plant and equipment

Written down

value - - - - - - - - - R u p e e s - - - - - - - - - - -

Description

38

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16. Long term deposits

12,563,598Lease key money 13,798,848 8,804,768Security deposits 8,424,815

21,368,366 22,223,663 1,632,456Less: Current portion - Lease key money 1,235,350

19,735,910 20,988,313

17. Stores, spares and loose tools

Stores1,206,956,197 1,312,757,364In hand

In transit 17,389,792 11,910,461 1,224,345,989 1,324,667,825

SparesIn hand 10,682,708 19,295,209 In transit - 10,115,850

10,682,708 29,411,059

Loose tools 79,037 157,726 1,235,107,734 1,354,236,610

17.1


18. Stock in trade

280,682,701 600,887,730Raw material1,373,758,465 2,684,382,599Work in process

768,403,277 1,159,493,203Finished goodsWaste 68,544,271 30,471,339

2,491,388,714 4,475,234,871

18.1

18.2


19. Trade debts

Considered goodSecured

117,383,517 148,463,987Foreign19.1Unsecured

2,730,865,669 2,489,791,767ForeignLocal 454,712,963 487,259,308

3,302,962,149 3,125,515,062

Stock in trade amounting to Rs. 884.951 million (2009: NIL) is at net realisable value.

Stock in trade amounting to Rs. 233.274 million (2009: Rs. 511.775 million) is pledged as security with thebanks.

Stores and spares include items that may result in fixed capital expenditure but are not distinguishable.

39

-Annual R

eport

2010


19.1 These include following balances due from associated undertakings:

Foreign1,399,839,632 934,197,708C.G.I Limited, United Arab Emirates

472,042,745 574,349,601Chenab, USA12,950,158 25,402,691Interfab PTY Limited, Australia

Local435,795,673Chen One Stores Limited 313,066,792

2,320,628,208 1,847,016,792

20. Loans and advances

Considered goodLoans to employees

3,185,1252,537,625Executives Others 2,593,500 3,366,216

Advances30,121,699Suppliers / contractors 38,834,334 93,690,274 83,625,362Income tax 7,674,038Letters of credit fee, margin and expenses 11,202,278

136,617,136 140,213,315

21. Deposits and prepayments

Deposits2,343,8111,322,858Security deposits

1,632,45616.Current portion of long term deposits 1,235,350 14,639,728 33,849,537Guarantee margin

Prepayments 2,718,436 4,334,584 20,313,478 41,763,282

22. Other receivables

101,394,692 48,168,853Export rebate / duty drawback -Research and development support 67,815,415

Excise duty 12,242,789 10,110,067 Other 15,167,834 5,002,738

128,805,315 131,097,073

23. Tax refunds due from Government

Sales tax 169,858,460 180,377,864Income tax 8,648,033 14,499,773

178,506,493 194,877,637

24. Cash and bank balances

Cash in hand 6,167,635 16,740,150 Cash at banks

11,252,737In current accounts 46,611,616 17,420,372 63,351,766

40

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imite

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25. Sales

Export25.1 7,994,932,820 8,199,592,734Fabrics / made ups / garments

130,262,757Add: Export rebate / duty drawback 61,050,977 8,125,195,577 8,260,643,711

Less:8,118,178Commission 56,091,918

125,887,092Discount 110,828,457134,005,270 166,920,375

7,991,190,307 8,093,723,336Local

824,479,30825.2Left over and waste material 997,655,19442,126,316Processing, conversion and stitching charges -

8,857,795,931 9,091,378,530

25.1 It includes exchange gain amounting to Rs. 58,101,473/- (2009: Rs.103,169,857/-).

25.2 It represents sale of left over / waste material out of goods manufactured for export.


26. Cost of sales

26.1 8,702,269,810Cost of goods manufactured 7,009,785,913Finished goods

1,189,964,542Opening stock 1,287,182,156947,548)(836,Closing stock (1,189,964,542)

353,016,994 97,217,614 26.2 9,055,286,804Cost of sales 7,107,003,527

26.1 Cost of goods manufactured

26.1.1 4,701,214,095Raw material consumed 4,118,310,287628,154,081 652,262,251Salaries, wages and benefits 53,453,821Staff retirement benefits 50,380,903

275,280,711 321,100,810Stores and spares486,360,452 544,922,782Dyes and chemicals369,353,777 408,918,841Packing material13,460,772 16,634,173Repairs and maintenance

459,405,773 523,675,614el and powerFu22,492,022 19,386,016Insurance

Research and development support 26.1.2 776,342 1,577,801 270,887,69915.2Depreciation 269,344,770110,806,131Other 172,715,450

7,391,645,676 7,099,229,698Work in process

2,684,382,599Opening stock 2,594,938,814(1,373,758,465)Closing stock (2,684,382,599)1,310,624,134 (89,443,785)8,702,269,810 7,009,785,913

41

-Annual R

eport

2010


26.1.1 Raw material consumed

600,887,730Opening stock 560,479,1284,381,009,066Purchases including purchase expenses 4,158,718,8894,981,896,796 4,719,198,017(280,682,701)Closing stock (600,887,730)

4,701,214,095 4,118,310,287

26.1.2 Research and development support

Research and development support67,815,415Claimed 155,569,833

Less: Rejected / to be utilised on receipt 1,606,165 67,815,415A 66,209,250vailable for utilisation 87,754,418

Utilisation:1,164,498 21,135,169Product development 9,177,431Skill development and training 21,614,718 3,054,972Up-gradation of information technology 4,232,701 5,058,747 15,568,649Environment improvement

5,255,69420,770,064Market research 27,759,880 17,463,639Technical up-gradation of production lines

-Participation in exhibitions 4,061,649 66,985,592 89,332,219

776,342 1,577,801

26.2


27. Other operating income

Scrap sale 1,624,045 1,390,367 -3,930,000Rental income

130,114,872Balances written back - net - 135,668,917 1,390,367

27.1


28. Selling and distribution expenses

477,339Advertisement and publicity 422,585 253,938,399 158,355,007Carriage and freight73,749,925 109,669,640Export clearing and forwarding19,636,878 20,065,254Export development surcharge

Other 15,885,351 18,921,721 363,687,892 307,434,207

It represents reversal of old outstanding trade and other payables of Rs. 49.840 million and retirement benefitspayable of Rs. 80.274 million.

It includes an amount of Rs. 632.983 million in respect of write down of inventories to net realisable values.

42

-Chenab L

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29. Administrative expenses

6,000,000Directors' remuneration 6,000,000 85,067,224 85,168,246Salaries and benefits 16,913,164 12,595,226Staff retirement benefits

Electricity 2,043,796 2,468,237 6,474,8916,369,517Postage, telephone and telex

17,852,694 17,184,015Vehicles running and maintenance 28,160,379 30,033,818Travelling and conveyance

3,465,9095,012,272Printing and stationery 7,057,6547,472,726Entertainment 1,376,4881,431,199bscriptionsFees and su

514,0972,916,630Legal and professional 2,139,4311,386,577Rent, rates and taxes 1,090,5001,336,00029.1Auditors' remuneration

793,6531,005,827Repairs and maintenance 11,321,72415.2Depreciation 14,030,963

Insurance 2,240,310 3,046,212 Other 1,715,958 3,917,079

198,245,997 197,356,419

29.1 Auditors' remuneration

Audit fee 1,000,000 750,000

Sundry services 236,000 265,500

Out of pocket expenses 100,000 75,000 1,336,000 1,090,500

30. Other operating expenses

6,634,6597,087,892Workers' welfare fund -Balances written off - net 361,100

7,087,892 6,995,759

31. Finance cost

Interest / mark up on:369,084,883 435,753,852Long term financing22,551,752 34,350,296Liabilities against assets subject to finance lease

831,245,854 888,777,445Short term borrowings85,901,374Bank charges and commission 128,826,902

1,308,783,863 1,487,708,495

32. Provision for taxation

Current88,388,024 82,933,342For the year

(46,314)For prior years - -32.1Deferred -

88,341,710 82,933,342

32.1

32.2 The relationship between tax expense and accounting profit has not been presented in these financialstatements as the total income of the Company falls under final tax regime and hence tax has been providedunder section 154 and 169 of the Income Tax Ordinance, 2001.

There are no temporary differences as the total income of the Company is chargeable to tax under final taxregime, hence no provision is made for deferred taxation.

43

-Annual R

eport

2010

33. REMUNERATION TO CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

ChiefChiefExecutiveExecutive

OfficerOfficer

Remuneration 1,600,000 2,400,000 19,208,666 1,600,000 2,400,000 18,356,711

House rent allowance 480,000 720,000 5,762,600 480,000 720,000 5,640,287

Medical allowance 160,000 240,000 1,920,867 160,000 240,000 1,835,701

Utility allowance 160,000 240,000 1,920,867 160,000 240,000 1,702,412

Other - - 2,039,653 - - -

Rupees 2,400,000 3,600,000 30,852,653 2,400,000 3,600,000 27,535,111

Number of persons 1 3 25 1 3 24

34. TRANSACTIONS WITH RELATED PARTIE S

2010 2009

Rupees Rupees

Nature of transactionRelationship

3,142,378,686Sale of goodsAssociated undertakings 2,753,594,812Organisational expenses recovered 537,258 481,743

-Commission paid 5,256,165

13,215,302Services received - 3,930,000Rental income -

35. INSTALLED CAPACITY AND ACTUAL PRODUCTIO N

Unit

2009201020092010

Mtrs 9,000,000 9,000,000 4,617,510 6,342,515

Mtrs 59,000,000 59,000,000 30,125,734 41,005,004

Mtrs 3,500,000 3,500,000 1,954,662 2,515,450

Reasons for shortfall

- Temporary closure for maintenance.

- Actual production is planned to meet the market demand.

-

Actual production per annum

It is difficult to describe precisely the production capacity of textile products being manufactured since itfluctuates widely depending upon various factors such as simple / multi-function articles, small and largesize articles, special articles and the pattern of articles adopted.

Made ups

Textile

Directors Executives Directors

2009

Garments

The Company in the normal course of business carries out transactions with various related parties which comprise ofassociated undertakings, directors and key management personnel. Amounts due from and to related parties areshown under relevant notes to the financial statements. Remuneration to Chief Executive Officer, Directors andExecutives is disclosed in Note 32. Other significant transactions with related parties are as under:

Rated capacity per annum Product

Fabrics

The Chief Executive Officer and Directors are entitled to free use of Company maintained vehicles. The monetaryvalue is Rs. 4,266,586/- (2009: Rs. 3,576,467/-). The Directors have waived off their meeting fee.

Executives

2010

44

-Chenab L

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2010 2009

36. Earnings per share- Basic and diluted

Loss for the year (2,027,969,310) (96,662,852)

Weighted average number of ordinary shares outstanding during the year 115,000,000 115,000,000

Earnings per share- Basic and diluted Rupees (17.63) (0.84)

36.1 There is no dilutive effect on the basic earnings per share of the Company.

37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

37.1 FINANCIAL INSTRUMENTS BY CATEGORY

2010 2009 Rupees Rupees

Financial assets:

Loans and receivables at amortised cost Trade debts 3,302,962,149 3,125,515,062

Loans and advances 5,131,125 6,551,341

Deposits 15,962,586 37,428,698

Other receivables 15,167,834 4,860,816

Bank balances 11,252,737 46,611,616

3,350,476,431 3,220,967,533

Financial liabilities:

Financial liabilities at amortised costLong term financing 3,124,956,750 3,230,779,966

Liabilities against assets subject to finance lease 155,231,092 169,931,002

Trade and other payables 1,843,945,246 2,030,183,703

Interest / markup payable 572,015,274 350,914,058

Short term borrowings 7,436,953,608 7,129,403,676

13,133,101,970 12,911,212,405

The Company finances its operations through the mix of equity, debt and working capital management with a view tomaintain an appropriate mix between various sources of finance to minimise risk. The overall risk management iscarried out by the finance department under the oversight of Board of Directors in line with the policies approved bythe Board.

45

-Annual R

eport

2010

37.2 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

37.2.1 Credit risk and concentration of credit risk


19,735,910 20,988,313 3,302,962,149 3,125,515,062 5,131,125 6,551,341 15,962,586 37,428,698 15,167,834 4,860,816 11,252,737 46,611,616 3,370,212,341 3,241,955,846


2,848,249,186 2,638,255,754 454,712,963 487,259,308

3,302,962,149 3,125,515,062

The aging of trade debts as at balance sheet date is as under:

Not past due 2,473,079,190 2,663,423,862

Past due 829,882,959 462,091,200

3,302,962,149 3,125,515,062

No provision has been made in respect of past due trade debt. Out of these past due debts, Rs. 112.359million has been recovered subsequently. The management is confident that its efforts will result in therecovery of above old outstanding balances, and hence, pending negotiations and resolution of thematter, no provision has been made in these financial statements.

Based on the past experience and taking into consideration, the financial position, and previous recordof recoveries, the Company believes that trade debts past due do not require any impairment. Thecredit risk exposure is limited in respect of deposits and bank balances as bank balances and majority of deposits are placed with foreign and local banks having good credit rating from international and localcredit rating agencies.

The Company’s activities expose it to a variety of financial risks (credit risk, liquidity risk and market risk). Risksmeasured and managed by the Company are explained below:

Bank balances

Trade debts

Other receivables Deposits

Long term deposits

Credit risk represents the accounting loss that would be recognised at the reporting date if counterparties failed completely to perform as contracted. The maximum exposure to credit risk at the reportingdate is as follows:

The Company’s most significant customers are foreign departmental stores and trading houses. Thebreak-up of amount due from customers is as follows:

Loans and advances

Due to the Company’s long standing relations with counterparties and after giving due consideration totheir financial standing, the management does not expect non performbyanthceese counter parties ontheir obligations to the company.

Export

For trade debts credit quality of the customer is assessed, taking into consideration its financial positionand previous dealings. Individual credit limits are set. The management regularly monitor and reviewcustomers credit exposure. The major export sales to customers, other than related parties, aresecured under letters of credit. The majority of export sales debtors of the Company are situated atMiddle East, USA and Europe. The Company is exposed to concentration of credit risk towards itsrelated parties as disclosed in Note 18.1 to the Financial statements.

Domestic retailers

46

-Chenab L

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37.2.2 Liquidity risk


Long term financing 3,124,957 4,030,555 532,992 390,398 2,822,127 285,037


subject to finance lease 155,231 181,785 61,405 33,684 86,696 -

Trade and other payables 1,843,945 1,843,945 1,843,945 - - -

Short term borrowings 7,436,954 7,855,538 7,855,538 - - -

12,561,087 13,911,823 10,293,880 424,082 2,908,823 285,037


Long term financing 2,934,127 4,113,876 640,364 501,128 2,615,869 356,515


subject to finance lease 169,931 207,903 53,737 35,185 118,981 -

Trade and other payables 2,030,184 2,030,184 2,030,184 - - -

Short term borrowings 7,129,404 7,792,517 7,792,517 - - -

12,263,646 14,144,480 10,516,802 536,313 2,734,850 356,515

The contractual cash flows relating to mark up have been determined on the basis of weighted average mark uprates on long term and short term borrowings. The Company is exposed to liquidity risk which will be managed bythe Company as explained in detail in Note 1.3.

Carrying

amount

Contractual

cash flows

Six months

or less

Six to twelve

months

2009

Carrying

amount

Contractual

cash flows

Six months

or less

Six to twelve

months

Two to five

years

More than

five years

------------------------------------------------Rupees in '000'--------------------------------------------

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financialliabilities. The Company’s approach to manage liquidity is to maintain sufficient level of liquidity of the Company onthe basis of expected cash flows, requirements of holding highly liquid assets and maintaining adequate reserveborrowing facilities to cover liquidity risk. This includes maintenance of balance sheet liquidity ratios throughworking capital management. Following are the contractual maturities of financial liabilities including interestpayments as at June 30, 2010 and 2009;

2010

More than

five years

------------------------------------------------Rupees in '000'--------------------------------------------

Two to five

years

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37.2.3 Market risk

i)

Sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

Cash flow sensitivity analysis for variable rate instruments

ii) Currency risk

iii) Equity price risk

The Company does not account for any fixed rate financial assets and liabilities at fair valuethrough profit and loss, therefore a change in interest rates at the reporting date would not effectprofit and loss account.

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates andequity prices will affect the Company’s income or the value of its holdings of financial instruments. Theobjective of market risk management is to manage and control market risk exposures within acceptableparameters while optimizing returns.

Interest rate risk

Majority of interest rate risk arises from long term and short term borrowings from banks. Theinterest rate profile of the Company’s interest bearing financial instruments is presented inrelevant notes to the financial statements.

Currency risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in foreign exchange rates. Foreign currency risk arises mainlywhere receivables and payables exist due to transactions with foreign undertakings. TheCompany is exposed to currency risk on foreign debtors and bills payable. The total foreigncurrency risk exposure on reporting date amounted to Rs. 2,827.742 million (2009: Rs.2,617.272 million).

Trading and investing in equity securities give rise to equity price risk. The Company is notexposed to equity price risk.

At June 30, 2010,e ifcuthrrency had weakened / strengthened by 5% against the foreigncurrencies with all other variables held constant, loss for the year would have been lower / higherby Rs. 141.27 million (2009: Rs. 125.007 million) and equity for the year would have been higher/ lower by Rs. 141.27 million (2009: Rs. 125.007 million).

Sensitivity to interest rate risk arises from mismatches of financial assets and financial liabilitiesthat mature or reprice in a given period. The Company manages these mismatches through riskmanagement strategies where significant changes in gap position can be adjusted.

If the interest rate had increased / decreased by 1% at the reporting date with all other variablesheld constant, loss for the year would have been higher / lower by Rs. 103.25 million (2009: Rs.94.2 million) and equity would have been lower / higher by 103.25 million (2009: Rs. 94.2million).

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates.

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37.3 Fair values of financial instruments

37.4 Capital risk management

2010 2009

Note Rupees Rupees

8, 9 & 13Total debt 10,420,488,364 10,233,461,558

24Less: Cash and cash equivalents 17,420,372 63,351,766

Net debt 10,403,067,992 10,170,109,792

Total equity 753,494,718 2,690,493,782

Total capital 11,156,562,710 12,860,603,574 79.08%93.25%Gearing ratio

37.5 Overdue loans

The gearing ratio has been deteriorated due to operating loss for the year. The Company is taking measures toimprove the gearing ratio which are explained in detail in Note 1.3.

The carrying values of all the financial assets and financial liabilities reported in the financial statementsapproximate their fair values.

The overdue installments of Rs. 5.188 million (2009: Rs. 37.630 million) alongwith mark up of Rs. 1.528 million(2009: Rs. 60.224 million) were subsequently paid. The Company has applied to the banking companies forrestructuring of the overdue loans and mark up.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeablewilling parties in an arm's length transaction.

The Company's objectives when managing capital are to safeguard the Company's ability to continue as agoing concern, so that it can continue to provide returns for shareholders and benefits for other stakeholdersand to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust thecapital structure, the Company may adjusat mthoeunt of dividends paid to shareholders, issue new shares orobtain / repay long term financing from / to financial institutions / sponsor directors.

On the reporting date the installments of long term, demand finances amounting to Rs. 5.000 million (2009: Nil)alongwith mark up of Rs. 1.528 million (2009: Nil), term finance amounting to Rs. 61.362 million (2009: Rs.24.352 million) alongwith mark up of Rs.159.770 million (2009: Rs.68.338 million), long term finances (LTF-EOP) amounting to Rs. 132.521 million (2009: Rs. 55.009 million) alongwith mark up of Rs. 13.097 million(2009: Rs. 27.293 million) , lease finance amounting to Rs.33.300 million (2009: Rs. 8.609 million) alongwithmark up of Rs.12.683 million (2009: Rs. 6.160 million) and short term borrowings amounting to Rs.271.540million (2009: NIL) alongwith mark up of Rs.248.975 million (2009: NIL) were over due.

The salient information relating to capital risk management of the Company as of June 30, 2010 and 2009 wereas follows:

Consistent with others in the industry, the Company manages its capital risk by monitoring its debt levels andliquid assets and keeping in view future investment requirements and expectation of the shareholders. Debt iscalculated as total external borrowings ('long term financing', ' liabilities against assets subject to finance lease'and 'short term borrowings' as shown in the balance sheet). Equity comprises of shareholders’ equity as shownin the balance sheet under 'share capital and reserves' and subordinated long term finance from directors.

On reporting date, the carrying amount of loans retoleavabnotve overdues were long term, demand financeRs. 75 million (2009: Nil), term finances Rs. 364.638 million (2009: Rs. 664.490 million), long term finance (LTF-EOP) Rs. 331.754 million (2009: Rs. 204.698 million), lease finance Rs. 118.400 million (2009: Rs.165.070million) and short term borrowings Rs.271.540 million (2009: NIL).

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38. DATE OF AUTHORISATION FOR ISSU E

The financial statements were authorised for issue on November 08, 2010 by the Board of Directors of the Company.

39.

40. NON - ADJUSTING EVENT AFTER THE BALANCE SHEET DAT E

41.

41.1

-

-

-

41.2

The Board of Directors in its meeting held on November 08, 2010 has approved transfer of Rs. 342,857,142/- frompreference shares redemption reserve to general reserve. These financial statements do not reflect thisappropriation.

Following reclassification / re-arrangement of prior year figures has been made to reflect more appropriatepresentation:

RECLASSIFICATION / REARRANGEMENT

Finance against trust receipts of Rs. 77,829,515/- was included in the line item of "Finance againstimported merchandise" under the head of " Short term borrowings". It has been disclosed as a separateline item under the same head.

Excise duty refundable of Rs. 10,110,067/- was grouped under the head " Tax refunds due fromGovernment". It has been regrouped under the head "Other receivables"'.

Current portion of long term deposits of Rs. 1,235,350/- was included in "Security deposits" under thehead "Deposits and prepayments". It has been separately disclosed under the same head.

Figures have been rounded off to the nearest Rupee except where mentioned rounding off in Rupees inthousands.

The dividend for cumulative preference shares amounting to Rs. 222 million will be accumulated and payable in theensuing years when the sufficient amount of profit will be available for appropriation.

DIVIDEND FOR CUMULATIVE PREFERENCE SHARES

GENERAL




Pattern of Holding of Ordinary Shares

Form “34”

Held by shares Holders as at June 30, 2010

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Share Holders From To Total Shares76 1 100 4,285 548 101 500 256,930 352 501 1,000 344,616 590 1,001 5,000 1,792,908 180 5,001 10,000 1,493,393 64 10,001 15,000 848,892 42 15,001 20,000 786,181 24 20,001 25,000 573,770 20 25,001 30,000 565,542 7 30,001 35,000 228,836 11 35,001 40,000 428,671 7 40,001 45,000 302,700 6 45,001 50,000 300,000 2 50,001 55,000 107,000 3 60,001 65,000 189,622 4 65,001 70,000 278,000 3 70,001 75,000 222,000 2 75,001 80,000 154,396 3 94,001 100,000 300,000 4 100,001 125,000 433,801 3 150,001 200,000 541,660 1 225,001 250,000 226,532 2 250,001 300,000 573,338 2 300,001 400,000 655,465 1 400,001 500,000 482,000 1 600,001 700,000 613,000 1 700,001 750,000 750,000 1 950,001 1,000,000 968,000 1 1,100,001 1,200,000 1,128,648 1 1,275,001 1,300,000 1,296,542 1 1,350,000 1,400,000 1,394,000 1 2,100,001 2,125,000 2,113,483 1 2,125,001 2,150,000 2,131,019 1 2,500,001 2,525,000 2,518,285 1 2,675,001 2,700,000 2,693,626 1 2,800,001 2,825,000 2,813,545 1 3,425,001 3,450,000 3,444,961 2 3,500,001 4,000,000 7,111,052 1 6,000,001 7,000,000 6,298,091 1 7,000,001 7,500,000 7,459,184 1 8,000,001 8,500,000 8,416,948 1 14,500,001 15,000,000 14,876,483 1 16,500,001 17,000,000 16,681,483 1 20,000,001 20,500,000 20,201,112

1977 115,000,000

Note: The Slabs not applicable, have not been shown.

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Categories of Shareholders

Categories of Shareholders Number Share held Percentage

Directors, Chief Executive

and their spouse, children

Mian Muhammad Latif Chief Executive Officer 1 16,681,483 14.51

Mian Muhammad Javaid Iqbal Director 1 14,876,483 12.94

Mr.Muhammad Naeem Director 1 20,201,112 17.57

Mr.Muhammad Faisal Latif Director 1 2,813,545 2.45

Mr.Muhammad Farhan Latif Director 1 8,416,948 7.32

Mr.Muhammad Rizwan Latif Director 1 3,444,961 3.00

Mr.Muhammad Zeeshan Latif Director 1 2,693,626 2.34

Mst.Shahnaz Latif Director 1 7,459,184 6.49

Mst.Tehmina Yasmin Director 1 2,518,285 2.19

Mst.Prveen Akthar Spouse 1 285,338 0.25

Mr Umair Javaid Son 1 2,419,019 2.10

Financial Institutions,Insurance Companies,Investment Companies,

Joint Stock Companies ,Leasing Companies,Mutual Fund & etc.

Financial Institutions 3 1,479,438 1.29

Insurance Companies 2 150,000 0.13

Investment Companies 1 25,000 0.02

Joint Stock Companies 43 1,128,382 0.98

Associate Company 1 6,603,556 5.74

Individuals 1916 23,803,640 20.70

1977 115,00 0 , 0 00 100.00

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Pattern of Holding of Preference SharesHeld by shares Holders as at June 30, 2010

ShareHolders From To Total Shares13 1 100 727

538 101 500 266,882 20 501 1,000 18,739 6 1,001 5,000 19,793 5 5,001 10,000 37,500 3 10,001 20,000 46,880 1 60,001 70,000 64,500 3 75,001 100,000 286,000 1 175,001 200,000 190,500 1 275,001 300,000 300,000 1 475,001 500,000 476,500 1 800,001 825,000 812,000 1 900,001 950,000 914,500 1 950,001 1,000,000 1,000,000 1 1,200,001 1,300,000 1,250,000 2 1,475,001 1,500,000 2,989,999 2 1,800,001 2,000,000 3,815,998 1 2,475,001 2,500,000 2,500,000 1 3,975,001 4,000,000 4,000,000 1 4,750,001 4,775,000 4,763,000 1 4,975,001 5,000,000 5,000,000 1 5,000,001 8,000,000 7,889,482 3 9,500,001 10,000,000 30,000,000 1 13,000,001 13,500,000 13,357,000

609 80,000,000

Note: The Slabs not applicable, have not been shown.

Sharesholder's Number of Number ofCategory Shareholders Shares Held

Son of Director 1 979,000 Financial Institutions 11 66,736,481 Insurance Companies 1 95,500 Joint Stock Companies 2 6,500 Individuals 587 2,293,728 Others 7 9,888,791

609 80,000,000

Form of Proxy

I/We _____________________________ of ______________________ being a Member of Chenab Limited (the “Company”) holding ________________ shares, hereby appoint ________________ of _______________, who is also a Member of the Company, as my/our proxy to vote for me/us, and on

stmy/our behalf at the 26 Annual General Meeting of the Company to be held on November 30, 2010 andat any adjournment there of. Signed this ___________________ day of __________________ 2010.

Folio No. CDC Account No.

Participant I.D.

Account No.

WITNESSES: 1. Signature _____________________ Name _____________________ CNIC _____________________ Address _____________________ ___________________ The Signature should agree with the specimen 2. Signature _____________________ signature registered with the Company. Name _____________________ CNIC _____________________ Address _____________________ Note: 1. This Proxy, duly completed, signed and witnessed, must be received at the registered office of the

Company, Nishatabad, Faisalabad no later than forty-eight (48) hours before the time appointed for the Meeting.

2. No person shall act as proxy who is not a member of the Company (except that a corporation may

appoint a person who is not a member). 3. If a Member appoints more than one proxy and more than one instruments of proxy are deposited by

a member with the Company, all such instruments of proxy shall be rendered invalid. 4. The Proxy shall produce his original CNIC or original passport at the time of the Meeting . 5. In case of individual CDC Account holders, attested copy of NIC or passport (as the case may be) of

the beneficial owner will have to be provided with this Proxy. 6. In case of corporate entity, the Board of Directors Resolution/Power of Attorney with specimen

signature of the nominee shall be submitted alongwith this Proxy (unless it has been provided earlier).

Revenue Stamp Rs.5/-

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Nishatabad, Faisalabad - Pakistan.Tel: +92-41-8754472-76

Fax: +92-41-8752400,8752700Email: [email protected] www.chenabgroup.com

Annual report 2010

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