Saif Annual Report 2007

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Saif Textile Mills Limited Annual Report 2007

CONTENTS

COMPANY INFORMATION 2

VISION AND MISSION STATEMENT 3

NOTICE OF ANNUAL GENERAL MEETING 4

DIRECTORS’ REPORT TO THE SHAREHOLDERS 5

PATTERN OF SHARESHOLDING 11

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OFCODE OF CORPORATE GOVERNANCE 14

REVIEW REPORT TO THE MEMBERS ON STATEMENT OFCOMPLIANCE WITH THE BEST PRACTICES OF CODE OFCORPORATE GOVERNANCE 16

AUDITORS’ REPORT TO THE MEMBERS 17

BALANCE SHEET 18

PROFIT AND LOSS ACCOUNT 20

CASH FLOW STATEMENT 21

STATEMENT OF CHANGES IN EQUITY 22

NOTES TO THE FINANCIAL STATEMENTS 23

FORM OF PROXY 53

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COMPANY INFORMATION

BOARD OF DIRECTORS Javed Saifullah Khan - ChairmanOsman Saifullah Khan - Chief ExecutiveOmar Saifullah KhanJehangir Saifullah KhanCh. Maqbool AhmadZafar QureshiMuhammad Ayub - NIT Nominee

AUDIT COMMITTEE Ch. Maqbool Ahmad - ChairmanZafar Qureshi - MemberMuhammad Ayub - Member

CHIEF FINANCIAL OFFICER Zaheen-ud-Din Qureshi

COMPANY SECRETARY Mumtaz H. Chaudhry

LEGAL ADVISORS Dr. Pervez HassanHassan & Hassan, Advocates

Abdul Latif Yousafzai, Advocates

AUDITORS M/s. Hameed Chaudhri & Co.,Chartered AccountantsHM House, 7-Bank Square, Lahore

BANKERS Albaraka Islamic Bank B.S.C (E.C)Allied Bank LimitedFaysal Bank LimitedHabib Bank LimitedMeezan Bank LimitedNational Bank of PakistanNIB Bank LimitedThe Bank of PunjabThe Hongkong and Shanghai Banking Corporation LimitedUnited Bank Limited

HEAD OFFICE Kulsum Plaza, 4th Floor,2020- Blue Area, Islamabad-44000Telephone : +92-51-2823924, 2829415Fax : +92-51-2277843, 2822564Email : [email protected]

REGISTERED OFFICE APTMA House, Tehkal Payan,Jamrud Road, PeshawarTelephone : +92-91-5843870, 5702941Fax : +92-91-5840273Email : [email protected]

SHARES REGISTRAR M/s. Hameed Majeed Associates (Pvt.) Ltd.,HM House, 7-Bank Square, LahoreTelephone : +92-42-7235081-7235082Fax : +92-42-7358817Email : [email protected]

MILLS Industrial Estate, Gadoon Amazai,District SwabiTelephone : +92-0938-270313,270429Fax : +92-0938-270514Email : [email protected]

CYBER www.saiftextile.com

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VISION AND MISSION STATEMENT

VISION

❃ To attain market leadership through unmatched quality, a diverse and unique product mix,empowered employees, world class systems, and the highest ethical and professional stan-dards.

MISSION

❃ Give our shareholders a competitive return on their investment through market leadership,sustainable business growth and sound financial management.

❃ Earn and sustain the trust of our stakeholders through efficient resource management.

❃ Provide the highest quality products and services consistent with customer needs and continueto earn the respect, confidence and goodwill of our customers and suppliers.

❃ Foster a culture of trust and openness in order to make professional life at the Saif TextileMills Limited a stimulating and challenging experience for all our people.

❃ Strive for the continuous development of Pakistan while adding value to the textile sector.

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that 18th Annual General Meeting of the members of Saif Textile Mills Limitedwill Insha Allah be held at registered office of the Company, APTMA House, Jamrud Road, Peshawar onTuesday, October 30, 2007 at 11:00 a.m. to transact the following business:

1) To confirm the minutes of the 17th Annual General Meeting held on October 30, 2006.

2) To receive, consider and adopt Annual Audited Financial Statements for the year ended June30, 2007 together with the Directors’ and Auditors’ Reports thereon.

3) To appoint auditors for the year ending June 30, 2008 and fix their remuneration. The retiringauditors M/s. Hameed Chaudhri & Co., Chartered Accountants, being eligible offered themselvesfor re-appointment.

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

By order of the Board

Islamabad (Mumtaz H. Chaudhry)October 08, 2007 Company Secretary

NOTES:

i. Share Transfer Books of the Company will remain closed from 24.10.2007 to 30.10.2007 (Both DaysInclusive)

ii. A member entitled to attend and vote at the meeting may appoint another member as his / her proxy toattend and vote on his / her behalf. The instrument appointing the proxy, duly completed, must bereceived at the Company’s Registered Office not later than 48 hours before the time of holding of themeeting.

iii. CDC individual Account holders or Sub-account holders are required to bring with them their originalComputerized National Identity Card (CNIC) / original passport along with participant’s ID numberand their account number in order to facilitate identification.

iv. In case of Corporate entity, resolution of the Board of Directors/Power of attorney with specimensignatures of nominees shall be produced (unless provided earlier) at the time of meeting.

v. Members are requested to promptly notify any change in their address.

vi. The Memorandum and Articles of Association of the Company as on date and also indicating theproposed amendment has been kept at the registered office of the Company and can be inspectedduring business hours on all working days upto October 30, 2007.

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DIRECTORS’ REPORT TO THE SHAREHOLDERSDear Shareholders,

On behalf of Board of Directors, it gives me pleasure to present the 18th Annual Audited financial statementsfor the year ended June 30, 2007.

GENERAL MARKET CONDITIONS

Market conditions have deteriorated and this has coincided with inflationary pressures on the cost side.This severe operating environment has adversely impacted your Company’s financial performance. Thefollowing conditions have prevailed since the start of the current financial year causing an adverse impacton your Company’s performance:

� An increase in the cost of inputs caused by the elevated prices of petroleum products.� Bearish sentiments dominating the market for cotton and man made fiber yarn.� Higher borrowing costs.

OPERATING RESULTS

The major highlights of your Company’s results as compared to the preceding year are as follows:

TURNOVER

Your Company achieved almost 9.78% growth in turnover as compared to the corresponding year due toup gradation of the production facilities and the development of a diversified product range.

PROFITABILITY

Despite adverse market conditions your Company was able to sustain its gross profit margin slightly above10%. The operating profit margin decreased from 7.60% to 6.27%. The reasons for the decrease in theoperating margin are an increase in distribution costs and a reduction in the gain from investments held fortrading. The combined effect of escalating interest rates and increasing short-term borrowings because ofadverse market conditions, has led to an increase in financial charges on borrowed funds, thereby depressingthe net profitability of your Company.

EXPANSION / BMR

During the year your Company completed a major BMR program, and installed 43 compact attachmentson the existing ring frames. The BMR has been fully completed and the trial production has been carriedout. Initial quality problems have been successfully addressed by the technical team. Your Company is ina position to fully focus on the premium quality fine yarn market. The recent BMR will both increase ourproductivity as well as enhance quality.

FUTURE OUTLOOK

Pakistan’s textile sector is at a critical point, primarily due to obstacles to growth in the national economy.The sharp rises in the cost of domestic borrowing, accompanied by continued escalations in the cost of

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energy are creating an extremely demanding environment for all manufacturers. Tariffs on domestic energysources continue their upward spiral, further elevating the cost of self-generated electricity and raising thecost of production. The seemingly infinite rise in financial charges and mark up rates is a critical factor thatwill inclemently affect the profitability of the entire textile sector. In addition the yarn market is dominatedby a bearish sentiment, while the spinning industry is facing stiff competition from heavily subsidizedoverseas competitors.

Despite repeated appeals and representations from the entire textile industry, the Government has failed toprovide any incentives or reforms for the spinning sector, piling on the miseries of the industry.

In this tough operating environment, the mission before your Company’s management is to minimize theadverse impact of the depressed market and economic conditions. In the absence of any positive externalfactors our operating results are unlikely to improve.

CONTRIBUTION TO THE NATIONAL EXCHEQUER

The company contributed Rs.176 million (2006: Rs.197 million) to the National exchequer during theperiod under review in the form of sales tax, import duties, surcharges and various other levies.

PROFIT APPROPRIATION

The Board in its meeting held on October 08, 2007 decided not to recommend any dividend for the year(2006: 7.5% i.e. Re. 0.75 per share).

PATTERN OF SHAREHOLDING

The pattern of shareholding under section 236(2) (d) of the Companies Ordinance, 1984 and additionalinformation as required by the code of corporate governance is enclosed.

EARNINGS PER SAHRE

Earnings per share during the period under report worked out to Rs.0.64 (2006: Rs.4.14)

EXTERNAL AUDITORS

The present auditors, M/s Hameed Chaudhri & Co. Chartered Accountants, retire and being eligible offerthemselves for re-appointment. As suggested by the Audit Committee, the Board recommends theirappointment as auditors of the Company to hold office from the conclusion of this Annual General Meetingto be held on October 30, 2007 until conclusion of next Annual General Meeting.

CORPORATE GOVERNANCE

We are pleased to report that your company has taken necessary steps to comply with the provisions of theCode of Corporate Governance, as incorporated in the listing rules of the Stock Exchanges.

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The statement on Corporate Governance and Financial Reporting Frame Work is given below:

� The financial statements prepared by the management of the company present fairly its truestate of affairs, the results of its operations, cash flows and changes in equity.

� Proper books of accounts have been maintained by the company.� Appropriate accounting policies have been consistently applied in preparation of financial

statements and accounting estimates are based on reasonable and prudent judgment.� International Accounting Standards, as applicable in Pakistan, have been followed in preparation

of financial statements.� The system of internal controls is sound in design and has been effectively implemented and

monitored.� There are no doubts upon the company’s ability to continue as a going concern.� There has been no trading of shares by CEO, Directors, CFO, Company Secretary, their spouses

and minor children, during the year other than that disclosed in pattern of share holding.� There has been no material departure from the best practices of code of corporate governance,

as detailed in the listing regulations.� The key operating and financial data of the company for last six years is given below :-

30, June Year Ended 30 September,Particulars

2007 2006 2005 2004 2003 200209Months(Rupees in thousand)

Operating assets 2,020,541 2,047,793 1,748,693 1,358,642 710,015 720,209Net worth 903,043 747,197 686,367 683,037 623,097 533,081Turnover 3,813,037 3,473,267 1,995,676 1,712,334 1,355,541 954,605Gross profit 389,441 360,958 189,854 162,145 141,243 112,703Gross profit margin (% age) 10.21 10.39 9.51 9.47 10.42 11.81Net Profit - after taxation 12,188 78,360 29,179 43,404 69,700 45,266Net profit margin (% age) 0.32 2.26 1.46 2.53 5.14 4.74Earnings per share Rs. 0.64 4.14 1.54 2.29 3.69 2.39

� The Board of Directors has adopted a Mission Statement and a Statement of Overall CorporateStrategy.

� Regarding outstanding taxes and levies, please refer note 19 to the annexed audited statements.

� During the year under report six meetings of the Board of Directors were held. The attendanceby each Director was as follows:

Name of Director Meetings Attended

Javed Saifullah Khan 5Osman Saifullah Khan 4Omar Saifullah Khan 2Jehangir Saifullah Khan 2Ch. Maqbool Ahmad 6Zafar Qureshi 6Muhammad Ayub (NIT Nominee) 6

Leave of absence was granted to Directors who could not attend any of the Board meetings.

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ACKNOWLEDGMENT

The Board places on record its appreciation of the support of our bankers and our valued customers. Iwould like to highlight the hard work put in by the members of our corporate family.

We are confident they will continue to show the same dedication in the days ahead.

On behalf of the Board of Directors

JAVED SAIFULLAH KHANDated: October 08, 2007 Chairman/Director

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CATEGORIES OF SHAREHOLDERS—————————————————————————————————————————————————Description Number of Shares Held % age

Shareholders—————————————————————————————————————————————————Directors, Chief Executive Officer, their Spouse and Minor Children 07 20,462 0.0775Associated Companies, Undertakings and Related Parties 06 13,112,645 49.6449NIT and ICP 02 4,213,439 15.9522Banks, Development Financial Institutions,

Non-Banking Financial Institutions 06 914,305 3.4616Insurance Companies 03 1,040,183 3.9382Modarabas and Mutual Funds 08 30,990 0.1173General Public:

- Local 1,401 7,011,789 26.5469

Others:- Brokerage Houses 32 69,067 0.2615—————————————————————————————————————————————————TOTAL 1,465 26,412,880 100.0000—————————————————————————————————————————————————

PATTERN OF SHARESHOLDINGAS AT 30 JUNE, 2007

Incorporation Number: P-00368 of 1989-90—————————————————————————————————————————————————

No. of ———— Shareholding———— Total SharesShareholders From To Held

—————————————————————————————————————————————————355 1 100 17,996500 101 500 129,489180 501 1,000 143,490316 1,001 5,000 652,500

44 5,001 10,000 333,78013 10,001 15,000 159,84715 15,001 20,000 260,52111 20,001 25,000 251,3924 25,001 30,000 110,0001 30,001 35,000 31,2461 35,001 40,000 35,5092 40,001 45,000 86,0002 50,001 55,000 104,0301 60,001 65,000 62,0001 65,001 70,000 70,0001 95,001 100,000 95,7371 105,001 110,000 107,1291 110,001 115,000 113,4361 125,001 130,000 127,4501 180,001 185,000 181,5001 270,001 275,000 272,5361 290,001 295,000 294,9361 295,001 300,000 299,2151 360,001 365,000 363,5001 685,001 690,000 689,7001 715,001 720,000 717,0001 795,001 800,000 798,6001 800,001 805,000 800,0871 890,001 895,000 891,0001 1,030,001 1,035,000 1,031,8481 2,010,001 2,015,000 2,012,1151 2,070,001 2,075,000 2,072,6461 5,245,001 5,250,000 5,246,8891 7,845,001 7,850,000 7,849,756

———————————————————————————————————————————————1,465 < Total > 26,412,880

———————————————————————————————————————————————

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DETAIL OF CATEGORIES OF SHAREHOLDERS——————————————————————————————————————————————————————

Name No of Shareholders Shares Held % age————————————————————————————————————————————————

Directors, Chief Executive Officer, theirSpouse and Minor Children

-Mr. Javed Saifullah Khan (Chairman) 01 11,000 0.0416

-Mr. Osman Saifullah Khan (Chief Executive) 01 1,500 0.0057

-Mr. Omer Saifullah Khan (Director) 01 1,000 0.0038

-Mr. Jehangir Saifullah Khan (Director) 01 1,000 0.0038

-Mr. Zafar Qureshi (Director) 01 2,565 0.0097

-Ch. Maqbool Ahmad (Director) 01 1,897 0.0072

-Begum Gulshan Javed SaifullahW/o Mr. Javed Saifullah Khan 01 1,500 0.0057

Associated Companies, Undertakingsand Related Parties

-Mr. Anwar Saifullah Khan 01 2,000 0.0076

-Mr. Humayun Saifullah Khan 01 2,000 0.0076

-Mr. Iqbal Saifullah Khan 01 3,500 0.0133

-Begum Shireen Iqbal Saifullah Khan 01 4,000 0.0151

-Begum Zeb Saifullah Khan 01 4,500 0.0170

-Saif Holdings Limited 01 13,096,645 49.5843

NIT and ICP

-National Bank of Pakistan,

Trustee Department (NIT) 01 4,212,211 15.9476

-Investment Corporation of Pakistan (ICP) 01 1,228 0.0046

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Executives Nil Nil

Public Sector Companies and Corporations Nil Nil

Banks, Development Financial Instituations,Non Banking Financial Instituations,

Insurance Companies,Modarabas and Mutual Funds 49 2,054,545 7.7786

Sharesholders holding ten percent or more votinginterest in the Company:

-Saif Holdings Limited 01 13,096,645 49.5843

-National Bank of Pakistan,

Trustee Department (NIT) 01 4,212,211 15.9476

——————————————————————————————————————————————————————Name No of Shareholders Shares Held % age

————————————————————————————————————————————————

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STATEMENT OF COMPLIANCE WITH THECODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in Regula-tion No. 37 of Listing Regulations of the Karachi Stock Exchange, Chapter XIII of Listing Regulations ofthe Lahore Stock Exchange and Chapter XI of Listing Regulations of the Islamabad Stock Exchange forthe purpose of establishing a framework of good governance, whereby a listed company is managed incompliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:

1. The Company encourages representation of non-executive directors and at present, all the membersof the Board are non-executive directors except for Chief Executive Officer.

2. The directors have confirmed that none of them is serving as a director in more than ten listed compa-nies, including this Company.

3. All the resident directors of the Company are registered as taxpayers and none of them has defaultedin payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stockexchange, has been declared as a defaulter by that stock exchange.

4. No casual vacancy was occurred in the Board during the year.

5. The Company has prepared a ‘Statement of Ethics and Business Practices’, which has been signed byall the directors and employees of the Company.

6. The Board has developed a vision/mission statement, overall corporate strategy and significant poli-cies of the Company. A complete record of particulars of significant policies along with the dates onwhich they were approved or amended has been maintained.

7. All the powers of the Board have been duly exercised and decisions on material transactions, includ-ing appointment and determination of remuneration and terms and conditions of employment of theCEO 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 directorelected by the Board for this purpose and the Board met at least once in every quarter. Written noticesof the Board meetings, along with agenda and working papers, were circulated at least seven daysbefore the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The Board arranged in-house orientation courses for its directors during the year to apprise them oftheir duties and responsibilities.

10. The Board has approved appointment of Company Secretary and Head of Internal Audit, includingtheir remuneration and terms and conditions of employment, as determined by the CEO.

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11. The Directors’ Report for this year has been prepared in compliance with the requirements of theCode and fully describes the salient matters required to be disclosed.

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

13. The directors, CEO and executives do not hold any interest in the shares of the Company other thanthat 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, which comprises of three members. All members, includ-ing the chairman of the committee, are non-executive directors.

16. The meetings of the audit committee were held at least once every quarter prior to approval of interimand final results of the Company and as required by the Code. The terms of reference of the Commit-tee have been formed and advised to the Committee for compliance.

17. The Board has set-up an effective internal audit function and the personnel involved are consideredsuitably qualified and experienced for the purpose and are conversant with the policies and proce-dures of the Company and they are involved in the internal audit function on a full time basis.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory ratingunder the quality control review programme of the Institute of Chartered Accountants of Pakistan,that they or any of the partners of the firm, their spouses and minor children do not hold shares of theCompany and that the firm and all its partners are in compliance with International Federation ofAccountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants ofPakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide otherservices except in accordance with the listing regulations and the auditors have confirmed that theyhave observed IFAC guidelines in this regard.

20. We confirm that all other material principles contained in the Code have been complied with.

On behalf of the Board of Directors

JAVED SAIFULLAH KHANDated: October 08, 2007 Chairman/Director

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REVIEW REPORT TO THE MEMBERS ONSTATEMENT OF COMPLIANCE WITH THE

BEST PRACTICES OF CODE OFCORPORATE GOVERNANCE

We have reviewed the Statement of Compliance with the best practices contained in the Code of CorporateGovernance prepared by the Board of Directors of SAIF TEXTILE MILLS LIMITED to comply withthe Listing Regulation No. 37 of the Karachi Stock Exchange (Guarantee) Limited, Chapter XIII of theListing Regulations of the Lahore Stock Exchange (Guarantee) Limited and Chapter XI of the ListingRegulations of the Islamabad Stock Exchange (Guarantee) Limited where the Company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directorsof the Company. Our responsibility is to review, to the extent where such compliance can be objectivelyverified, whether the Statement of Compliance reflects the status of the Company’s compliance with theprovisions of the Code of Corporate Governance and report if it does not. A review is limited primarily toinquiries of the Company personnel and review of various documents prepared by the Company to complywith the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accountingand internal control systems sufficient to plan the audit and develop an effective audit approach. We havenot carried out any special review of the internal control system to enable us to express an opinion as towhether the Board’s statement on internal control covers all controls and the effectiveness of such internalcontrols.

Based on our review, nothing has come to our attention which causes us to believe that the Statement ofCompliance does not appropriately reflect the Company’s compliance, in all material respects, with thebest practices contained in the Code of Corporate Governance as applicable to the Company for the yearended 30 June, 2007.

LAHORE HAMEED CHAUDHRI & CO.,Dated: October 08, 2007 CHARTERED ACCOUNTANTS

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AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed balance sheet of SAIF TEXTILE MILLS LIMITED as at 30 June, 2007and the related profit and loss account, cash flow statement and statement of changes in equity togetherwith the notes forming part thereof, for the year then ended and we state that we have obtained all theinformation and explanations which, to the best of our knowledge and belief, were necessary for the purposesof 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 standardsand the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion onthese statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above saidstatements are free of any material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the above said statements. An audit also includes assessing theaccounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statements. We believe that our audit provides a reasonable basis for ouropinion 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 CompaniesOrdinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawnup in conformity with the Companies Ordinance, 1984, and are in agreement with the books ofaccount and are further in accordance with accounting policies consistently applied;

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

(iii) the business conducted, investments made and the expenditure incurred during the year were inaccordance with the objects of the Company;

(c) in our opinion and to the best of our information and according to the explanations given to us, thebalance sheet, profit and loss account, cash flow statement and statement of changes in equity togetherwith the notes forming part thereof conform with approved accounting standards as applicable inPakistan, and, give the information required by the Companies Ordinance, 1984, in the manner sorequired and respectively give a true and fair view of the state of the Company’s affairs as at 30 June,2007 and of the profit, its cash flows and changes in equity for the year then ended; and

(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980)was deducted by the Company and deposited in the Central Zakat Fund established under Section 7of that Ordinance.

LAHORE HAMEED CHAUDHRI & CO.,Dated: October 08, 2007 CHARTERED ACCOUNTANTS

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BALANCE SHEET

2007 2006Note (Rupees in thousand)

EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES

Authorised capital30,000,000 ordinaryshares of Rs. 10 each 300,000 300,000

========== ==========Issued, subscribed and paid-up capital 7 264,129 189,129Reserves 8 265,981 190,981Unappropriated profit 372,933 367,087

————— ——————903,043 747,197

SURPLUS ON REVALUATIONOF PROPERTY, PLANTAND EQUIPMENT 9 111,063 118,906

NON-CURRENT LIABILITIESLong term finances 10 1,070,597 981,914Long term deposits 11 1,375 1,793Liabilities against assets

subject to finance lease 12 0 40Staff retirement benefits - gratuity 13 26,761 19,820Deferred taxation 14 0 15,613

1,098,733 1,019,180CURRENT LIABILITIES

Current portion of:- long term finances 10 245,318 204,486- liabilities against assets subject to finance lease 12 40 407Short term finances 15 1,496,385 1,152,378Trade and other payables 16 249,112 274,539Accrued mark-up and interest 17 59,527 53,497Taxation 18 18,961 17,300

2,069,343 1,702,607CONTINGENCIES AND COMMITMENTS 19

————— ——————4,182,182 3,587,890========== ==========

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

Javed Saifullah KhanChairman/Director

These financial statements are not signed by the Chief Executive as he is out of country. This informationis disclosed as required under Section 241(2) of the Companies Ordinance, 1984.

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Zafar QureshiDirector

AS AT 30 JUNE, 2007


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 20 2,019,828 2,046,111

Capital work-in-progress 21 282,187 74,238

Store held for capital expenditure 2,279 0

Intangible assets 22 713 1,682

Long term loans 23 3,066 1,259

Long term deposits 7,163 7,205

Deferred taxation 14 38,826 0————— ——————2,354,062 2,130,495

CURRENT ASSETS

Stores, spares and loose tools 24 52,877 46,001

Stock-in-trade 25 933,599 909,582

Trade debtors 26 732,669 382,206

Deposit for shares 27 0 0

Investments 28 17,939 30,130

Loans and advances 29 1,807 977

Advance payments 21,488 3,381

Trade deposits and prepayments 30 3,416 2,353

Sales tax refundable 31 18,691 24,995

Other receivables 32 1,842 3,761

Advance income tax

and tax deducted at source 33 40,638 38,983

Bank balances 34 3,154 15,026

1,828,120 1,457,395————— ——————

4,182,182 3,587,890========== ==========

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PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 JUNE, 2007

Year Yearended ended

30 June, 30 June,2007 2006

Note (Rupees in thousand)

SALES 35 3,813,037 3,473,267

COST OF SALES 36 3,423,596 3,112,309————— ——————

GROSS PROFIT 389,441 360,958

ADMINISTRATIVE EXPENSES 37 73,849 74,674

DISTRIBUTION COST 38 80,030 49,002

OTHER OPERATING EXPENSES 39 2,809 4,392

156,688 128,068————— ——————

232,753 232,890

OTHER OPERATING INCOME 40 6,387 30,983————— ——————

239,140 263,873

FINANCE COST 41 260,902 211,500————— ——————

(LOSS) / PROFIT BEFORE TAXATION (21,762) 52,373

TAXATIONCurrent 18 18,961 17,300Prior years’ 18 1,528 (4,325)Deferred 14 (54,439) (38,962)

(33,950) (25,987)————— ——————

PROFIT AFTER TAXATION 12,188 78,360========== ==========

( R u p e e s )

BASIC EARNINGS PER SHARE 44 0.64 4.14========== ==========

- The annexed notes form an integral part of these financial statements.- Appropriations have been reflected in the statement of changes in equity.

Javed Saifullah Khan Zafar QureshiChairman/Director Director


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CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE, 2007

Year Yearended ended

30 June, 30 June,2007 2006

Note (Rupees in thousand)NET CASH (OUTFLOW) / INFLOW FROM

OPERATING ACTIVITIES 42 (55,362) 377,887CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of right shares 150,000 0Long term finances - obtained 334,000 575,000

- repaid (204,485) (496,627)Lease finances - net (407) (721)Short term finances - net 344,007 75,688Dividend paid (13,929) (14,173)Finance cost paid (247,961) (193,536)

NET CASH INFLOW / (OUTFLOW) FROMFINANCING ACTIVITIES 361,225 (54,369)

CASH FLOW FROM INVESTING ACTIVITIESProperty, plant and equipment acquired (127,579) (296,512)Intangible assets 0 (765)Capital work-in-progress and stores held for

capital expenditure (210,228) (38,218)Sale proceeds of operating fixed assets /

insurance claim of vehicles 4,657 1,000Investments purchased (193,401) (31,117)Sale proceeds of investments 208,816 55,675Profit on bank deposit accounts 0 8

NET CASH OUTFLOW FROM INVESTING ACTIVITIES (317,735) (309,929)————— ——————

NET (DECREASE) / INCREASE INCASH AND CASH EQUIVALENTS (11,872) 13,589CASH AND CASH EQUIVALENTS

- At the beginning of the year 15,026 1,437————— ——————

CASH AND CASH EQUIVALENTS - At the end of the year 3,154 15,026

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




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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE, 2007

RESERVES

Gain on Unapprop-Share Capital Revenue hedging Sub-total riated Totalcapital instruments Profit

(cash flowhedge)

( R u p e e s i n t h o u s a n d )

Balance as at 30 June, 2005 189,129 40,981 150,000 9,600 200,581 296,657 686,367

Final dividend @ Re.0.75 pershare for the period of ninemonths ended 30 June, 2005 0 0 0 0 0 (14,185) (14,185)

Gain arisen on maturity of forwardforeign exchange contractstransferred to cost of materials 0 0 0 (9,600) (9,600) 0 (9,600)

Profit for the year ended30 June, 2006 0 0 0 0 0 78,360 78,360

Transfer from surplus onrevaluation of property, plant& equipment on account ofincremental depreciation for the

year - net of deferred taxation 0 0 0 0 0 6,255 6,255———————————————————————————————————————

Balance as at 30 June, 2006 189,129 40,981 150,000 0 190,981 367,087 747,197

Final dividend @ Re.0.75 pershare for the year ended30 June, 2006 0 0 0 0 0 (14,185) (14,185)

Nominal value of ordinary rightshares issued 75,000 0 0 0 0 0 75,000

Premium received on issue of ordinaryright shares 0 75,000 0 0 75,000 0 75,000

Profit for the year ended30 June, 2007 0 0 0 0 0 12,188 12,188

Transfer from surplus onrevaluation of property, plant& equipment on account ofincremental depreciation for theyear - net of deferred taxation 0 0 0 0 0 7,843 7,843

———————————————————————————————————————Balance as at 30 June, 2007 264,129 115,981 150,000 0 265,981 372,933 903,043

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




23


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE, 2007

1. LEGAL STATUS AND OPERATIONS

The Company was incorporated in Pakistan on 24 December, 1989 as a Public Company and itsshares are quoted on Stock Exchanges in Pakistan. The Company is principally engaged in manufactureand sale of yarn. The Company’s Mills are located in Industrial Estate, Gadoon Amazai, DistrictSawabi and its Registered Office at APTMA House, Tehkal Payan, Jamrud Road, Peshawar.

2. STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with approved accounting standards asapplicable in Pakistan and the requirements of the Companies Ordinance, 1984 (the Ordinance).Approved Accounting Standards comprise of such International Financial Reporting Standards asnotified under the provisions of the Ordinance and the directives issued by the Securities and ExchangeCommission of Pakistan (SECP). Wherever, the requirements of the Ordinance or directives issuedby the SECP differ with the requirements of these Standards, the requirements of the Ordinance orthe said directives take precedence.

3. BASIS OF MEASUREMENT

3.1 Accounting convention

These financial statements have been prepared under the historical cost convention except asdisclosed in the accounting policies below.

3.2 Functional and presentation currency

These financial statements are presented in Pakistan Rupees, which is also the Company’sfunctional currency. All financial information presented in Pakistan Rupees has been roundedto the nearest thousand.

4. USE OF ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with approved accounting standards, asapplicable in Pakistan, requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the Company’s accounting policies.Estimates and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances. The areas involving a higher degree of judgement or complexity or areas whereassumptions and estimates are significant to the financial statements are as follows:

a) staff retirement benefits;

b) taxation; and

c) useful life of depreciable assets and provision for impairment there against.

24


5. NEW ACCOUNTING STANDARDS AND IFRIC INTERPRETATIONS THAT

ARE NOT YET EFFECTIVE

The following standards, amendments and interpretations of approved accounting standards are onlyeffective for accounting periods beginning on or after 01 July, 2007 and are either not relevant to theCompany’s operations or are not expected to have significant impact on the Company’s financialstatements other than certain increased disclosures in certain cases:

• IAS 1 - Presentation of Financial Statements - Amendments relating to Capital Disclosures;• IAS 41 - Agriculture;• IFRS 2 - Share-based Payment;• IFRS 3 - Business Combinations;• IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations;• IFRS 6 - Exploration for and Evaluation of Mineral Resources;• IFRIC 8 - Scope of IFRS 2 Share-based Payment;• IFRIC 9 - Reassessment of Embedded Derivatives;• IFRIC 10 - Interim Financial Reporting and Impairment;• IFRIC 11 - Group and Treasury Share Transactions;• IFRIC 12 - Service Concession Arrangements;• IFRIC 13 - Customer Loyalty Programmes; and• IFRIC 14 - The Limit on a Defined Benefit Asset Minimum

Funding Requirements and their Interaction.

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6.1 The principal accounting policies applied in the preparation of these financial statements are setout below. These policies have been consistently applied.

6.2 Equity instruments

These are recorded at their face value.

6.3 Taxation

(a) Current

Provision for current taxation is based on taxable income at the current rates of taxationafter taking into account tax credits and tax rebates available, if any, or minimum tax at therate of 0.5% of turnover, whichever is higher.

(b) Deferred

Deferred tax is recognised using the balance sheet liability method in respect of all temporarydifferences between the carrying amounts of assets and liabilities for financial reporting

25


purposes and the amounts used for taxation purposes. Deferred tax assets are recognisedto the extent that it is probable that taxable profits will be available against which thedeductible temporary differences, unused tax losses and tax credits can be utilised. Deferredtax liability is based on the expected tax rates applicable at the time of reversal.

6.4 Staff retirement benefits (defined benefit plan)

The Company operates an un-funded retirement gratuity scheme for its eligible employees.Provision for gratuity is made annually to cover obligation under the scheme in accordance withthe actuarial recommendations. Latest actuarial valuation was conducted on 30 June, 2006 onthe basis of the projected unit credit method by an independent Actuary.

6.5 Property, plant and equipment and depreciation/amortisation

Leasehold land, buildings on leasehold land, plant & machinery, generators, electric installationsand air-conditioning equipment are shown at fair value, based on valuations carried-out withsufficient regularity by external independent valuers, less subsequent amortisation / depreciation.Any accumulated amortisation / depreciation at the date of revaluation is eliminated against thegross carrying amount of the asset, and the net amount is restated to the revalued amount of theasset. The remaining property, plant and equipment are stated at historical cost less accumulateddepreciation. Historical cost includes expenditure that is directly attributable to the acquisitionof the items. Capital work-in-progress is stated at cost.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,as appropriate, only when it is probable that future economic benefits associated with the itemwill flow to the Company and the cost of the item can be measured reliably. All other repairs andmaintenance are charged to income during the financial year in which they are incurred.

Depreciation on assets, except leasehold land, is charged to income applying reducing balancemethod so as to write-off the depreciable amount of an asset over its remaining useful life at therates stated in note 20. Leasehold land is amortised over the lease term using the straight-linemethod. The assets’ residual values and useful lives are reviewed at each financial year-end andadjusted if impact on depreciation is significant.

Depreciation on additions to operating assets is charged from the month in which an asset isacquired or capitalised while no depreciation is charged for the month in which the asset isdisposed off.

Normal repairs and replacements are taken to profit and loss account as and when incurred.Major renewals and replacements are capitalised and assets replaced, if any, other thanthose kept as stand-by, are retired.

Gains / losses on disposal of property, plant and equipment are taken to profit and loss account.

6.6 Assets subject to finance lease

These are stated at the lower of present value of minimum lease payments under the leaseagreements and the fair value of the assets. The related obligation of leases is accounted for asliability. Finance cost is allocated to accounting periods in a manner so as to provide a constantperiodic rate of finance cost on the remaining balance of principal liability for each period.

26


Depreciation is charged to income at the rate stated in note 20 applying reducing balance methodto write-off the cost of the asset over its estimated remaining useful life in view of certainty ofownership of assets at the end of lease period.

Finance cost and depreciation on leased assets are charged to income currently.

6.7 Intangible assets and amortisation thereon

These are stated at cost less accumulated amortisation except assets-in-progress which are statedat cost. Amortisation is charged to income applying straight-line method to amortise the cost ofintangible assets over their estimated useful life. Rate of amortisation is stated in note 22.

Gain / loss on retirement / disposal of intangible assets is taken to profit and loss account.

6.8 Impairment

The carrying amounts of the Company’s assets are reviewed at each balance sheet date todetermine whether there is any indication of impairment loss. If any such indication exists, therecoverable amount of the assets is estimated in order to determine the extent of impairmentloss, if any. Impairment losses are recognised as expense in the profit and loss account.

6.9 Stores, spares and loose tools

These are valued at moving average cost except items-in-transit which are valued at costaccumulated to the balance sheet date.

6.10 Stock-in-trade

Basis of valuation are as follows:Particulars Mode of valuationRaw materials:At mills - At lower of moving average cost and market value.In transit - At cost accumulated to the balance sheet date.Work-in-process - At manufacturing cost.Finished goods - At lower of cost and net realisable value.Waste - At net realisable value.- Cost in relation to work-in-process and finished goods consists of prime cost and appropriate

production overheads. Prime cost is allocated on the basis of moving average cost.

- Net realisable value signifies the selling price in the ordinary course of business less costof completion and cost necessary to be incurred to effect such sale.

6.11 Trade debtors

Trade debtors are carried at original invoice amount less an estimate for doubtful debtors basedon review of outstanding amounts at the year-end. Bad debts are written-off when identified.

27


6.12 Investments at fair value through profit or loss

Investments at fair value through profit or loss are those which are acquired for generating aprofit from short-term fluctuation in prices. All investments are initially recognised at cost,being the fair value of the consideration given. Subsequent to initial recognition, these investmentsare re-measured at fair value (quoted market price). Any gain or loss from a change in the fairvalue is recognised in income.

6.13 Foreign currency translations

Transactions in foreign currencies are accounted for in Pak Rupees at the exchange rates prevailingon the date of transactions. Assets and liabilities in foreign currencies are translated into PakRupees at the exchange rates prevailing on the balance sheet date except where forwardexchange rates are booked, which are translated at the contracted rates.

The Company, during the financial period ended 30 June, 2005, in pursuance of the substitutedFourth Schedule to the Companies Ordinance, 1984 had changed its accounting policy withrespect to capitalisation of exchange differences. Upto 30 September, 2004, exchange differenceson loans / borrowings utilised for acquisition of fixed assets were capitalised and all otherexchange differences were charged to income. The Company, effective from 01 October, 2004,is charging all exchange differences to profit and loss account.

6.14 Revenue recognition

- Local sales through agents are recorded on intimation from agents whereas direct salesare recorded when goods are dispatched to customers.

- Export sales are booked on shipment of goods.- Rebate on export sales is recorded on ‘accrual basis’.- Return on bank deposits is accounted for on ‘accrual basis’.- Dividend income is accounted for when the right of receipt is established.

6.15 Borrowing costs

Borrowing costs incurred on finances obtained for acquisition of fixed assets are capitalisedupto the date of commissioning of the respective assets. All other borrowing costs are taken toprofit and loss account.

6.16 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as aresult of past events and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount ofobligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the currentbest estimate.

6.17 Financial assets and liabilities

Financial assets and liabilities are recognised when the Company becomes a party to thecontractual provisions of the instrument. The particular recognition methods adopted are disclosedin the individual policy statements associated with each item.

28


6.18 Off setting of financial instruments

Financial assets and liabilities are off-set and the net amount reported in the balance sheet whenthere is a legally enforceable right to set-off the recognised amounts and there is an intention tosettle on a net basis, or realise the asset and settle the liability simultaneously.

6.19 Cash and bank balances

Cash-in-hand and at banks and short term deposits which are held to maturity are carried at cost.For the purposes of cash flow statement, cash equivalents are short term highly liquidinstruments which are readily convertible to known amounts of cash and which are subjectto insignificant risk of changes in values.

6.20 Derivative financial instruments

In certain cases, the Company uses forward foreign exchange contracts to hedge its risk associatedprimarily with foreign currency fluctuations relating to purchases of raw materials from overseassuppliers. These contracts (except those having immaterial financial impact) are included in thebalance sheet at fair value and any resultant gain or loss is recognised in the statement of changesin equity and subsequently adjusted against the value of raw materials. The fair values of forwardforeign exchange contracts are included in ‘other receivables’ in case of favourable contractsand ‘trade and other payables’ in case of unfavourable contracts. The fair values of forwardforeign exchange contracts are calculated by reference to current forward foreign exchangerates with similar maturity profiles.

6.21 Related party transactions

Sales, purchases and other transactions with related parties are made at arm’s length pricesdetermined in accordance with the comparable uncontrolled price method except for the allocationof expenses relating to combined offices shared with the Associated Companies, which are onthe actual basis.

6.22 Dividend distribution

Dividend distribution to shareholders is recognised as liability in the financial statements in theyear in which the dividend is approved.

6.23 Trade and other payables

Creditors relating to trade and other payables are carried at cost which is the fair value ofconsideration to be paid in the future for goods and services received, whether or not billed tothe Company.

29



7. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL

9,812,468 ordinary shares of Rs. 10 each issued for cash 98,125 98,1259,100,412 ordinary shares of Rs.10 each issued as

fully paid bonus shares 91,004 91,0047,500,000 ordinary right shares of Rs.10 each fully paid

in cash issued and allotted during the year 7.1 75,000 0————— —————— ——————26,412,880 264,129 189,129========== ========== ==========

7.1 Against the total offer of 7,500,000 ordinary right shares of Rs.10/- each made to the existingshareholders on 03 April, 2007 at the rate of Rs.20/- each (inclusive of premium of Rs.10/-each), the shareholders subscribed a total of 2,328,804 shares by the close of acceptance date,i.e. 21 June, 2007 leaving 5,171,196 shares as unsubscribed. Saif Holdings Limited (formerlySaif Telecom Limited), an Associated Company, has subscribed the unsubscribed portion of theright issue, i.e. 5,171,196 ordinary right shares at the rate of Rs.20/- each. Right shares havebeen allotted to the shareholders on 26 June, 2007.

7.2 Saif Holdings Limited holds 13,096,645 (2006: 5,507,795) shares of the Company as at 30June, 2007.

8. RESERVES

Capital - share premium account 8.1 115,981 40,981Revenue - general reserve 150,000 150,000

————— —————265,981 190,981

========== ==========8.1 Share premium account

Premium received on:3,820,780 shares @ Rs.7 per share issued during 1992 26,745 26,7452,303,569 shares @ Rs.5 per share issued during 1996 11,518 11,518

62,019 shares @ Rs.5 per share allotted during 1997 2,810 2,8107,500,000 shares @ Rs.10 per share allotted during 2007 75,000 0

————— —————116,073 41,073

Less: preliminary expenses written-off during 1992 92 92————— —————

115,981 40,981========== ==========

9. SURPLUS ON REVALUATION OF PROPERTY,PLANT AND EQUIPMENT

The Company had revalued its leasehold land, buildings on leasehold land, plant & machinery,generators, electric installations and air-conditioning equipment on 15 January, 2006. The revaluation

30


exercise was carried-out by M/s Hamid Mukhtar & Co. (Pvt) Ltd. (Consulting Engineers, Surveyors& Loss Adjusters, Valuation Consultants, Lahore) to replace the carrying amounts of these assetswith their depreciated market values. The aggregated net appraisal surplus arisen on the revaluationamounting Rs.192.518 million was credited to this account to comply with the requirements of section235 of the Companies Ordinance, 1984. The year-end balance has been arrived at as follows:


Opening balance 118,906 0Net surplus on revaluation carried-out during the year 0 192,518

————— —————118,906 192,518

Less: related deferred taxation 0 67,357————— —————

118,906 125,161Less: transferred to unappropriated profit on account of

incremental depreciation for the year - net of deferred taxation 7,843 6,255————— —————

Closing balance 111,063 118,906========== ==========

10. LONG TERM FINANCES - Secured

National Bank of Pakistan:- demand finance - I 10.1 0 33,750- demand finance - II 10.2 84,000 0Faysal Bank Limited:- murabaha finance - I 10.3 138,665 167,650- murabaha finance - II 10.4 120,000 150,000United Bank Limited:- demand finance - I 10.5 140,000 180,000- demand finance - II 10.6 218,750 250,000The Bank of Punjab:- demand finances 10.7 72,000 80,000Habib Bank Limited:- demand finance - I 10.8 292,500 325,000- demand finance - II 10.9 250,000 0

————— —————1,315,915 1,186,400

Less: current portion grouped under current liabilities 245,318 204,486————— —————1,070,597 981,914

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

10.1 These finances were obtained against a demand finance facility of Rs.180 million and wererepayable in 16 equal quarterly instalments of Rs.11.250 million commenced from April, 2003.These finances, during the year, carried mark-up at the rates ranging from 10.79% to 11.31%per annum and were secured against first pari passu charge on the present and future fixedassets of the Company for Rs.112.500 million (the charge amounting Rs.1.000 million was

31


registered while the rest of the charge was equitable) and demand promissory note. The openingoutstanding balance of this finance facility was fully repaid during the current financial year.

10.2 These finances have been obtained during the current financial year against a demand financefacility of Rs.84 million. This finance facility, during the year, carried mark-up at the rate of11.66% per annum and is secured against first pari passu charge on fixed assets of the Companyfor Rs.112.500 million. The principal balance of this finance facility is repayable in 6 equalhalf-yearly instalments of Rs.14 million commencing November, 2008.

10.3 These finances have been obtained against a murabaha finance facility of Rs.175 million andcarry profit at the rates ranging from 10.71% to 12.07% per annum. This finance facility and thefacility stated in note 10.4 are secured against first pari passu registered hypothecation andmortgage charge on the Company’s present and future fixed assets for Rs.434 million. Thesefinances are repayable in 11 equal half-yearly instalments commenced from September, 2005.

10.4 These finances have been obtained against a murabaha finance facility of Rs.150 million andcarry profit at the rates ranging from 10.75% to 12.12% per annum. This finance facility issecured against the securities as stated in note 10.3. These finances are repayable in 10 half-yearly instalments commenced from August, 2006.

10.5 These finances have been obtained against a demand finance facility of Rs.200 million and arerepayable in 10 equal half-yearly instalments of Rs.20 million commenced from March, 2006.These finances, during the year, carried mark-up at the rates ranging from 10.32% to 11.46%per annum and are secured against first pari passu registered hypothecation charge on all presentand future fixed assets of the Company for Rs.250 million.

10.6 These finances have been obtained during the preceding financial year against a demand financefacility of Rs.250 million to finance BMR / expansion in the existing production capacity of theCompany. UBL, during the current financial year, has restructured this finance facility in thefollowing manner:- created long term finance amounting Rs.163.763 million, which is repayable in 8 equal

half-yearly instalments of Rs.20.470 million commenced from March, 2007. These finances,during the year, carried mark-up at the rates ranging from 11.76% to 12.86% per annum;and

- transferred the remaining portion amounting Rs.86.237 million under the State Bank ofPakistan’s Scheme for long term financing of Export Oriented Projects. This finance facility,during the year, carried mark-up at the rate of 7% per annum and is repayable in 8 equalhalf-yearly instalments of Rs.10.780 million commenced from March, 2007.

These finance facilities are secured against registered hypothecation pari passu charge on allpresent and future fixed assets of the Company for Rs.313 million.

10.7 These finances have been obtained against a demand finance facility of Rs.80 million and arerepayable in 10 equal half-yearly instalments of Rs.8 million commenced from March, 2007.These finances, during the year, carried mark-up at the rates ranging from 11.02% to 11.65%per annum and are secured against first registered pari passu charge on fixed assets of theCompany for Rs.107 million.

32


10.8 These finances have been obtained against a demand finance facility of Rs.325 million to financethe ongoing BMR / expansion plan. This finance facility, during the year, carried mark-up at therates ranging from 11.11% to 12.15% per annum and is secured against first pari passu chargeon all present and future fixed assets of the Company for Rs.434 million. The principal balanceof this finance facility is repayable in 10 equal half-yearly instalments of Rs.32.500 millioncommenced from Mach, 2007.

10.9 These finances have been obtained during the current financial year against a demand financefacility of Rs.250 million to finance the ongoing BMR / expansion plan. This finance facility,during the year, carried mark-up at the rates ranging from 12% to 12.65% per annum and issecured against first pari passu charge on all present and future fixed assets of the Company forRs.334 million. The principal balance of this finance facility is repayable in 10 equal half-yearly instalments of Rs.25 million commencing September, 2008.

11. LONG TERM DEPOSITS - Secured

These interest free deposits have been received in accordance with the Company’s Car IncentiveScheme and against these deposits vehicles have been provided to the employees. These are adjustableafter specified periods by transfer of title of vehicles to the respective employees.

12. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE - Secured

Upto From Upto From oneParticulars one one to 2007 one to five 2006

year five year yearsyears

(Rupees in thousand)

Minimum lease payments 96 0 96 656 97 753

Less: financial chargesallocated to future periods 1 0 1 22 1 23

----------------- ----------------- ----------------- ----------------- ----------------- -----------------95 0 95 634 96 730

Less: security deposits adjustableon expiry of lease terms 55 0 55 227 56 283

----------------- ----------------- ----------------- ----------------- ----------------- -----------------Present value of minimum lease

payments 40 0 40 407 40 447============ ============ ============ ============

Less: current portion groupedunder current liabilities 40 407

----------------- -----------------0 40

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

12.1 The Company has entered into lease agreements with ORIX Leasing Pakistan Limited andFaysal Bank Limited to acquire vehicles. The lease agreement with ORIX has matured duringthe current financial year whereas the lease agreement with Faysal Bank Ltd. will mature during

33


October, 2007. These liabilities, during the year, were subject to finance charges at the ratesranging from 8% to 17% per annum. The Company intends to exercise its option to purchase theleased vehicle upon completion of the lease term. The lease finance facility is secured againsttitle of the leased vehicle in the name of Faysal Bank Ltd.

13. STAFF RETIREMENT BENEFITS - Gratuity

The future contribution rates of this scheme include allowance for deficit and surplus. Projected unitcredit method, based on the following significant assumptions, is used for valuation:

2007 2006- discount rate 9% 9%- expected rate of growth per annum in future salaries 8% 8%- average expected remaining working life time of employees 04 years 04 years

2007 2006(Rupees in thousand)

The amount recognised in the balancesheet is as follows:

Present value of defined benefit obligation 34,413 29,054Unrecognised actuarial loss (7,652) (9,234)

————— —————Net liability as at 30 June, 26,761 19,820

========== ==========Net liability as at 01 July, 19,820 18,026Charge to profit and loss account 12,725 8,853Payments during the year (5,784) (7,059)

————— —————Net liability as at 30 June, 26,761 19,820

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

The movement in the present value of defined benefitobligation is as follows:

Present value of defined benefit obligation 29,054 20,126Current service cost 8,528 7,221Interest cost 2,615 1,610Benefits paid (5,784) (7,059)Actuarial loss 0 7,156

————— —————Present value of defined benefit obligation 34,413 29,054

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

34


Comparison of present value of defined benefit obligation and the surplus or deficit of gratuity fundfor five years is as follows:

2007 2006 2005 2004 2003(Rupees in thousand)

Present value of defined benefitobligation 34,413 29,054 20,126 19,503 14,778

======= ======= ======= ======= =======(Percentage)

Experience adjustment onobligation N/A 25% N/A 7% N/A

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

The Company’s policy with regard to actuarial gains / losses is to follow the minimum recommendedapproach under IAS 19 (Employee Benefits).


14. DEFERRED TAXATION

The deferred tax liability / (asset) comprises of temporarydifferences arising due to:

Credit balances arising in respect of:- accelerated tax depreciation allowances 246,838 243,874- surplus on revaluation of property, plant and equipment 43,790 49,271- lease finances 43 259

————— —————290,671 293,404

Debit balances arising in respect of:- unused tax losses 14.1 265,226 233,886- provision for doubtful deposit for shares 2,564 2,695- staff retirement benefits - gratuity 6,863 5,342- minimum tax recoverable against

normal tax charge in future years 54,844 35,868329,497 277,791

————— —————(38,826) 15,613

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

14.1 Deferred tax asset has been recognised based on the projections prepared by the managementindicating reasonable probability that taxable profits will be available in the foreseeable futureagainst which the unused tax losses will be utilised.

15. SHORT TERM FINANCES - Secured

Short term finance facilities available from various commercial / investment banks under mark-uparrangements aggregate Rs.2,430 million (2006: Rs.1,920 million) and are secured against pledge ofstock-in-trade, charge on fixed and current assets of the Company and lien on export bills. Thesefacilities, during the year, carried mark-up at the rates ranging from 4.61% to 12.92% per annum andare expiring on various dates by February, 2008.

35


Facilities available for opening letters of credit and guarantee from various commercial banks aggregateRs.1,686 million (2006: Rs.1,260 million) and are secured against lien on import documents andcharge on fixed assets of the Company. These facilities are expiring on various dates by February,2008.


16. TRADE AND OTHER PAYABLES

Bills payable 16.1 163,471 174,667Creditors 47,412 56,919Accrued expenses 33,840 35,633Tax deducted at source 67 615Workers’ (profit) participation fund 16.2 0 2,639Unclaimed dividends 4,322 4,066

————— —————249,112 274,539

========== ==========16.1 These are secured against import documents.

16.2 Workers’ (profit) participation fund

Opening balance 2,639 1,968Add: interest on funds utilised in the Company’s business 126 90

————— —————2,765 2,058

Less: payments made during the year 2,765 2,058————— —————

0 0Allocation for the year 0 2,639

————— —————0 2,639

========== ==========17. ACCRUED MARK-UP AND INTEREST

Mark-up accrued on:- long term finances 35,963 34,922- short term finances 23,564 18,572

Lease finance charges 0 3————— —————

59,527 53,497========== ==========

18. TAXATION - Net

Opening balance 17,300 6,033Add: provision made during the year:- current 18,961 17,300- prior years’ 1,528 (4,325)

20,489 12,975————— —————

37,789 19,008Less: adjustments against completed assessments (18,828) (1,708)

————— —————18,961 17,300

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

36


18.1 Income tax assessments of the Company have been completed upto the Tax Year 2006; thereturn for the said year has not been taken-up for audit till 30 June, 2007.

18.2 In view of available tax losses, the current tax provision represents the minimum tax on turnoverfor the year due under section 113 of the Income Tax Ordinance, 2001.

18.3 No numeric tax rate reconciliation is given as the Company is liable for minimum tax.

18.4 Income of the Company was exempt from tax for a period of ten years under clause 122(c) to theSecond Schedule of the repealed Income Tax Ordinance, 1979 ( the repealed Ordinance) due tolocation of its Mills in tax exempt area of Gadoon Amazai Industrial Estate. Tax exemptionperiod expired on 11 February, 2002.

18.5 (a) The Income Tax Appellate Tribunal (ITAT), Peshawar Bench, Peshawar vide its orderdated 15 February, 1999 accepted the Company’s applications under section 156 of therepealed Ordinance filed for the Assessment Years 1994-95 and 1995-96. The ITAT heldthat, on the basis of the judgment dated 04 June, 1997 delivered by the Supreme Court ofPakistan in Ellahi Cotton Mills Limited, the Company is entitled to the protection of section6 of the Economic Reforms Act, 1992. Therefore, the Company’s turnovers are exemptfrom tax under section 80D of the repealed Ordinance. The Assessing Officers, however,while finalising assessments for the Assessment Years 1999-2000 to 2002-03, have notaccepted the ITAT’s exemption allowed by it to the Company and raised minimum taxdemands aggregating Rs.21.444 million.

(b) The ITAT, vide its order dated 16 June, 2006 relevant to the Assessment Years 2001-02and 2002-03, has again held that the issue of minimum tax has already been settled by theSupreme Court of Pakistan, i.e. profit and gain of units enjoying exemption are exemptfrom taxation; however, interest income is not profit and gain of the industrial undertakingand is taxable under section 30 of the repealed Ordinance. The ITAT, however, has acceptedthe contention of the Company that expenditure incurred wholly and exclusively for earningof interest income is an allowable deduction under section 31(1)(b) of the repealedOrdinance. Accordingly, the ITAT has directed the Assessing Officer to allow the expensesincurred for earning of interest income. The Assessing Officer, vide her orders dated 30April, 2007 and 12 June, 2007 following the directions of ITAT, has given the appealeffects and created tax demands of Rs.4.005 million for the Assessment Years 1997-98 to2002-03. The Company has already paid and expensed the tax demands raised by theAssessing Officer in prior year.

(d) The Company had made payments aggregating Rs.12.736 million till 30 September, 2003under protest; however, Rs.3.000 million were adjusted against the completed assessmentduring the financial year ended 30 September, 2004 and the balance amount was groupedunder advance income tax (note 33).

19. CONTINGENCIES AND COMMITMENTS

19.1 The Company had imported textile plant & machinery availing exemption from customs dutyand sales tax on importation thereof under SROs 554(1)/98 and 987(1)/99. In case conditions ofthe aforementioned SROs are violated, the amounts of customs duty and sales tax exempted

37


aggregating Rs.151.014 million shall be recoverable by the Customs Authorities along withpenalties under section 202 of the Customs Act, 1969.

19.2 Commitments for letters of credit outstanding 2007 2006at the year-end were as follows: (Rupees in thousand)

- capital expenditure 758 20,872- others 206,057 267,792

————— —————206,815 288,664

===================== =====================20. PROPERTY, PLANT AND EQUIPMENT

20.1 Additions to plant & machinery during the preceding year included borrowing cost amountingRs.8.827 million.

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20.2 Disposal of operating fixed assets

20.3 (a) The management, during the current year, in order to ascertain the useful life of operatingfixed assets carried-out an internal exercise and assessed the remaining useful life ofbuildings on leasehold land, plant & machinery, generators, electric installations and air-conditioning equipment. The management also obtained the opinion of independent Valuers[ M/s Hamid Mukhtar & Co. (Pvt.) Ltd., Consulting Engineers, Surveyors & Loss Adjusters,Valuation Consultants, Lahore] in this regard. However, the depreciation rates suggestedby the Valuers were found below the depreciation rates determined by the management.Consequently, the depreciation rates, as determined by the management, have been appliedfor computation of depreciation expense for the current year. The old and reviseddepreciation rates are as follows:

Revised Oldrate rate

- buildings on leasehold land 5% 10%- plant & machinery 7.5% 10%- generators 7.5% 10%- electric installations 7.5% 10%- air-conditioning equipment 7.5% 10%

39


(b) The aforementioned revision has been accounted for as change in accountingestimates in accordance with the requirements of IAS 8 (Accounting Policies, Changesin Accounting Estimates and Errors). The effect of this change in accounting estimatehas been recognised prospectively in the profit and loss account of the current year.Had there been no revision, loss before taxation for the current year would havebeen higher by Rs.57.887 million whereas carrying value of operating fixed assetswould have been lower by Rs.57.887 million. Accordingly, loss per share for theyear ended 30 June, 2007 would have been Rs.2.40 instead of earnings per share ofRe.0.64.

20.4 Had the property, plant and equipment been recognised under the cost model, the carrying amountsof each revalued class of property, plant and equipment would have been as follows:


- leasehold land 46,139 46,408- buildings on leasehold land 266,946 242,352- plant & machinery 1,244,209 1,302,965- generators 153,779 133,991- electric installations 48,559 52,006- air-conditioning equipment 39,839 36,366

————— —————1,799,471 1,814,088

===================== =====================20.5 Depreciation for the year has been apportioned as under:

Cost of sales 142,666 182,145Administrative expenses 7,849 7,147

————— —————150,515 189,292

===================== =====================21. CAPITAL WORK-IN-PROGRESS

Plant and machinery including in transit

valuing Rs.Nil (2006: Rs.20.988 million) 21.1 256,468 43,273

Electric installations 11,829 0

Advance payments:

- leasehold land 21.2 941 850

- factory buildings 12,256 23,671

- plant and machinery 0 1,799

- generators 693 1,563

- electric installations 0 882

- furniture and fixtures 0 2,200————— —————

282,187 74,238===================== =====================

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21.1 Additions to plant & machinery include borrowing cost amounting Rs.20.813 million (2006:Rs.Nil) ; the borrowing cost rates have been disclosed in note 10.9.

21.2 The Company is in the process of obtaining leasehold rights of the land; therefore, theseadvances have been grouped under capital work-in-progress.


22. INTANGIBLE ASSETS - Computer software

Cost at the beginning of the year 4,843 4,078

Additions during the year 0 765

Cost at the end of the year 4,843 4,843

Less: amortisation:

- at the beginning of the year 3,161 2,193

- charge for the year 22.1 969 968

- at the end of the year 4,130 3,161————— —————

Net book value as at 30 June, 713 1,682===================== =====================

22.1 Amortisation is charged to income applying the straight-line method at the rate of 20% perannum.

23. LONG TERM LOANS - Considered goodInterest free loans to:

- executives 23.1 2,763 870

- employees 23.2 1,191 750————— —————

3,954 1,620

Less: current portion grouped under current assets 888 361————— —————

3,066 1,259===================== =====================

23.1 (a) Opening balance 870 1,506

Add: disbursements made during the year 2,300 0————— —————

3,170 1,506

Less: recoveries / adjustments made during the year 407 636————— —————

Closing balance 2,763 870===================== =====================

(b) These loans have been advanced for construction of house, employees’ children educationalexpenses and various other purposes. These are recoverable in monthly instalments exceptfor two (2006: nil) loans, which are adjustable against the gratuity balances of the employeesat the end of respective employment terms.

(c) Maximum aggregate amount due from the executives at any month-end during the yearwas Rs.2.819 million (2006: Rs.1.459 million).

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23.2 These loans are recoverable in monthly instalments except for one (2006: one) loan, which isadjustable against the gratuity balance of the employee at the end of employment term.

23.3 The fair value adjustment in accordance with the requirements of IAS 39 arising in respect ofstaff loans is not considered material and hence not recognised.


24. STORES, SPARES AND LOOSE TOOLS

Stores including in transit valuing

Rs.2.466 million (2006: Rs.Nil) 25,859 14,865

Spares including in transit valuing

Rs.6.191 million (2006: Rs.14.685 million) 23,455 28,200

Loose tools 3,563 2,936————— —————

52,877 46,001===================== =====================

25. STOCK-IN-TRADE

Raw materials:

- at mills 500,578 579,290

- in transit 292,651 282,795————— —————

793,229 862,085

Work-in-process 36,133 34,230

Finished goods 104,237 13,267————— —————

933,599 909,582===================== =====================

25.1 Stock-in-trade inventory valuing Rs.535.900 million (2006: Rs.400 million) is pledged withcommercial banks as security for short term finances.

26. TRADE DEBTORS

Unsecured - considered good

- local 583,898 308,917

Secured- export bills 148,771 59,014- local 0 14,275

————— —————732,669 382,206

===================== =====================27. DEPOSIT FOR SHARES

Security Electric Power Company Ltd. - SEPCL(an Ex - Associated Company) 27.1 10,000 10,000

Less: provision for doubtful deposit for shares 27.2 10,000 10,000————— —————

0 0===================== =====================

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27.1 The Company had deposited Rs.5 million during the year ended 30 September, 1994 and Rs.5million during the year ended 30 September, 1998 with SEPCL for purchase of shares. Sharesagainst these deposits, however, have not been issued so far.

27.2 The Auditors had relied upon management’s representation for making this provision of Rs.10million as the management was of the opinion that SEPCL had abandoned the project due to IPPcrisis and SEPCL utilised this amount in payment of penalty imposed by the Private PowerInfrastructure Board (Ministry of Water and Power). The Company filed a complaint before theWafaqi Muhtasib for recovery of the said deposit along with penalty. As remote chances ofrecovery existed, full provision for doubtful deposit for shares was made in the books of accountduring the year ended 30 September, 2000.


28. INVESTMENTS - Quoted

(at fair value through profit or loss)

Lucky Cement Limited700 (2006: 10,677) ordinary shares of Rs. 10 each 76 486

Oil & Gas Development Company Limited50,000 (2006: 112,868) ordinary shares of Rs. 10 each 6,410 13,887

MCB Bank LimitedNil shares (2006: 10,000 ordinary shares of Rs. 10 each) 0 1,946

National Bank of Pakistan10,000 (2006: 30,000) ordinary shares of Rs. 10 each 2,436 5,830

Pakistan Oilfields Limited17,000 (2006: 15,000) ordinary shares of Rs. 10 each 5,667 6,554

Prime Commercial Bank Limited27,000 ordinary shares of Rs. 10 each 1,382 0

Fauji Cement Company Limited20,000 ordinary shares of Rs. 10 each 390 0

United Bank Limited5,000 ordinary shares of Rs. 10 each 1,091 0

Maple Leaf Cement Factory Limited10,000 ordinary shares of Rs. 10 each 258 0

Dewan Salman Fibre Limited66,500 ordinary shares of Rs. 10 each 705 0

————— —————18,415 28,703

Adjustment on remeasurement to fair value - net (476) 1,427————— —————

17,939 30,130===================== =====================

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29. LOANS AND ADVANCES - Considered good

Current portion of long term loans 23 888 361Advances to:

- executives 542 59- employees 377 557

————— —————1,807 977

===================== =====================30. TRADE DEPOSITS AND PREPAYMENTS

Margin deposits 441 441

Containers security deposits 1,195 0

Prepayments 1,780 1,912————— —————

3,416 2,353===================== =====================

31. SALES TAX REFUNDABLE

Sales tax paid under protest 1,878 1,878

Sales tax refundable 16,813 23,117————— —————

18,691 24,995===================== =====================

32. OTHER RECEIVABLES

Letters of credit 711 2,768

Claims receivable 1,131 993————— —————

1,842 3,761===================== =====================

33. ADVANCE INCOME TAX AND TAXDEDUCTED AT SOURCE

Tax deducted at source / advance payment of tax 30,902 29,247

Minimum tax paid under protest [refer contents of note 18.5 (d)] 9,736 9,736————— —————

40,638 38,983===================== =====================

34. BANK BALANCES

Cash at banks on:

- current accounts 34.1 2,897 14,994

- saving accounts 257 32————— —————

3,154 15,026===================== =====================

34.1 These include foreign currency balances of U.S.$ 343 (2006: U.S.$ 186,949) translated intoPak. Rupees at the year-end exchange rate, i.e. U.S.$ 1= Rs.60.36 (2006: U.S.$ 1= Rs.60.11).

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35. SALESOwn manufactured goods:Local

- yarn 1,958,549 1,885,362- waste 9,130 4,734

1,967,679 1,890,096Export

- yarn 796,453 693,459- waste 43,040 40,489

839,493 733,948————— —————2,807,172 2,624,044

Trading activities:Local

- yarn 446,294 561,042- raw materials 379,745 233,951

826,039 794,993Export

- yarn 159,133 35,337- waste 20,693 18,893

179,826 54,230————— —————3,813,037 3,473,267

===================== =====================35.1 Sales are shown net of export development surcharge amounting Rs.2,377 thousand (2006:

Rs.1,664 thousand).

36. COST OF SALES

Raw materials consumed 36.1 2,259,558 1,874,409Packing materials consumed 69,048 53,057Salaries, wages and benefits 36.2 173,432 159,066Power and fuel 211,652 221,636Repair and maintenance 52,440 36,569Depreciation 142,666 182,145Insurance 5,891 5,055Textile cess 89 89Doubling charges 5,789 4,894Dyeing charges 1,423 0

————— —————2,921,988 2,536,920

Adjustment of work-in-processOpening 34,230 27,139Closing (36,133) (34,230)

(1,903) (7,091)————— —————

Cost of goods manufactured 2,920,085 2,529,829Adjustment of finished goods

Opening stock 13,267 85,877Purchases 594,481 509,870Closing stock (104,237) (13,267)

503,511 582,480————— —————3,423,596 3,112,309

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

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36.1 Raw materials consumedOpening stock 862,085 639,167Purchases (for manufacturing) 1,815,347 1,866,363Cost of raw materials sold 375,109 230,877

2,190,456 2,097,240————— —————3,052,541 2,736,407

Less: closing stock 793,229 862,085————— —————2,259,312 1,874,322

Add: cotton cess 246 87————— —————2,259,558 1,874,409

===================== =====================36.2 These include Rs.8.337 million (2006: Rs.5.801 million) in respect of staff retirement benefits

- gratuity.

37. ADMINISTRATIVE EXPENSESDirectors’ meeting fee 127 32Salaries and benefits 37.2 31,878 33,916Travelling and conveyance:- directors 1,922 2,092- others 2,785 2,736Rent, rates and taxes 3,599 3,326Entertainment 1,611 1,277Communication 3,706 5,592Printing and stationery 2,104 1,801Electricity, gas and water 1,538 1,808Insurance 1,640 1,685Repair and maintenance 1,419 1,414Vehicles’ running and maintenance 7,624 7,397Advertisement 209 263Fees and subscription 2,702 1,357Newspapers and periodicals 56 99Depreciation 7,849 7,147Amortisation 969 968Auditors’ remuneration:- statutory audit 200 175- half yearly review 65 60- consultancy, tax services and certification charges 170 370-out-of-pocket expenses 22 29

457 634Legal and professional (other than Auditors’) 1,130 847Others 524 283

————— —————73,849 74,674

===================== =====================37.1 The Company, during the year, shared administrative expenses aggregating Rs.1,768 thousand

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(2006: Rs.1,608 thousand) with an Associated Company on account of proportionate expensesof the combined offices at Karachi and Lahore. These expenses have been booked in the respectiveheads of account.

37.2 These include Rs.4.388 million (2006: Rs.3.052 million) in respect of staff retirement benefits- gratuity.


38. DISTRIBUTION COST

Staff salaries 6,593 5,561Travelling 2,904 1,733Communication 2,140 1,196Loading and unloading 2,392 1,813Freight on local yarn 2,712 4,451Freight on export yarn 35,156 16,022Export expenses 7,016 3,135Insurance 268 247Sizing charges 29 4Commission on sales 20,820 14,840

————— —————80,030 49,002

===================== =====================39. OTHER OPERATING EXPENSES

Donations 39.1 470 1,370Exchange fluctuation loss - net 1,863 383Workers’ (profit) participation fund 0 2,639Adjustment on remeasurement of

investments to fair value 28 476 0————— —————

2,809 4,392===================== =====================

39.1 These include an amount of Rs.420 thousand (2006: Rs.420 thousand) which represents amountdonated to Saifullah Foundation for Sustainable Development (a Social Welfare Society)administered by the following directors of the Company:

- Mr. Javed Saifullah Khan - Mr. Jehangir Saifullah Khan- Mr. Osman Saifullah Khan

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40. OTHER INCOME

Sale of scrap - net of sales tax of Rs.80 thousand(2006: Rs.73 thousand) 533 485

Unclaimed balances written-back 87 43Gain on disposal of operating fixed assets - net 20.2 1,310 565Adjustment on remeasurement of

investments to fair value 0 1,427Dividend income 757 151Realised gain on sale of investments 3,700 28,304Profit on deposit accounts 0 8

————— —————6,387 30,983

===================== =====================41. FINANCE COST

Mark-up on:- long term finances 126,553 109,769- short term finances 127,418 96,390

Lease finance charges 20 93

Interest on workers’ (profit) participation fund 126 90Bank and other charges 6,785 5,158

————— —————260,902 211,500

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

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42 CASH FLOW FROM OPERATING ACTIVITIES

(Loss) / profit for the year - before taxation (21,762) 52,373Adjustments for:Depreciation 150,515 189,292Amortisation of intangible assets 969 968Unclaimed balances written-back (87) (43)Staff retirement benefits - gratuity (net) 6,941 1,794Gain on disposal of operating fixed assets - net (1,310) (565)Realised gain on sale of investments (3,700) (28,304)Adjustment on remeasurement of investments to

fair value - net 476 (1,427)Profit on deposit accounts 0 (8)Finance cost [excluding interest on workers’

(profit) participation fund and bank charges] 253,991 206,252————— —————

CASH INFLOW FROM OPERATING ACTIVITIES- Before working capital changes 386,033 420,332

(Increase) / decrease in current assets:Stores, spares and loose tools (6,876) (742)Stock-in-trade (24,017) (157,399)Trade debtors (350,463) (28,122)Loans and advances (303) (224)Advance payments (18,107) 27,545Trade deposits and prepayments (1,063) 1,822Sales tax refundable 6,304 (19,691)Other receivables 1,919 1,534

(Decrease) / increase in trade and other payables (25,596) 154,654(418,202) (20,623)

————— —————CASH (OUTFLOW) / INFLOW FROM

OPERATING ACTIVITIES- Before taxation (32,169) 399,709

Income tax paid (20,483) (22,529)————— —————

CASH (OUTFLOW) / INFLOW FROMOPERATING ACTIVITIES- After taxation (52,652) 377,180

Long term loans (2,334) 217Long term deposits 42 (56)Long term deposits from employees (418) 546

————— —————NET CASH (OUTFLOW) / INFLOW FROM

OPERATING ACTIVITIES (55,362) 377,887===================== =====================

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43. FINANCIAL ASSETS AND LIABILITIES

43.1 The effective mark-up rates for the monetary financial assets and liabilities have been mentionedin the respective notes to the financial statements.

43.2 Foreign exchange risk management

Foreign exchange risk arises when receivables and payables exist due to transactions with foreignundertakings. The management takes out forward exchange contracts, where appropriate, tomitigate the risk. However, no forward foreign exchange contracts were outstanding at the year-end.

43.3 Concentration of credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date ifcounter parties fail completely to perform as contracted. All of the Company’s financial assets,except for long term loans amounting Rs.3,954 thousand (2006: Rs.1,620 thousand), are subjectto credit risk. To manage exposure to credit risk, the Company applies credit limits to its customersand also obtains advances from them.

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43.4 Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the financial statementsapproximate to their fair values. Further, staff loans have been valued at their original cost lessrepayments.

43.5 Liquidity risk

Liquidity risk reflects an entity’s inability in raising funds to meet commitments. The Companyfollows an effective cash management and planning policy to ensure availability of funds and totake appropriate measures for new requirement.

43.6 Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changesin the market interest rates. The Company usually borrows funds at fixed and market based ratesand as such the risk is minimised.


44. BASIC EARNINGS PER SHARE

Profit after taxation attributable to ordinary shareholders 12,188 78,360===================== =====================

(No. of shares)Weighted average number of shares outstanding during the year 19,015,620 18,912,880

===================== =====================Rupees

Basic earnings per share 0.64 4.14===================== =====================

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

45. TRANSACTIONS WITH RELATED PARTIES

45.1 Maximum aggregate balance due from Associated Companies, on account of normal tradingtransactions, at any month-end during the year was Rs.40.829 million (2006: Rs.59.303 million).

45.2 The Company has related party relationship with its Associated Companies, employee benefitplan, its directors and key management personnel. Transactions with related parties are carried-out on arm’s length basis. There were no transactions with key management personnel otherthan under the terms of employment. Aggregate transactions with Associated Companies duringthe year were as follows:

- purchase of fixed assets 0 1,888- sale of fixed assets 1,127 0- sale of goods and services 426,002 333,379- purchase of goods and services 557,662 483,516- dividend paid 3,932 3,703

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46. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

46.1 Chief executive and some of the executives have also been provided with the Company main-tained cars and residential telephones.

2007 200647. CAPACITY AND PRODUCTION

No. of spindles installed 88,476 88,476Average of spindles shifts installed Figure in ‘000 96,881 96,881Average of spindles shifts worked Figure in ‘000 94,125 93,947No. of days worked 365 365No. of shifts worked 1,095 1,095Average count 35.96 36.81Actual production Kgs Figure in ‘000 14,012 13,734

It is difficult to describe precisely the production capacity in textile spinning industry since it fluctu-ates widely depending on various factors, such as count of yarn spun, spindles speed, twist per inchand raw materials used, etc. It also varies according to the pattern of production adopted in a particu-lar year.

48. DATE OF AUTHORISATION OF FINANCIAL STATEMENTS

These financial statements were authorised for issue on October 08, 2007 by the board of directors ofthe Company.

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49. FIGURESin the financial statements have been rounded-off to the nearest thousand Rupees except statedotherwise.

Corresponding figures have been rearranged and reclassified , wherever necessary, for the purposes ofcomparison; however, no material rearrangements / reclassifications have been made in these financialstatements.



53


FORM OF PROXYSEVENTEENTH ANNUAL GENERAL MEETING

I / We _______________________________________________________________________________

of _________________________________ being a member of Saif Textile Mills Limited and holder of

_______________________ ordinary Shares as per Share Register Folio No. _____________________

For beneficial owners as per CDC List

CDC Participant I.D. No. _____________________ Sub-Account No._____________________

CNIC No. ____________________________________ or Passport No. ________________________

hereby appoint ___________________________________ of _________________________________

who is also a member of the Company, Folio No. / CDC Account No._____________ or failing him /her_________________________________ of ______________________ who is also a member of theCompany, Folio No. / CDC Account No ___________________________ as my / our proxy to vote and

act for me / our behalf at the 18th Annual General Meeting of the Company to be held on October 30 , 2007or at any adjournment thereof.

Signature of Shareholder_____________________

Dated this _________ day of _________ 2007 Signature of Proxy__________________________

For beneficial owners as per CDC list

1. WITNESS 2. WITNESS

Signature ___________________________ Signature_____________________________

Name: ______________________________ Name: _______________________________

Address: ____________________________ Address: _____________________________

___________________________________ ____________________________________

___________________________________ ____________________________________

CNIC No. ___________________________ CNIC No. ____________________________Note:1. Proxies, in order to be effective, must be received at the Registered Office of the Company at APTMA

House, Jamrud Road, Peshawar not less than 48 hours before the meeting.2. CDC Shareholders and their Proxies are each requested to attach an attested photocopy of their

Computerized National Identity Card or Passport with the proxy form before submission to theCompany (Original CNIC / Passport is required to be produced at the time of the meeting).

3. In case of corporate entity, the Board of Directors’ resolution / power of attorney with specimensignature shall be submitted (unless it has been provided earlier) alongwith proxy form to the Company.

Please affixrupees fiverevenue stamp

(Signatures should agree with thespecimen signature registeredwith the Company)

Saif Annual Report 2007

Documents

Transcript of Saif Annual Report 2007