Saif Annual Report 2007

Saif Textile Mills Limited
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CONTENTS
Annual Report 2007
COMPANY INFORMATION VISION AND MISSION STATEMENT NOTICE OF ANNUAL GENERAL MEETING DIRECTORS REPORT TO THE SHAREHOLDERS PATTERN OF SHARESHOLDING STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE AUDITORS REPORT TO THE MEMBERS BALANCE SHEET PROFIT AND LOSS ACCOUNT CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS FORM OF PROXY
2 3 4 5 11 14
16 17 18 20 21 22 23 53
Annual Report 2007
COMPANY INFORMATION
BOARD OF DIRECTORS Javed Saifullah Khan Osman Saifullah Khan Omar Saifullah Khan Jehangir Saifullah Khan Ch. Maqbool Ahmad Zafar Qureshi Muhammad Ayub Ch. Maqbool Ahmad Zafar Qureshi Muhammad Ayub Zaheen-ud-Din Qureshi Mumtaz H. Chaudhry Dr. Pervez Hassan Hassan & Hassan, Advocates Abdul Latif Yousafzai, Advocates AUDITORS M/s. Hameed Chaudhri & Co., Chartered Accountants HM House, 7-Bank Square, Lahore Albaraka Islamic Bank B.S.C (E.C) Allied Bank Limited Faysal Bank Limited Habib Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited The Bank of Punjab The Hongkong and Shanghai Banking Corporation Limited United Bank Limited Kulsum Plaza, 4th Floor, 2020- Blue Area, Islamabad-44000 Telephone : +92-51-2823924, 2829415 Fax : +92-51-2277843, 2822564 Email : stm@saifgroup.com APTMA House, Tehkal Payan, Jamrud Road, Peshawar Telephone : +92-91-5843870, 5702941 Fax : +92-91-5840273 Email : peshawar@saifgroup.com M/s. Hameed Majeed Associates (Pvt.) Ltd., HM House, 7-Bank Square, Lahore Telephone : +92-42-7235081-7235082 Fax : +92-42-7358817 Email : info@hmaconsultants.com Industrial Estate, Gadoon Amazai, District Swabi Telephone : +92-0938-270313,270429 Fax : +92-0938-270514 Email : stmgdn@saifgroup.com www.saiftextile.com - Chairman - Chief Executive
- NIT Nominee - Chairman - Member - Member
AUDIT COMMITTEE
CHIEF FINANCIAL OFFICER COMPANY SECRETARY LEGAL ADVISORS
BANKERS
HEAD OFFICE
REGISTERED OFFICE
SHARES REGISTRAR
MILLS
CYBER
Annual Report 2007
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 standards.
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 continue to 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 Textile Mills Limited a stimulating and challenging experience for all our people. Strive for the continuous development of Pakistan while adding value to the textile sector.
Annual Report 2007
NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that 18th Annual General Meeting of the members of Saif Textile Mills Limited will Insha Allah be held at registered office of the Company, APTMA House, Jamrud Road, Peshawar on Tuesday, October 30, 2007 at 11:00 a.m. to transact the following business: 1) 2) To confirm the minutes of the 17th Annual General Meeting held on October 30, 2006. To receive, consider and adopt Annual Audited Financial Statements for the year ended June 30, 2007 together with the Directors and Auditors Reports thereon. To appoint auditors for the year ending June 30, 2008 and fix their remuneration. The retiring auditors M/s. Hameed Chaudhri & Co., Chartered Accountants, being eligible offered themselves for re-appointment. To transact any other business with the permission of the Chair. By order of the Board
3)
4)
Islamabad October 08, 2007
(Mumtaz H. Chaudhry) Company Secretary
NOTES: i. Share Transfer Books of the Company will remain closed from 24.10.2007 to 30.10.2007 (Both Days Inclusive)
ii. A member entitled to attend and vote at the meeting may appoint another member as his / her proxy to attend and vote on his / her behalf. The instrument appointing the proxy, duly completed, must be received at the Companys Registered Office not later than 48 hours before the time of holding of the meeting. iii. CDC individual Account holders or Sub-account holders are required to bring with them their original Computerized National Identity Card (CNIC) / original passport along with participants ID number and their account number in order to facilitate identification. iv. In case of Corporate entity, resolution of the Board of Directors/Power of attorney with specimen signatures 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 the proposed amendment has been kept at the registered office of the Company and can be inspected during business hours on all working days upto October 30, 2007.
Annual Report 2007
DIRECTORS REPORT TO THE SHAREHOLDERS

Dear Shareholders, On behalf of Board of Directors, it gives me pleasure to present the 18th Annual Audited financial statements for 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 Companys financial performance. The following conditions have prevailed since the start of the current financial year causing an adverse impact on your Companys 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 Companys 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 to up 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 above 10%. The operating profit margin decreased from 7.60% to 6.27%. The reasons for the decrease in the operating margin are an increase in distribution costs and a reduction in the gain from investments held for trading. The combined effect of escalating interest rates and increasing short-term borrowings because of adverse market conditions, has led to an increase in financial charges on borrowed funds, thereby depressing the net profitability of your Company. EXPANSION / BMR During the year your Company completed a major BMR program, and installed 43 compact attachments on the existing ring frames. The BMR has been fully completed and the trial production has been carried out. Initial quality problems have been successfully addressed by the technical team. Your Company is in a position to fully focus on the premium quality fine yarn market. The recent BMR will both increase our productivity as well as enhance quality. FUTURE OUTLOOK Pakistans 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
Annual Report 2007
energy are creating an extremely demanding environment for all manufacturers. Tariffs on domestic energy sources continue their upward spiral, further elevating the cost of self-generated electricity and raising the cost of production. The seemingly infinite rise in financial charges and mark up rates is a critical factor that will inclemently affect the profitability of the entire textile sector. In addition the yarn market is dominated by a bearish sentiment, while the spinning industry is facing stiff competition from heavily subsidized overseas competitors. Despite repeated appeals and representations from the entire textile industry, the Government has failed to provide any incentives or reforms for the spinning sector, piling on the miseries of the industry. In this tough operating environment, the mission before your Companys management is to minimize the adverse impact of the depressed market and economic conditions. In the absence of any positive external factors 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 the period 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 additional information 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 offer themselves for re-appointment. As suggested by the Audit Committee, the Board recommends their appointment as auditors of the Company to hold office from the conclusion of this Annual General Meeting to 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 the Code of Corporate Governance, as incorporated in the listing rules of the Stock Exchanges.
Annual Report 2007
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 true state 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 companys 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 :Particulars 30, June 2007 2006 Year Ended 30 September, 2005 2004 09Months (Rupees in thousand) 1,748,693 686,367 1,995,676 189,854 9.51 29,179 1.46 1.54 1,358,642 683,037 1,712,334 162,145 9.47 43,404 2.53 2.29 2003 2002
Operating assets 2,020,541 Net worth 903,043 Turnover 3,813,037 Gross profit 389,441 Gross profit margin (% age) 10.21 Net Profit - after taxation 12,188 Net profit margin (% age) 0.32 Earnings per share Rs. 0.64
2,047,793 747,197 3,473,267 360,958 10.39 78,360 2.26 4.14
710,015 623,097 1,355,541 141,243 10.42 69,700 5.14 3.69
720,209 533,081 954,605 112,703 11.81 45,266 4.74 2.39
The Board of Directors has adopted a Mission Statement and a Statement of Overall Corporate Strategy. 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 attendance by each Director was as follows: Name of Director Javed Saifullah Khan Osman Saifullah Khan Omar Saifullah Khan Jehangir Saifullah Khan Ch. Maqbool Ahmad Zafar Qureshi Muhammad Ayub (NIT Nominee) Meetings Attended 5 4 2 2 6 6 6
Leave of absence was granted to Directors who could not attend any of the Board meetings.
Annual Report 2007
ACKNOWLEDGMENT The Board places on record its appreciation of the support of our bankers and our valued customers. I would 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
Dated: October 08, 2007
JAVED SAIFULLAH KHAN Chairman/Director
Annual Report 2007
Annual Report 2007
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Annual Report 2007
PATTERN OF SHARESHOLDING AS AT 30 JUNE, 2007

Incorporation Number: P-00368 of 1989-90 No. of Shareholding Total Shares Shareholders From To Held
355 500 180 316 44 13 15 11 4 1 1 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1,465 < 1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 50,001 60,001 65,001 95,001 105,001 110,001 125,001 180,001 270,001 290,001 295,001 360,001 685,001 715,001 795,001 800,001 890,001 1,030,001 2,010,001 2,070,001 5,245,001 7,845,001 Total > 100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 55,000 65,000 70,000 100,000 110,000 115,000 130,000 185,000 275,000 295,000 300,000 365,000 690,000 720,000 800,000 805,000 895,000 1,035,000 2,015,000 2,075,000 5,250,000 7,850,000 17,996 129,489 143,490 652,500 333,780 159,847 260,521 251,392 110,000 31,246 35,509 86,000 104,030 62,000 70,000 95,737 107,129 113,436 127,450 181,500 272,536 294,936 299,215 363,500 689,700 717,000 798,600 800,087 891,000 1,031,848 2,012,115 2,072,646 5,246,889 7,849,756 26,412,880
CATEGORIES OF SHAREHOLDERS
Description Number of Shares Held % age Shareholders
Directors, Chief Executive Officer, their Spouse and Minor Children Associated Companies, Undertakings and Related Parties NIT and ICP Banks, Development Financial Institutions, Non-Banking Financial Institutions Insurance Companies Modarabas and Mutual Funds General Public: - Local Others:- Brokerage Houses TOTAL 07 06 02 06 03 08 1,401 32 1,465 20,462 13,112,645 4,213,439 914,305 1,040,183 30,990 7,011,789 69,067 0.0775 49.6449 15.9522 3.4616 3.9382 0.1173 26.5469 0.2615

26,412,880 100.0000
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Annual Report 2007
DETAIL OF CATEGORIES OF SHAREHOLDERS
Name No of Shareholders Shares Held % age

Directors, Chief Executive Officer, their Spouse and Minor Children -Mr. Javed Saifullah Khan (Chairman) -Mr. Osman Saifullah Khan (Chief Executive) -Mr. Omer Saifullah Khan (Director) -Mr. Jehangir Saifullah Khan (Director) -Mr. Zafar Qureshi (Director) -Ch. Maqbool Ahmad (Director) -Begum Gulshan Javed Saifullah W/o Mr. Javed Saifullah Khan Associated Companies, Undertakings and Related Parties -Mr. Anwar Saifullah Khan -Mr. Humayun Saifullah Khan -Mr. Iqbal Saifullah Khan -Begum Shireen Iqbal Saifullah Khan -Begum Zeb Saifullah Khan -Saif Holdings Limited 01 01 01 01 01 01 2,000 2,000 3,500 4,000 4,500 13,096,645 0.0076 0.0076 0.0133 0.0151 0.0170 49.5843 01 01 01 01 01 01 01 11,000 1,500 1,000 1,000 2,565 1,897 1,500 0.0416 0.0057 0.0038 0.0038 0.0097 0.0072 0.0057
NIT and ICP -National Bank of Pakistan, Trustee Department (NIT) -Investment Corporation of Pakistan (ICP) 01 01 4,212,211 1,228 15.9476 0.0046
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Annual Report 2007
Name No of Shareholders Shares Held % age

Executives Nil Nil
Public Sector Companies and Corporations Banks, Development Financial Instituations, Non Banking Financial Instituations, Insurance Companies, Modarabas and Mutual Funds Sharesholders holding ten percent or more voting interest in the Company: -Saif Holdings Limited -National Bank of Pakistan, Trustee Department (NIT) 01 01
Nil
Nil
49
2,054,545
7.7786
13,096,645
49.5843
4,212,211
15.9476
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Annual Report 2007
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No. 37 of Listing Regulations of the Karachi Stock Exchange, Chapter XIII of Listing Regulations of the Lahore Stock Exchange and Chapter XI of Listing Regulations of the Islamabad Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. The Company encourages representation of non-executive directors and at present, all the members of the Board are non-executive directors except for Chief Executive Officer. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. No casual vacancy was occurred in the Board during the year. The Company has prepared a Statement of Ethics and Business Practices, which has been signed by all the directors and employees of the Company. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. The Board arranged in-house orientation courses for its directors during the year to apprise them of their duties and responsibilities.
2.
3.
4. 5.
6.
7.
8.
9.
10. The Board has approved appointment of Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO.
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Annual Report 2007
11. The Directors Report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that 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, including 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 interim and final results of the Company and as required by the Code. The terms of reference of the Committee have been formed and advised to the Committee for compliance. 17. The Board has set-up an effective internal audit function and the personnel involved 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. 18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan. 19. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 20. We confirm that all other material principles contained in the Code have been complied with.
On behalf of the Board of Directors
Dated: October 08, 2007
JAVED SAIFULLAH KHAN Chairman/Director
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Annual Report 2007
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of SAIF TEXTILE MILLS LIMITED to comply with the Listing Regulation No. 37 of the Karachi Stock Exchange (Guarantee) Limited, Chapter XIII of the Listing Regulations of the Lahore Stock Exchange (Guarantee) Limited and Chapter XI of the Listing Regulations 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 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 Companys 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 Boards statement on internal control covers all controls and the effectiveness of such internal controls. 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 Companys compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended 30 June, 2007.
LAHORE Dated: October 08, 2007
HAMEED CHAUDHRI & CO., CHARTERED ACCOUNTANTS
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Annual Report 2007
AUDITORS REPORT TO THE MEMBERS

We have audited the annexed balance sheet of SAIF TEXTILE MILLS LIMITED as at 30 June, 2007 and the related profit and loss account, 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 Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of 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;
(ii) the expenditure incurred during the year was for the purpose of the Companys business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, 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 Companys 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 7 of that Ordinance. LAHORE Dated: October 08, 2007 HAMEED CHAUDHRI & CO., CHARTERED ACCOUNTANTS
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Annual Report 2007
BALANCE SHEET
Note EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorised capital 30,000,000 ordinary shares of Rs. 10 each Issued, subscribed and paid-up capital Reserves Unappropriated profit SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT NON-CURRENT LIABILITIES Long term finances Long term deposits Liabilities against assets subject to finance lease Staff retirement benefits - gratuity Deferred taxation CURRENT LIABILITIES Current portion of: - long term finances - liabilities against assets subject to finance lease Short term finances Trade and other payables Accrued mark-up and interest Taxation CONTINGENCIES AND COMMITMENTS 7 8 2007 2006 (Rupees in thousand)
300,000 = = = = = = = = = = 264,129 265,981 372,933 903,043
300,000 = = = = = = = = = = 189,129 190,981 367,087 747,197
111,063
118,906
10 11 12 13 14
1,070,597 1,375 0 26,761 0 1,098,733
981,914 1,793 40 19,820 15,613 1,019,180
10 12 15 16 17 18 19
245,318 40 1,496,385 249,112 59,527 18,961 2,069,343 4,182,182 = = = = = = = = = =
204,486 407 1,152,378 274,539 53,497 17,300 1,702,607 3,587,890 = = = = = = = = = =
The annexed notes form an integral part of these financial statements. Javed Saifullah Khan Chairman/Director These financial statements are not signed by the Chief Executive as he is out of country. This information is disclosed as required under Section 241(2) of the Companies Ordinance, 1984.
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Annual Report 2007
AS AT 30 JUNE, 2007
Note ASSETS NON-CURRENT ASSETS Property, plant and equipment Capital work-in-progress Store held for capital expenditure Intangible assets Long term loans Long term deposits Deferred taxation CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debtors Deposit for shares Investments Loans and advances Advance payments Trade deposits and prepayments Sales tax refundable Other receivables Advance income tax and tax deducted at source Bank balances 33 34 40,638 3,154 1,828,120 4,182,182 = = = = = = = = = = 38,983 15,026 1,457,395 3,587,890 = = = = = = = = = = 30 31 32 24 25 26 27 28 29 52,877 933,599 732,669 0 17,939 1,807 21,488 3,416 18,691 1,842 46,001 909,582 382,206 0 30,130 977 3,381 2,353 24,995 3,761 14 22 23 20 21 2,019,828 282,187 2,279 713 3,066 7,163 38,826 2,354,062 2,046,111 74,238 0 1,682 1,259 7,205 0 2,130,495 2007 2006 (Rupees in thousand)
Zafar Qureshi Director
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Annual Report 2007
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE, 2007
Year Year ended ended 30 June, 30 June, 2007 2006 (Rupees in thousand) 3,813,037 3,423,596 389,441 73,849 80,030 2,809 156,688 232,753 OTHER OPERATING INCOME 40 6,387 239,140 260,902 (21,762) 18,961 1,528 (54,439) 3,473,267 3,112,309 360,958 74,674 49,002 4,392 128,068 232,890 30,983 263,873 211,500 52,373 17,300 (4,325) (38,962)
Note SALES COST OF SALES GROSS PROFIT ADMINISTRATIVE EXPENSES DISTRIBUTION COST OTHER OPERATING EXPENSES 37 38 39 35 36
FINANCE COST (LOSS) / PROFIT BEFORE TAXATION TAXATION Current Prior years Deferred
41
18 18 14
PROFIT AFTER TAXATION
(33,950) (25,987) 12,188 78,360 = = = = = = = = = = = = = = = = = = = = (Rupees) 44 0.64 = = = = = = = = = = 4.14 = = = = = = = = = =
BASIC EARNINGS PER SHARE
- 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 Qureshi Chairman/Director Director These financial statements are not signed by the Chief Executive as he is out of country. This information is disclosed as required under Section 241(2) of the Companies Ordinance, 1984.
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Annual Report 2007
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE, 2007

Year Year ended ended 30 June, 30 June, 2007 2006 (Rupees in thousand) (55,362) 150,000 334,000 (204,485) (407) 344,007 (13,929) (247,961) 361,225 377,887 0 575,000 (496,627) (721) 75,688 (14,173) (193,536) (54,369)
Note NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of right shares Long term finances - obtained - repaid Lease finances - net Short term finances - net Dividend paid Finance cost paid NET CASH INFLOW / (OUTFLOW) FROM FINANCING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment acquired Intangible assets Capital work-in-progress and stores held for capital expenditure Sale proceeds of operating fixed assets / insurance claim of vehicles Investments purchased Sale proceeds of investments Profit on bank deposit accounts NET CASH OUTFLOW FROM INVESTING ACTIVITIES NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - At the beginning of the year CASH AND CASH EQUIVALENTS - At the end of the year The annexed notes form an integral part of these financial statements. 42
(127,579) 0 (210,228) 4,657 (193,401) 208,816 0 (317,735) (11,872) 15,026 3,154 = = = = = = = = = =
(296,512) (765) (38,218) 1,000 (31,117) 55,675 8 (309,929) 13,589 1,437 15,026 = = = = = = = = = =
Javed Saifullah Khan Zafar Qureshi Chairman/Director Director These financial statements are not signed by the Chief Executive as he is out of country. This information is disclosed as required under Section 241(2) of the Companies Ordinance, 1984.
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Annual Report 2007
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE, 2007

RESERVES Share capital Capital Revenue Gain on hedging instruments (cash flow hedge) Sub-total Unappropriated Profit Total
(Rupees in thousand) Balance as at 30 June, 2005 Final dividend @ Re.0.75 per share for the period of nine months ended 30 June, 2005 Gain arisen on maturity of forward foreign exchange contracts transferred to cost of materials Profit for the year ended 30 June, 2006 189,129 40,981 150,000 9,600 200,581 296,657 686,367
(14,185)
(14,185)
0 0
0 0
0 0
(9,600) 0
(9,600) 0
0 78,360
(9,600) 78,360
Transfer from surplus on revaluation of property, plant & equipment on account of incremental 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 per share for the year ended 30 June, 2006 Nominal value of ordinary right shares issued
0 75,000 0 0
0 0 75,000 0
0 0 0 0
0 0 0 0
0 0 75,000 0
(14,185) 0 0 12,188
(14,185) 75,000 75,000 12,188
Premium received on issue of ordinary right shares Profit for the year ended 30 June, 2007
Transfer from surplus on revaluation of property, plant & equipment on account of incremental depreciation for the year - 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 =============== =========================================================== The annexed notes form an integral part of these financial statements.
Javed Saifullah Khan Zafar Qureshi Chairman/Director Director These financial statements are not signed by the Chief Executive as he is out of country. This information is disclosed as required under Section 241(2) of the Companies Ordinance, 1984.
22
Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS FOR 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 its shares are quoted on Stock Exchanges in Pakistan. The Company is principally engaged in manufacture and sale of yarn. The Companys Mills are located in Industrial Estate, Gadoon Amazai, District Sawabi 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 as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 (the Ordinance). Approved Accounting Standards comprise of such International Financial Reporting Standards as notified under the provisions of the Ordinance and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever, the requirements of the Ordinance or directives issued by the SECP differ with the requirements of these Standards, the requirements of the Ordinance or the said directives take precedence. 3. BASIS OF MEASUREMENT 3.1 Accounting convention These financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. 3.2 Functional and presentation currency These financial statements are presented in Pakistan Rupees, which is also the Companys functional currency. All financial information presented in Pakistan Rupees has been rounded to the nearest thousand. 4. USE OF ESTIMATES AND JUDGEMENTS The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Companys accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the financial statements are as follows: a) b) c) staff retirement benefits; taxation; and useful life of depreciable assets and provision for impairment there against.
23
Annual Report 2007
5.
NEW ACCOUNTING STANDARDS AND IFRIC INTERPRETATIONS THAT ARE NOT YET EFFECTIVE The following standards, amendments and interpretations of approved accounting standards are only effective for accounting periods beginning on or after 01 July, 2007 and are either not relevant to the Companys operations or are not expected to have significant impact on the Companys financial statements 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 set out 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 taxation after taking into account tax credits and tax rebates available, if any, or minimum tax at the rate of 0.5% of turnover, whichever is higher. (b) Deferred Deferred tax is recognised using the balance sheet liability method in respect of all temporary differences between the carrying amounts of assets and liabilities for financial reporting
24
Annual Report 2007
purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax 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 with the actuarial recommendations. Latest actuarial valuation was conducted on 30 June, 2006 on the 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 installations and air-conditioning equipment are shown at fair value, based on valuations carried-out with sufficient regularity by external independent valuers, less subsequent amortisation / depreciation. Any accumulated amortisation / depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. The remaining property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Capital work-in-progress is stated at cost. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance 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 balance method so as to write-off the depreciable amount of an asset over its remaining useful life at the rates stated in note 20. Leasehold land is amortised over the lease term using the straight-line method. The assets residual values and useful lives are reviewed at each financial year-end and adjusted if impact on depreciation is significant. Depreciation on additions to operating assets is charged from the month in which an asset is acquired or capitalised while no depreciation is charged for the month in which the asset is disposed 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 than those 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 lease agreements and the fair value of the assets. The related obligation of leases is accounted for as liability. Finance cost is allocated to accounting periods in a manner so as to provide a constant periodic rate of finance cost on the remaining balance of principal liability for each period.
25
Annual Report 2007
Depreciation is charged to income at the rate stated in note 20 applying reducing balance method to write-off the cost of the asset over its estimated remaining useful life in view of certainty of ownership 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 stated at cost. Amortisation is charged to income applying straight-line method to amortise the cost of intangible 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 Companys assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss, 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 cost accumulated to the balance sheet date. 6.10 Stock-in-trade Basis of valuation are as follows: Particulars Mode of valuation Raw 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 cost of 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 based on review of outstanding amounts at the year-end. Bad debts are written-off when identified.
26
Annual Report 2007
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 a profit 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 investments are re-measured at fair value (quoted market price). Any gain or loss from a change in the fair value is recognised in income. 6.13 Foreign currency translations Transactions in foreign currencies are accounted for in Pak Rupees at the exchange rates prevailing on the date of transactions. Assets and liabilities in foreign currencies are translated into Pak Rupees at the exchange rates prevailing on the balance sheet date except where forward exchange rates are booked, which are translated at the contracted rates. The Company, during the financial period ended 30 June, 2005, in pursuance of the substituted Fourth Schedule to the Companies Ordinance, 1984 had changed its accounting policy with respect to capitalisation of exchange differences. Upto 30 September, 2004, exchange differences on loans / borrowings utilised for acquisition of fixed assets were capitalised and all other exchange 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 sales are 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 capitalised upto the date of commissioning of the respective assets. All other borrowing costs are taken to profit and loss account. 6.16 Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 6.17 Financial assets and liabilities Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
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Annual Report 2007
6.18 Off setting of financial instruments Financial assets and liabilities are off-set and the net amount reported in the balance sheet when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle 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 liquid instruments which are readily convertible to known amounts of cash and which are subject to 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 associated primarily with foreign currency fluctuations relating to purchases of raw materials from overseas suppliers. These contracts (except those having immaterial financial impact) are included in the balance sheet at fair value and any resultant gain or loss is recognised in the statement of changes in equity and subsequently adjusted against the value of raw materials. The fair values of forward foreign exchange contracts are included in other receivables in case of favourable contracts and trade and other payables in case of unfavourable contracts. The fair values of forward foreign exchange contracts are calculated by reference to current forward foreign exchange rates with similar maturity profiles. 6.21 Related party transactions Sales, purchases and other transactions with related parties are made at arms length prices determined in accordance with the comparable uncontrolled price method except for the allocation of expenses relating to combined offices shared with the Associated Companies, which are on the actual basis. 6.22 Dividend distribution Dividend distribution to shareholders is recognised as liability in the financial statements in the year 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 of consideration to be paid in the future for goods and services received, whether or not billed to the Company.
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Annual Report 2007
Note 7. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 9,812,468 9,100,412 7,500,000 26,412,880 = = = = = = = = = = ordinary shares of Rs. 10 each issued for cash ordinary shares of Rs.10 each issued as fully paid bonus shares ordinary right shares of Rs.10 each fully paid in cash issued and allotted during the year
2007 2006 (Rupees in thousand)
98,125 91,004 7.1 75,000 264,129 = = = = = = = = = =
98,125 91,004 0 189,129 = = = = = = = = = =
7.1 Against the total offer of 7,500,000 ordinary right shares of Rs.10/- each made to the existing shareholders 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 (formerly Saif Telecom Limited), an Associated Company, has subscribed the unsubscribed portion of the right issue, i.e. 5,171,196 ordinary right shares at the rate of Rs.20/- each. Right shares have been 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 30 June, 2007. 8. RESERVES Capital - share premium account Revenue - general reserve 8.1 115,981 40,981 150,000 150,000 265,981 190,981 = = = = = = = = = = = = = = = = = = = =
8.1 Share premium account Premium received on: 3,820,780 shares @ Rs.7 per share issued during 1992 26,745 26,745 2,303,569 shares @ Rs.5 per share issued during 1996 11,518 11,518 62,019 shares @ Rs.5 per share allotted during 1997 2,810 2,810 7,500,000 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 = = = = = = = = = = = = = = = = = = = = 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
9.
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Annual Report 2007
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 assets with their depreciated market values. The aggregated net appraisal surplus arisen on the revaluation amounting Rs.192.518 million was credited to this account to comply with the requirements of section 235 of the Companies Ordinance, 1984. The year-end balance has been arrived at as follows: Note Opening balance Net surplus on revaluation carried-out during the year Less: related deferred taxation 2007 2006 (Rupees in thousand) 118,906 0 118,906 0 118,906 0 192,518 192,518 67,357 125,161
Less: 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 - demand finance - II Faysal Bank Limited: - murabaha finance - I - murabaha finance - II United Bank Limited: - demand finance - I - demand finance - II The Bank of Punjab: - demand finances Habib Bank Limited: - demand finance - I - demand finance - II Less: current portion grouped under current liabilities
10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9
0 84,000 138,665 120,000 140,000 218,750 72,000
33,750 0 167,650 150,000 180,000 250,000 80,000
292,500 325,000 250,000 0 1,315,915 1,186,400 245,318 204,486 1,070,597 981,914 = = = = = = = = = = = = = = = = = = = =
10.1 These finances were obtained against a demand finance facility of Rs.180 million and were repayable 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 fixed assets of the Company for Rs.112.500 million (the charge amounting Rs.1.000 million was
30
Annual Report 2007
registered while the rest of the charge was equitable) and demand promissory note. The opening outstanding 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 finance facility of Rs.84 million. This finance facility, during the year, carried mark-up at the rate of 11.66% per annum and is secured against first pari passu charge on fixed assets of the Company for Rs.112.500 million. The principal balance of this finance facility is repayable in 6 equal half-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 and carry profit at the rates ranging from 10.71% to 12.07% per annum. This finance facility and the facility stated in note 10.4 are secured against first pari passu registered hypothecation and mortgage charge on the Companys present and future fixed assets for Rs.434 million. These finances 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 and carry profit at the rates ranging from 10.75% to 12.12% per annum. This finance facility is secured against the securities as stated in note 10.3. These finances are repayable in 10 halfyearly instalments commenced from August, 2006. 10.5 These finances have been obtained against a demand finance facility of Rs.200 million and are repayable 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 present and 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 finance facility of Rs.250 million to finance BMR / expansion in the existing production capacity of the Company. UBL, during the current financial year, has restructured this finance facility in the following 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 of Pakistans 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 equal half-yearly instalments of Rs.10.780 million commenced from March, 2007. These finance facilities are secured against registered hypothecation pari passu charge on all present 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 are repayable 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 the Company for Rs.107 million.
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Annual Report 2007
10.8 These finances have been obtained against a demand finance facility of Rs.325 million to finance the ongoing BMR / expansion plan. This finance facility, during the year, carried mark-up at the rates ranging from 11.11% to 12.15% per annum and is secured against first pari passu charge on all present and future fixed assets of the Company for Rs.434 million. The principal balance of this finance facility is repayable in 10 equal half-yearly instalments of Rs.32.500 million commenced from Mach, 2007. 10.9 These finances have been obtained during the current financial year against a demand finance facility 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 is secured against first pari passu charge on all present and future fixed assets of the Company for Rs.334 million. The principal balance of this finance facility is repayable in 10 equal halfyearly instalments of Rs.25 million commencing September, 2008. 11. LONG TERM DEPOSITS - Secured These interest free deposits have been received in accordance with the Companys Car Incentive Scheme and against these deposits vehicles have been provided to the employees. These are adjustable after specified periods by transfer of title of vehicles to the respective employees. 12. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE - Secured Upto one year From one to five years Upto one year From one to five years
Particulars
2007
2006
(Rupees in thousand) Minimum lease payments Less: financial charges allocated to future periods Less: security deposits adjustable on expiry of lease terms Present value of minimum lease payments Less: current portion grouped under current liabilities 96 0 96 656 97 753
1 0 1 22 1 23 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------95 0 95 634 96 730 55 0 55 227 56 283 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------40 0 = = = = = = = = = = = = = = = = = = = = = = = = 40 40 ----------------0 = = = = = = = = = = = = 407 40 = = = = = = = = = = = = = = = = = = = = = = = = 447 407 ----------------40 = = = = = = = = = = = =
12.1 The Company has entered into lease agreements with ORIX Leasing Pakistan Limited and Faysal Bank Limited to acquire vehicles. The lease agreement with ORIX has matured during the current financial year whereas the lease agreement with Faysal Bank Ltd. will mature during
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Annual Report 2007
October, 2007. These liabilities, during the year, were subject to finance charges at the rates ranging from 8% to 17% per annum. The Company intends to exercise its option to purchase the leased vehicle upon completion of the lease term. The lease finance facility is secured against title 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 unit credit method, based on the following significant assumptions, is used for valuation: 2007 9% 8% 04 years 2006 9% 8% 04 years
- discount rate - expected rate of growth per annum in future salaries - average expected remaining working life time of employees
2007 2006 (Rupees in thousand) The amount recognised in the balance sheet is as follows: Present value of defined benefit obligation Unrecognised actuarial loss Net liability as at 30 June, Net liability as at 01 July, Charge to profit and loss account Payments during the year Net liability as at 30 June, The movement in the present value of defined benefit obligation is as follows: Present value of defined benefit obligation Current service cost Interest cost Benefits paid Actuarial loss Present value of defined benefit obligation 29,054 8,528 2,615 (5,784) 0 34,413 = = = = = = = = = = 20,126 7,221 1,610 (7,059) 7,156 29,054 = = = = = = = = = = 34,413 (7,652) 26,761 = = = = = = = = = = 19,820 12,725 (5,784) 26,761 = = = = = = = = = = 29,054 (9,234) 19,820 = = = = = = = = = = 18,026 8,853 (7,059) 19,820 = = = = = = = = = =
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Annual Report 2007
Comparison of present value of defined benefit obligation and the surplus or deficit of gratuity fund for five years is as follows: 2007 2006 2005 2004 2003 (Rupees in thousand) Present value of defined benefit obligation 34,413 29,054 20,126 19,503 14,778 ======= ======= ======= ======= ======= (Percentage) Experience adjustment on obligation N/A 25% N/A 7% N/A ======= ======= ======= ======= ======= The Companys policy with regard to actuarial gains / losses is to follow the minimum recommended approach under IAS 19 (Employee Benefits). 2007 2006 Note (Rupees in thousand) 14. DEFERRED TAXATION The deferred tax liability / (asset) comprises of temporary differences arising due to: Credit balances arising in respect of: - accelerated tax depreciation allowances - surplus on revaluation of property, plant and equipment - lease finances Debit balances arising in respect of: - unused tax losses - provision for doubtful deposit for shares - staff retirement benefits - gratuity - minimum tax recoverable against normal tax charge in future years
246,838 43,790 43 290,671 265,226 2,564 6,863
243,874 49,271 259 293,404 233,886 2,695 5,342
14.1
54,844 35,868 329,497 277,791 (38,826) 15,613 = = = = = = = = = = = = = = = = = = = =
14.1 Deferred tax asset has been recognised based on the projections prepared by the management indicating reasonable probability that taxable profits will be available in the foreseeable future against 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-up arrangements aggregate Rs.2,430 million (2006: Rs.1,920 million) and are secured against pledge of stock-in-trade, charge on fixed and current assets of the Company and lien on export bills. These facilities, during the year, carried mark-up at the rates ranging from 4.61% to 12.92% per annum and are expiring on various dates by February, 2008.
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Annual Report 2007
Facilities available for opening letters of credit and guarantee from various commercial banks aggregate Rs.1,686 million (2006: Rs.1,260 million) and are secured against lien on import documents and charge on fixed assets of the Company. These facilities are expiring on various dates by February, 2008. 2007 2006 Note (Rupees in thousand) 16. TRADE AND OTHER PAYABLES Bills payable Creditors Accrued expenses Tax deducted at source Workers (profit) participation fund Unclaimed dividends 16.1 163,471 174,667 47,412 56,919 33,840 35,633 67 615 0 2,639 4,322 4,066 249,112 274,539 = = = = = = = = = = = = = = = = = = = =
16.2
16.1 These are secured against import documents. 16.2 Workers (profit) participation fund Opening balance Add: interest on funds utilised in the Companys business Less: payments made during the year Allocation for the year 2,639 126 2,765 2,765 0 0 0 = = = = = = = = = = 1,968 90 2,058 2,058 0 2,639 2,639 = = = = = = = = = =
17. ACCRUED MARK-UP AND INTEREST Mark-up accrued on: - long term finances - short term finances Lease finance charges 35,963 23,564 34,922 18,572
0 3 59,527 53,497 = = = = = = = = = = = = = = = = = = = = 17,300 6,033
18. TAXATION - Net Opening balance Add: provision made during the year: - current - prior years
Less: adjustments against completed assessments
18,961 17,300 1,528 (4,325) 20,489 12,975 37,789 19,008 (18,828) (1,708) 18,961 17,300 = = = = = = = = = = = = = = = = = = = =
35
Annual Report 2007
18.1 Income tax assessments of the Company have been completed upto the Tax Year 2006; the return 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 turnover for 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 the Second Schedule of the repealed Income Tax Ordinance, 1979 ( the repealed Ordinance) due to location of its Mills in tax exempt area of Gadoon Amazai Industrial Estate. Tax exemption period expired on 11 February, 2002. 18.5 (a) The Income Tax Appellate Tribunal (ITAT), Peshawar Bench, Peshawar vide its order dated 15 February, 1999 accepted the Companys applications under section 156 of the repealed Ordinance filed for the Assessment Years 1994-95 and 1995-96. The ITAT held that, on the basis of the judgment dated 04 June, 1997 delivered by the Supreme Court of Pakistan in Ellahi Cotton Mills Limited, the Company is entitled to the protection of section 6 of the Economic Reforms Act, 1992. Therefore, the Companys turnovers are exempt from 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 not accepted the ITATs exemption allowed by it to the Company and raised minimum tax demands aggregating Rs.21.444 million.
(b) The ITAT, vide its order dated 16 June, 2006 relevant to the Assessment Years 2001-02 and 2002-03, has again held that the issue of minimum tax has already been settled by the Supreme Court of Pakistan, i.e. profit and gain of units enjoying exemption are exempt from taxation; however, interest income is not profit and gain of the industrial undertaking and is taxable under section 30 of the repealed Ordinance. The ITAT, however, has accepted the contention of the Company that expenditure incurred wholly and exclusively for earning of interest income is an allowable deduction under section 31(1)(b) of the repealed Ordinance. Accordingly, the ITAT has directed the Assessing Officer to allow the expenses incurred for earning of interest income. The Assessing Officer, vide her orders dated 30 April, 2007 and 12 June, 2007 following the directions of ITAT, has given the appeal effects and created tax demands of Rs.4.005 million for the Assessment Years 1997-98 to 2002-03. The Company has already paid and expensed the tax demands raised by the Assessing Officer in prior year. (d) The Company had made payments aggregating Rs.12.736 million till 30 September, 2003 under protest; however, Rs.3.000 million were adjusted against the completed assessment during the financial year ended 30 September, 2004 and the balance amount was grouped under advance income tax (note 33). 19. CONTINGENCIES AND COMMITMENTS 19.1 The Company had imported textile plant & machinery availing exemption from customs duty and sales tax on importation thereof under SROs 554(1)/98 and 987(1)/99. In case conditions of the aforementioned SROs are violated, the amounts of customs duty and sales tax exempted
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Annual Report 2007
aggregating Rs.151.014 million shall be recoverable by the Customs Authorities along with penalties under section 202 of the Customs Act, 1969. 19.2 Commitments for letters of credit outstanding at the year-end were as follows: - capital expenditure - others 2007 2006 (Rupees in thousand) 758 206,057 206,815 = = = = = = = = = = = = = = = = = = = = = 20,872 267,792 288,664 = = = = = = = = = = = = = = = = = = = = =
20. PROPERTY, PLANT AND EQUIPMENT
20.1 Additions to plant & machinery during the preceding year included borrowing cost amounting Rs.8.827 million.
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Annual Report 2007
20.2 Disposal of operating fixed assets
20.3 (a)
The management, during the current year, in order to ascertain the useful life of operating fixed assets carried-out an internal exercise and assessed the remaining useful life of buildings on leasehold land, plant & machinery, generators, electric installations and airconditioning 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 suggested by the Valuers were found below the depreciation rates determined by the management. Consequently, the depreciation rates, as determined by the management, have been applied for computation of depreciation expense for the current year. The old and revised depreciation rates are as follows: Revised Old rate 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%
38
Annual Report 2007
(b)
The aforementioned revision has been accounted for as change in accounting estimates in accordance with the requirements of IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors). The effect of this change in accounting estimate has 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 have been higher by Rs.57.887 million whereas carrying value of operating fixed assets would have been lower by Rs.57.887 million. Accordingly, loss per share for the year ended 30 June, 2007 would have been Rs.2.40 instead of earnings per share of Re.0.64.
20.4 Had the property, plant and equipment been recognised under the cost model, the carrying amounts of each revalued class of property, plant and equipment would have been as follows: Note - leasehold land - buildings on leasehold land - plant & machinery - generators - electric installations - air-conditioning equipment 2007 2006 (Rupees in thousand) 46,139 266,946 1,244,209 153,779 48,559 39,839 1,799,471 = = = = = = = = = = = = = = = = = = = = = 142,666 7,849 150,515 = = = = = = = = = = = = = = = = = = = = = 46,408 242,352 1,302,965 133,991 52,006 36,366 1,814,088 = = = = = = = = = = = = = = = = = = = = = 182,145 7,147 189,292 = = = = = = = = = = = = = = = = = = = = =
20.5 Depreciation for the year has been apportioned as under: Cost of sales Administrative expenses
21. CAPITAL WORK-IN-PROGRESS Plant and machinery including in transit valuing Rs.Nil (2006: Rs.20.988 million) Electric installations Advance payments: - leasehold land - factory buildings - plant and machinery - generators - electric installations - furniture and fixtures 21.2 941 12,256 0 693 0 0 282,187 = = = = = = = = = = = = = = = = = = = = = 850 23,671 1,799 1,563 882 2,200 74,238 = = = = = = = = = = = = = = = = = = = = = 21.1 256,468 11,829 43,273 0
39
Annual Report 2007
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, these advances have been grouped under capital work-in-progress. 2007 2006 Note (Rupees in thousand) 22. INTANGIBLE ASSETS - Computer software Cost at the beginning of the year Additions during the year Cost at the end of the year Less: amortisation: - at the beginning of the year - charge for the year - at the end of the year Net book value as at 30 June, 22.1 3,161 969 4,130 713 = = = = = = = = = = = = = = = = = = = = = 2,193 968 3,161 1,682 = = = = = = = = = = = = = = = = = = = = = 4,843 0 4,843 4,078 765 4,843
22.1 Amortisation is charged to income applying the straight-line method at the rate of 20% per annum. 23. LONG TERM LOANS - Considered good Interest free loans to: - executives - employees 23.1 23.2 2,763 1,191 3,954 888 3,066 = = = = = = = = = = = = = = = = = = = = = 870 2,300 3,170 407 2,763 = = = = = = = = = = = = = = = = = = = = = 870 750 1,620 361 1,259 = = = = = = = = = = = = = = = = = = = = = 1,506 0 1,506 636 870 = = = = = = = = = = = = = = = = = = = = =
Less: current portion grouped under current assets
23.1 (a)
Opening balance Add: disbursements made during the year
Less: recoveries / adjustments made during the year Closing balance
(b) These loans have been advanced for construction of house, employees children educational expenses and various other purposes. These are recoverable in monthly instalments except for two (2006: nil) loans, which are adjustable against the gratuity balances of the employees at the end of respective employment terms. (c) Maximum aggregate amount due from the executives at any month-end during the year was Rs.2.819 million (2006: Rs.1.459 million).
40
Annual Report 2007
23.2 These loans are recoverable in monthly instalments except for one (2006: one) loan, which is adjustable 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 of staff loans is not considered material and hence not recognised. 2007 2006 Note (Rupees in thousand) 24. STORES, SPARES AND LOOSE TOOLS Stores including in transit valuing Rs.2.466 million (2006: Rs.Nil) Spares including in transit valuing Rs.6.191 million (2006: Rs.14.685 million) Loose tools 25,859 14,865
23,455 28,200 3,563 2,936 52,877 46,001 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
25. STOCK-IN-TRADE Raw materials: - at mills - in transit 500,578 579,290 292,651 282,795 793,229 862,085 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 with commercial banks as security for short term finances.
26. TRADE DEBTORS Unsecured - considered good - local Secured - export bills - local 27. DEPOSIT FOR SHARES Security Electric Power Company Ltd. - SEPCL (an Ex - Associated Company) Less: provision for doubtful deposit for shares 583,898 148,771 0 732,669 = = = = = = = = = = = = = = = = = = = = = 308,917 59,014 14,275 382,206 = = = = = = = = = = = = = = = = = = = = =
27.1 27.2
10,000 10,000 0 = = = = = = = = = = = = = = = = = = = = =
10,000 10,000 0 = = = = = = = = = = = = = = = = = = = = =
41
Annual Report 2007
27.1 The Company had deposited Rs.5 million during the year ended 30 September, 1994 and Rs.5 million during the year ended 30 September, 1998 with SEPCL for purchase of shares. Shares against these deposits, however, have not been issued so far. 27.2 The Auditors had relied upon managements representation for making this provision of Rs.10 million as the management was of the opinion that SEPCL had abandoned the project due to IPP crisis and SEPCL utilised this amount in payment of penalty imposed by the Private Power Infrastructure Board (Ministry of Water and Power). The Company filed a complaint before the Wafaqi Muhtasib for recovery of the said deposit along with penalty. As remote chances of recovery existed, full provision for doubtful deposit for shares was made in the books of account during the year ended 30 September, 2000. 2007 2006 (Rupees in thousand) 28. INVESTMENTS - Quoted (at fair value through profit or loss) Lucky Cement Limited 700 (2006: 10,677) ordinary shares of Rs. 10 each Oil & Gas Development Company Limited 50,000 (2006: 112,868) ordinary shares of Rs. 10 each MCB Bank Limited Nil shares (2006: 10,000 ordinary shares of Rs. 10 each) National Bank of Pakistan 10,000 (2006: 30,000) ordinary shares of Rs. 10 each Pakistan Oilfields Limited 17,000 (2006: 15,000) ordinary shares of Rs. 10 each Prime Commercial Bank Limited 27,000 ordinary shares of Rs. 10 each Fauji Cement Company Limited 20,000 ordinary shares of Rs. 10 each United Bank Limited 5,000 ordinary shares of Rs. 10 each Maple Leaf Cement Factory Limited 10,000 ordinary shares of Rs. 10 each Dewan Salman Fibre Limited 66,500 ordinary shares of Rs. 10 each Adjustment on remeasurement to fair value - net 76 6,410 0 2,436 5,667 1,382 390 1,091 258 705 18,415 (476) 17,939 = = = = = = = = = = = = = = = = = = = = = 486 13,887 1,946 5,830 6,554 0 0 0 0 0 28,703 1,427 30,130 = = = = = = = = = = = = = = = = = = = = =
42
Annual Report 2007
Note 29. LOANS AND ADVANCES - Considered good Current portion of long term loans Advances to: - executives - employees 23
2007 2006 (Rupees in thousand) 888 542 377 1,807 = = = = = = = = = = = = = = = = = = = = = 441 1,195 1,780 3,416 = = = = = = = = = = = = = = = = = = = = = 1,878 16,813 18,691 = = = = = = = = = = = = = = = = = = = = = 711 1,131 1,842 = = = = = = = = = = = = = = = = = = = = = 361 59 557 977 = = = = = = = = = = = = = = = = = = = = = 441 0 1,912 2,353 = = = = = = = = = = = = = = = = = = = = = 1,878 23,117 24,995 = = = = = = = = = = = = = = = = = = = = = 2,768 993 3,761 = = = = = = = = = = = = = = = = = = = = =
30. TRADE DEPOSITS AND PREPAYMENTS Margin deposits Containers security deposits Prepayments
31. SALES TAX REFUNDABLE Sales tax paid under protest Sales tax refundable
32. OTHER RECEIVABLES Letters of credit Claims receivable
33. ADVANCE INCOME TAX AND TAX DEDUCTED AT SOURCE Tax deducted at source / advance payment of tax Minimum tax paid under protest [refer contents of note 18.5 (d)] 30,902 9,736 40,638 = = = = = = = = = = = = = = = = = = = = = 29,247 9,736 38,983 = = = = = = = = = = = = = = = = = = = = =
34. BANK BALANCES Cash at banks on: - current accounts - saving accounts 34.1 2,897 257 3,154 = = = = = = = = = = = = = = = = = = = = = 14,994 32 15,026 = = = = = = = = = = = = = = = = = = = = =
34.1 These include foreign currency balances of U.S.$ 343 (2006: U.S.$ 186,949) translated into Pak. Rupees at the year-end exchange rate, i.e. U.S.$ 1= Rs.60.36 (2006: U.S.$ 1= Rs.60.11).
43
Annual Report 2007
Note 35. SALES Own manufactured goods: Local - yarn - waste Export - yarn - waste
1,958,549 9,130 1,967,679 796,453 43,040 839,493 2,807,172 446,294 379,745 826,039
1,885,362 4,734 1,890,096 693,459 40,489 733,948 2,624,044 561,042 233,951 794,993
Trading activities: Local - yarn - raw materials Export - yarn - waste
159,133 35,337 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 Packing materials consumed Salaries, wages and benefits Power and fuel Repair and maintenance Depreciation Insurance Textile cess Doubling charges Dyeing charges Adjustment of work-in-process Opening Closing Cost of goods manufactured Adjustment of finished goods Opening stock Purchases Closing stock 36.1 36.2 2,259,558 69,048 173,432 211,652 52,440 142,666 5,891 89 5,789 1,423 2,921,988 34,230 (36,133) (1,903) 2,920,085 13,267 594,481 (104,237) 503,511 3,423,596 = = = = = = = = = = = = = = = = = = = = = 1,874,409 53,057 159,066 221,636 36,569 182,145 5,055 89 4,894 0 2,536,920 27,139 (34,230) (7,091) 2,529,829 85,877 509,870 (13,267) 582,480 3,112,309 = = = = = = = = = = = = = = = = = = = = =
44
Annual Report 2007
Note 36.1 Raw materials consumed Opening stock Purchases (for manufacturing) Cost of raw materials sold
862,085 639,167 1,815,347 1,866,363 375,109 230,877 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. 127 31,878 1,922 2,785 3,599 1,611 3,706 2,104 1,538 1,640 1,419 7,624 209 2,702 56 7,849 969 32 33,916 2,092 2,736 3,326 1,277 5,592 1,801 1,808 1,685 1,414 7,397 263 1,357 99 7,147 968
37. ADMINISTRATIVE EXPENSES Directors meeting fee Salaries and benefits Travelling and conveyance: - directors - others Rent, rates and taxes Entertainment Communication Printing and stationery Electricity, gas and water Insurance Repair and maintenance Vehicles running and maintenance Advertisement Fees and subscription Newspapers and periodicals Depreciation Amortisation Auditors remuneration: - statutory audit - half yearly review - consultancy, tax services and certification charges -out-of-pocket expenses
37.2
200 175 65 60 170 370 22 29 457 634 Legal and professional (other than Auditors) 1,130 847 Others 524 283 73,849 74,674 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 37.1 The Company, during the year, shared administrative expenses aggregating Rs.1,768 thousand
45
Annual Report 2007
(2006: Rs.1,608 thousand) with an Associated Company on account of proportionate expenses of the combined offices at Karachi and Lahore. These expenses have been booked in the respective heads of account. 37.2 These include Rs.4.388 million (2006: Rs.3.052 million) in respect of staff retirement benefits - gratuity. Note 38. DISTRIBUTION COST Staff salaries Travelling Communication Loading and unloading Freight on local yarn Freight on export yarn Export expenses Insurance Sizing charges Commission on sales 6,593 2,904 2,140 2,392 2,712 35,156 7,016 268 29 20,820 80,030 = = = = = = = = = = = = = = = = = = = = = 39.1 470 1,863 0 476 2,809 = = = = = = = = = = = = = = = = = = = = = 5,561 1,733 1,196 1,813 4,451 16,022 3,135 247 4 14,840 49,002 = = = = = = = = = = = = = = = = = = = = = 1,370 383 2,639 0 4,392 = = = = = = = = = = = = = = = = = = = = = 2007 2006 (Rupees in thousand)
39. OTHER OPERATING EXPENSES Donations Exchange fluctuation loss - net Workers (profit) participation fund Adjustment on remeasurement of investments to fair value
28
39.1 These include an amount of Rs.420 thousand (2006: Rs.420 thousand) which represents amount donated to Saifullah Foundation for Sustainable Development (a Social Welfare Society) administered by the following directors of the Company: - Mr. Javed Saifullah Khan - Mr. Osman Saifullah Khan - Mr. Jehangir Saifullah Khan
46
Annual Report 2007
Note 40. OTHER INCOME Sale of scrap - net of sales tax of Rs.80 thousand (2006: Rs.73 thousand) Unclaimed balances written-back Gain on disposal of operating fixed assets - net Adjustment on remeasurement of investments to fair value Dividend income Realised gain on sale of investments Profit on deposit accounts
20.2
533 87 1,310 0 757 3,700 0 6,387 = = = = = = = = = = = = = = = = = = = = =
485 43 565 1,427 151 28,304 8 30,983 = = = = = = = = = = = = = = = = = = = = =
41. FINANCE COST Mark-up on: - long term finances - short term finances Lease finance charges Interest on workers (profit) participation fund Bank and other charges
126,553 127,418 20 126 6,785 260,902 = = = = = = = = = = = = = = = = = = = = =
109,769 96,390 93 90 5,158 211,500 = = = = = = = = = = = = = = = = = = = = =
47
Annual Report 2007
2007 2006 (Rupees in thousand) 42 CASH FLOW FROM OPERATING ACTIVITIES (Loss) / profit for the year - before taxation Adjustments for: Depreciation Amortisation of intangible assets Unclaimed balances written-back Staff retirement benefits - gratuity (net) Gain on disposal of operating fixed assets - net Realised gain on sale of investments Adjustment on remeasurement of investments to fair value - net Profit on deposit accounts Finance cost [excluding interest on workers (profit) participation fund and bank charges] CASH INFLOW FROM OPERATING ACTIVITIES - Before working capital changes (Increase) / decrease in current assets: Stores, spares and loose tools Stock-in-trade Trade debtors Loans and advances Advance payments Trade deposits and prepayments Sales tax refundable Other receivables (Decrease) / increase in trade and other payables CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES - Before taxation Income tax paid CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES - After taxation Long term loans Long term deposits Long term deposits from employees NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES (21,762) 150,515 969 (87) 6,941 (1,310) (3,700) 476 0 253,991 386,033 (6,876) (24,017) (350,463) (303) (18,107) (1,063) 6,304 1,919 (25,596) (418,202) (32,169) (20,483) (52,652) (2,334) 42 (418) (55,362) = = = = = = = = = = = = = = = = = = = = = 52,373 189,292 968 (43) 1,794 (565) (28,304) (1,427) (8) 206,252 420,332 (742) (157,399) (28,122) (224) 27,545 1,822 (19,691) 1,534 154,654 (20,623) 399,709 (22,529) 377,180 217 (56) 546 377,887 = = = = = = = = = = = = = = = = = = = = =
48
Annual Report 2007
43. FINANCIAL ASSETS AND LIABILITIES
43.1 The effective mark-up rates for the monetary financial assets and liabilities have been mentioned in 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 foreign undertakings. The management takes out forward exchange contracts, where appropriate, to mitigate the risk. However, no forward foreign exchange contracts were outstanding at the yearend. 43.3 Concentration of credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties fail completely to perform as contracted. All of the Companys financial assets, except for long term loans amounting Rs.3,954 thousand (2006: Rs.1,620 thousand), are subject to credit risk. To manage exposure to credit risk, the Company applies credit limits to its customers and also obtains advances from them.
49
Annual Report 2007
43.4 Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in the financial statements approximate to their fair values. Further, staff loans have been valued at their original cost less repayments. 43.5 Liquidity risk Liquidity risk reflects an entitys inability in raising funds to meet commitments. The Company follows an effective cash management and planning policy to ensure availability of funds and to take 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 changes in the market interest rates. The Company usually borrows funds at fixed and market based rates and as such the risk is minimised. 2007 2006 (Rupees in thousand) 44. BASIC EARNINGS PER SHARE 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 trading transactions, 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 benefit plan, its directors and key management personnel. Transactions with related parties are carriedout on arms length basis. There were no transactions with key management personnel other than under the terms of employment. Aggregate transactions with Associated Companies during the year were as follows: - purchase of fixed assets - sale of fixed assets - sale of goods and services - purchase of goods and services - dividend paid 0 1,127 426,002 557,662 3,932 1,888 0 333,379 483,516 3,703 Profit after taxation attributable to ordinary shareholders
50
Annual Report 2007
46. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
46.1 Chief executive and some of the executives have also been provided with the Company maintained cars and residential telephones. 2007 2006 47. CAPACITY AND PRODUCTION No. of spindles installed Average of spindles shifts installed Average of spindles shifts worked No. of days worked No. of shifts worked Average count Actual production Figure in 000 Figure in 000 88,476 96,881 94,125 365 1,095 35.96 14,012 88,476 96,881 93,947 365 1,095 36.81 13,734
Kgs
Figure in 000
It is difficult to describe precisely the production capacity in textile spinning industry since it fluctuates widely depending on various factors, such as count of yarn spun, spindles speed, twist per inch and raw materials used, etc. It also varies according to the pattern of production adopted in a particular year. 48. DATE OF AUTHORISATION OF FINANCIAL STATEMENTS These financial statements were authorised for issue on October 08, 2007 by the board of directors of the Company.
51
Annual Report 2007
49. FIGURES in the financial statements have been rounded-off to the nearest thousand Rupees except stated otherwise. Corresponding figures have been rearranged and reclassified , wherever necessary, for the purposes of comparison; however, no material rearrangements / reclassifications have been made in these financial statements.
Javed Saifullah Khan Chairman/Director
Zafar Qureshi Director
These financial statements are not signed by the Chief Executive as he is out of country. This information is disclosed as required under Section 241(2) of the Companies Ordinance, 1984.
52
Annual Report 2007
FORM OF PROXY
SEVENTEENTH 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 the Company, 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 , 2007 or at any adjournment thereof. Please affix rupees five revenue stamp (Signatures should agree with the specimen signature registered with the Company) Signature of Shareholder_____________________ Signature of Proxy__________________________
Dated this _________ day of _________ 2007 For beneficial owners as per CDC list 1. WITNESS Signature ___________________________ Name: ______________________________ Address: ____________________________ ___________________________________ ___________________________________
2.
WITNESS Signature _____________________________ Name: _______________________________ 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 the Company (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 specimen signature shall be submitted (unless it has been provided earlier) alongwith proxy form to the Company.
53

Saif Annual Report 2007

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Saif Textile Mills Limited

Annual Report 2007

Saif Textile Mills Limited

Annual Report 2007

- NIT Nominee - Chairman - Member - Member

CHIEF FINANCIAL OFFICER COMPANY SECRETARY LEGAL ADVISORS

Saif Textile Mills Limited

Annual Report 2007

VISION AND MISSION STATEMENT

Saif Textile Mills Limited

Annual Report 2007

NOTICE OF ANNUAL GENERAL MEETING

Islamabad October 08, 2007

(Mumtaz H. Chaudhry) Company Secretary

Saif Textile Mills Limited

Annual Report 2007

DIRECTORS REPORT TO THE SHAREHOLDERS

Saif Textile Mills Limited

Annual Report 2007

Saif Textile Mills Limited

Annual Report 2007

2,047,793 747,197 3,473,267 360,958 10.39 78,360 2.26 4.14

710,015 623,097 1,355,541 141,243 10.42 69,700 5.14 3.69

720,209 533,081 954,605 112,703 11.81 45,266 4.74 2.39

Saif Textile Mills Limited

Annual Report 2007

On behalf of the Board of Directors

Dated: October 08, 2007

JAVED SAIFULLAH KHAN Chairman/Director

Saif Textile Mills Limited

Annual Report 2007

Saif Textile Mills Limited

Annual Report 2007

Saif Textile Mills Limited

Annual Report 2007

PATTERN OF SHARESHOLDING AS AT 30 JUNE, 2007

Saif Textile Mills Limited

Annual Report 2007

DETAIL OF CATEGORIES OF SHAREHOLDERS

Name No of Shareholders Shares Held % age

Saif Textile Mills Limited

Annual Report 2007

Name No of Shareholders Shares Held % age

Saif Textile Mills Limited

Annual Report 2007

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

Saif Textile Mills Limited

Annual Report 2007

On behalf of the Board of Directors

Dated: October 08, 2007

JAVED SAIFULLAH KHAN Chairman/Director

Saif Textile Mills Limited

Annual Report 2007

LAHORE Dated: October 08, 2007

HAMEED CHAUDHRI & CO., CHARTERED ACCOUNTANTS

Saif Textile Mills Limited

Annual Report 2007

AUDITORS REPORT TO THE MEMBERS

Saif Textile Mills Limited

Annual Report 2007

300,000 = = = = = = = = = = 264,129 265,981 372,933 903,043

300,000 = = = = = = = = = = 189,129 190,981 367,087 747,197

1,070,597 1,375 0 26,761 0 1,098,733

981,914 1,793 40 19,820 15,613 1,019,180