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24th

Annual Report 2011

Khalid Siraj Textile Mills Ltd.

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KHALID SIRAJ TEXTILE MILLS LIMITED

24TH ANNUAL REPORT 2011

C O N T E N T S

COMPANY INFORMATION

VISION AND MISSION STATEMENT

NOTICE OF ANNUAL GENERAL MEETING

DIRECTORS' REPORT TO THE SHAREHOLDERS

STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE

REVIEW REPORT TO THE MEMBERS

PATTERN OF SHAREHOLDING

FINANCE HIGHLIGHTS

AUDITORS' REPORT TO THE MEMBERS

BALANCE SHEET

PROFIT AND LOSS ACCOUNT

STATEMENT OF COMPREHENSIVE INCOME

CASH FLOW STATEMENT

STATEMENT OF CHANGES IN EQUITY

NOTES TO THE ACCOUNTS

FORM OF PROXY

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5-7

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10-11

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13

14

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19-37

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Khalid Siraj TEXTILE MILLS LIMITED

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COMPANY INFORMATION

CHIEF EXECUTIVE - MIAN TAYYAB IQBAL

DIRECTORS ------

MIAN TAHIR IQBAL MISS RABIA IQBAL MRS. TAYYABA WASEEM MRS. RUKHSANA ARIF KH. IFTIKHAR-UD-DIN MR. MUHAMMAD ASIF (NIT NOMINEE)

AUDIT COMMITTEE

- CHAIRMAN - MEMBERS

---

MIAN TAHIR IQBAL MISS RABIA IQBALMRS. RUKHSANA ARIF

COMPANY SECRETARY - HAJI TARIQ SAMAD

BANKERS ---

NATIONAL BANK OF PAKISTANHABIB BANK LIMITEDFAYSAL BANK

AUDITORS - NAZIR CHAUDHRI & CO. CHARTERED ACCOUNTANTSGARDEE INVESTMENT BUILDING,NAPIER ROAD, LAHORE.

LEGAL ADVISOR - MS. QAMAR MEHNAZ (ADVOCATE)

REGISTERED OFFICE - 467-M BLOCK, MODEL TOWN EXTENSION,LAHORE.

MILLS - 48 - KM, LAHORE - MULTAN ROAD,PHOOL NAGAR (BHAI PHERU),TEHSIL PATTOKI, DISTT. KASUR.


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V i s i o nTo accomplish, build up and sustain a good reputation of the

project in textile sector locally and globally by manufacturing

and marketing high quality of yarn through team work by

means of honesty, integrity and commitment.

M i s s i o nTo provide maximum satisfaction to customers by supplying

fine quality yarn for knitting and Weaving for well known

textile Brands through effective utilization of men, material

and machines by encouraging, supporting and rewarding

the employees and sharing profits with our shareholders.

We do have social responsibility towards our community in

which we operate and we are committed to safety,

health and environment in all our operations.


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thNotice is hereby given that the 24 Annual General Meeting of the shareholders of Khalid Siraj Textile Mills Ltd. will be held at 467-M Block, Model Town Ext., Lahore, on Monday, October 31, 2011 at 10:30 A.M. to transact the following business:

Ordinary Business:1. To confirm the minutes of the Annual General Meeting of the shareholders held on October 30,

2010.2. To receive, consider and adopt the Audited Balance Sheet and Profit and Loss Account of the

Company together with the Directors' and Auditors' Reports thereon for the year ended June 30, 2011.

3. To appoint Auditors for the year ending June 30, 2012 and fix their remuneration. A shareholder has given notice under section 253(2) of the Companies Ordinance, 1984, proposing M/S Kaleem & Co., Chartered Accountants for appointment as auditors of the Company in place of M/S Nazir Chaudhri & Co., Chartered Accountants.

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

By order of the Board Khalid Siraj Textile Mills Ltd.

Haji Tariq Samad Company Secretary

LahoreOctober 10, 2011

Notes:

1. The Share Transfer Books of the Company will remain closed from October 27, 2011 to November 03, 2011 (both days inclusive).

2. A member entitled to attend and vote at the General Meeting is entitled to appoint another member as a proxy to attend and vote instead of him / her.

3. The instrument appointing a proxy must be received at the Registered Office of the Company not later than 48 hours before the time fixed for the meeting. A member shall not be entitled to appoint more than one proxy. If a member appoints more than one proxy and more than one instrument of proxy is deposited by a member with the Company, all such instruments of proxy shall rendered invalid.

4. An individual beneficial owner of CDC entitled to attend and vote at this meeting, must bring his / her CNIC or Passport in original to prove his / her identity and in case of a proxy, must enclose an attested copy of his / her CNIC or Passport along with CDC A/C No. Representatives of corporate members should bring the usual documents required for such purpose.

5. Shareholders are requested to promptly notify the change in their addresses, if any, to the Company Registrar i.e. M/S Corplink (Pvt) Ltd., Wings Arcade, 1-K, Commercial, Model Town, Lahore. Fax: 042-35869037.

NOTICE OF ANNUAL GENERAL MEETING


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DIRECTORS' REPORT TO THE SHAREHOLDERS

IN THE NAME OF ALLAH, THE MOST GRACIOUS, THE MOST MERCIFUL

DEAR SHAREHOLDERS:

thThe Directors of your company welcome you at the 24 Annual General Meeting and are pleased to present the audited accounts and auditors' report thereon for the year ended June 30, 2011.

The company sold 3.962 million kilograms of yarn valuing Rs. 1,088.27 million during the year under review as compared to 4.056 million kilograms of yarn valuing Rs. 718.93 million in the previous year. There would have been a gross profit during the year under review, but charging of depreciation on revalued fixed assets amounting to Rs. 27.974 million turned the gross profit into a gross loss of Rs. 16.405 million as compared to the gross profit of Rs. 11.661 million in the previous year. During the year, the company suffered a pre tax loss of Rs. 51.568 million as compared to pre tax loss of Rs. 25.146 million in the previous year.

APPROPRIATIONS

June 30, 2011

June 30, 2010

Loss before taxation (51,568,003) (25,145,558)

Taxation (771,673) (18,724,073)

Loss after taxation (50,796,330) (6,421,485)

Loss brought forward (88,737,847) (122,322,404)

Transfer from surplus on revaluation of fixed assets on account of incremental depreciation-net of deferred tax

18,183,336 40,006,042

Loss carried forward (121,350,841) (88,737,847)

Loss per share-basic and diluted (4.75) (0.60)


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CORPORATE AND FINANCIAL REPORTING FRAME WORK

The Board of Directors state that:

a) The financial statements prepared by the management, present fairly its state of affairs, the result of

its operations, cash flows and changes in equity;

b) Proper books of accounts have been maintained by the company;

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

statements based on reasonable and prudent judgement;

d) International Financial Reporting Standards (IFRS), as applicable in Pakistan have been followed

in preparation of financial statements and any departure there from has been adequately disclosed;

e) The system of internal control is sound in design and has been effectively implemented and

monitored;

f) There is no significant doubt the company's ability to continue as a going concern;

g) The main reason for non declaration of dividend is after tax loss of Rs. 50.796 million;

h) There has been no material departure from the best practices of corporate governance, as detailed

in the listing regulations;

PATTERN OF SHAREHOLDINGS

A statement reflecting the pattern of shareholdings is attached to the Annual Report on page 10-11.

KEY OPERATING AND FINANCIAL DATA

A statement summarising the key operating and financial data of last six years alongwith current year is

attached to the Annual Report on page 12.

STATUTORY PAYMENTS

As on the closing date, no government taxes, duties, levies and charges were outstanding/overdue expect

the routine payments of various levies.

TRADE IN THE SHARES OF THE COMPANY

There was no trading in the shares of the Company by the Chief Executive, Directors, Chief Financial

Officer, Company Secretary and their spouses and minor children during the year under review.


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BOARD MEETINGS

During the period under consideration, four (4) meetings were held and the attendance by the respective Directors was as follows:

DIRECTORS NUMBER OF MEETINGS ATTENDED

Mian Tayyab Iqbal 4Mian Tahir Iqbal 4Miss Rabia Iqbal 2Mrs. Tayyaba Waseem 2Mrs. Rukhsana Arif 2Kh.Iftikhar-ud-Din 4Mr. Muhammad Asif (NIT Nominee) 4Leave of absence was granted by the board to the non attending directors.

FUTURE PROSPECTS

The initial cotton prices are unstable mainly due to uncertain figures of crop size. The sale price of cotton yarn has not increased in line with cotton price and other production costs. The reports of damage to cotton crop, due to heavy rains and floods in the months of August 2011 & September 2011 in Sindh, are coming in. Cotton rates at present prevail between Rs. 6,500 to Rs. 7,000 per maund, which are high as compared to current yarn rates. The Directors of your company are trying their best to improve the situation through better production and marketing strategies.

AUDITORS

The Auditors M/s. Nazir Chaudhri & Co., Chartered Accountants, are retiring at the conclusion of the Annual General Meeting, scheduled to be held on 31-10-2011. A shareholder has given notice under section 253(2) of the Companies Ordinance, 1984, proposing M/s. Kaleem & Co., Chartered Accountants, for appointment as auditors of the Company in place of M/s. Nazir Chaudhri & Co., Chartered Accountants.

MANAGEMENT / EMPLOYEES RELATIONS

The labour management relations remained cordial throughout the year. The Directors take the opportunity to express their appreciation of the spirit of understanding and good will reciprocated by the workers of the company. We trust that this spirit of harmony and mutual understanding will prevail in the times to come, Insha Allah.

Your Directors also place on record their appreciation for the loyalty and devotion to duty of the officers and members of the staff of the company.

APPRECIATION

The Directors place on record their appreciation for the support and co-operation extended by its bankers and other financial institutions to the company.

Lahore: 04 October 2011

For and on behalf of the Board of Directors

MIAN TAYYAB IQBAL CHAIRMAN/CHIEF EXECUTIVE


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STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in listing regulations of Stock Exchanges 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 independent non-executive directors and directors representing minority interests on its Board of Directors. At present the Board includes one independent non-executive director and one director representing minority shareholders.

2. The directors have confirmed that none of them is serving as a director on more than ten listed companies, including this company.

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

4. No casual vacancy occurred in the Board of Directors of the company during the year.

5. The Board has prepared a 'Statement of Ethics and Business Practices', which has been signed by all the directors and employees of the company.

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

7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The directors of the Board of the company are individuals with vast diversified experience of the financial and corporate affairs and are well conversant with the local laws and practices.

10. The Board arranged an orientation course for its directors during the year to apprise them of their duties and responsibilities.

11. All material information as required under the relevant rules has been provided to the stock exchanges and to the Securities and Exchange Commission of Pakistan (SECP) within the prescribed time limit.

12. The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment as determined by the CEO.

13. 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.

14. The financial statements of the company were duly endorsed by CEO and CFO before approval of the Board.

15. 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.

16. The company has complied with all the corporate and financial reporting requirements of the Code.

17. The Board has formed an audit committee. It comprises three members, of whom two are non-executive directors and the chairman of the committee is an executive director.

18. 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.

19. The Board has set-up an effective internal audit function. The staff is considered to be suitably qualified and experienced. They are conversant with the policies and procedures of the company.

20. 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.

21. 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.

22. The related party transactions have been placed before the audit committee and approved by the Board of Directors to comply with the requirements of listing regulations of the stock exchanges.

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

Lahore: 04 October 2011

For and on behalf of the Board

MIAN TAYYAB IQBAL CHIEF EXECUTIVE

CNIC # 35202-7317351-7

Name of company: KHALID SIRAJ TEXTILE MILLS LIMITED Year Ended 30 June 2011.


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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 Khalid Siraj Textile Mills Limited to comply with the Listing Regulation No. 35 of the Karachi and Lahore Stock Exchanges, where the company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the company's compliance with the provisions of Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel and review of various documents prepared by the company to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the company's corporate governance procedures and risks.

Further, sub-regulation (xiii a) of Listing Regulations 35 notified by The Karachi and Lahore Stock Exchanges vide circular KSE/N-269 dated January 19, 2009 requires the company to place before the board of directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the board of directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance.

REVIEW REPORT TO THE MEMBERS

On the Statement of Compliance with Best Practices of Code of Corporate Governance

NAZIR CHAUDHRI & CO.Chartered Accountants

Nazir Ahmad Chaudhri

NAZIR CHAUDHRI & CO. CHARTERED ACCOUNTANTS

Gardee Investment Building, Napier Road, Lahore-54000.Tel: 042-37359251-53, Fax: 042-37359254, E-mail: [email protected]

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PLACE : LAHOREDATE 04 October 2011:

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No. of Shareholders

From ToTotal

Shares Held

389 1 100 18,645206 101 500 56,693202 501 1000 123,000142 1001 5000 262,45516 5001 10000 100,3151 10001 15000 12,0802 15001 20000 34,4695 35001 40000 184,4002 70001 75000 149,4001 85001 90000 86,5671 100001 105000 102,8003 105001 110000 324,71210 110001 115000 1,130,9872 145001 150000 298,5301 150001 155000 152,1001 155001 160000 159,1601 160001 165000 162,5001 240001 245000 240,7501 295001 300000 299,6001 305001 310000 306,0621 365001 370000 369,9731 370001 375000 373,0021 380001 385000 382,2321 395001 400000 399,4311 545001 550000 546,6821 550001 555000 553,8402 695001 700000 1,397,1221 2472001 2477000 2,472,493

997 10700000

Categories ofShareholders

Number ofShareholders

TotalShares Held

Percentage ofIssued Capital

INDIVIUAL 981 8,200,418 76.64PUBLIC LIMITED COMPANY 0 0 0.00PRIVATE LIMITED COMPANY 0 0 0.00BANKING/INVESTMENT COMPANIES 3 8,005 0.07INSURANCE COMPANIES 0 0 0.00MODARABA COMPANIES 6 11,235 0.11OTHERS 7 2,480,342 23.18

997 10,700,000 100.00

Detail of shareholders categories as on June 30, 20111. 3

6,800 0.061100 0.01

Banking / Investment Companies N.B.P. Trustee Department Investment Corporation of Pakistan Crescent Investment Bank Ltd. 105 0.00

2. Insurance Companies 03. Modarabas 6 First Mehran Modaraba 800 0.01 Modaraba Al-Tijarah 5,100 0.05 Trust Modaraba 1,000 0.01 Unicap Modaraba 10 0.00 Third Prudential Modaraba 1,700 0.02 First Interfund Modaraba 2,625 0.024. Others 7 National Industrial Co-operative Finance Corp. Ltd. 4,400 0.04 Pak Libya Holding Co. (Pvt) Ltd. 700 0.01 Yousafzai Brothers (Pvt) Ltd. 535 0.01 A. Razzak Ali Mohd. & Brothers 1,000 0.01 Grays of Cambridge (Pak) Ltd. 1,000 0.01 T.V. Shop 214 0.00 CDC of Pakistan 2,472,493 23.11

PATTERN OF SHAREHOLDING AS AT JUNE 30, 2011


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CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITEDPATTERN OF SHAREHOLDING OF KHALID SIRAJ TEXTILE MILLS LIMITED

AS AT 30-06-2011Shareholding

No. of Shareholders

From To Total Shares Held

89 1 100 3,32572 101 500 24,11153 501 1000 38,78579 1001 5000 183,13622 5001 10000 165,8383 10001 15000 39,4853 15001 20000 52,3911 20001 25000 25,0001 25001 30000 28,5001 30001 35000 35,0001 55001 60000 57,6291 60001 65000 62,3711 65001 70000 66,6831 90001 95000 92,5451 95001 100000 100,0001 145001 150000 149,8921 225001 230000 227,0001 420001 425000 420,3041 700001 705000 700,498

333 2,472,493

Categories of Number of Total Percentage ofShareholders Shareholders Shares Held Issued Capital

INDIVIUAL 318 1,108,854 44.85PUBLIC LIMITED COMPANY 0 0 0.00PRIVATE LIMITED COMPANY 0 0 0.00BANKING/INVESTMENT COMPANIES 4 935,112 37.82INSURANCE COMPANIES 2 425,654 17.22MODARABA COMPANIES 0 0 0.00OTHERS 9 2,873 0.12

333 2,472,493 100.00

Detail of shareholders categories as on June 30, 20111. Banking / Investment Companies 4 National Bank of Pakistan Trustee Department 700,498 6.55 National Investment Trust Limited 18,039 0.17 National Bank of Pakistan 66,683 0.62 The Bank of Punjab 149,892 1.40

2. Insurance Companies 2 Asia Insurance Company Limited 5,350 0.05 State Life Insurance Corp. of Pakistan 420,304 3.93

3. Modarabas 04. Others 9

31 0.001,070 0.01

35 0.0010 0.007 0.00

900 0.01150 0.00600 0.01

Punjab Cooperative Board 128 Securities (Pvt) Ltd. KSR Stock Brokerage (Pvt) Ltd. M. R. Securities (SMC-Pvt) Ltd. NH Securities (Pvt) Ltd. Pearl Capital Management (Pvt) Ltd. Sarfaraz Mahmood (Pvt) Ltd. Time Securities (Pvt) Ltd. The Karachi Stock Exchange (G) Limited 70 0.00

INTREST OF DIRECTORS AND THEIR RELATIVES SHARES HELD BY: MIAN TAYYAB IQBAL 74,800 MIAN TAYYAB IQBAL. (CDC) 57,629 MRS. TAYYABA WASEEM 74,600 MIAN TAHIR IQBAL 10,000 MISS RABIA IQBAL 1,400 MRS. RUKHSANA ARIF 500 KHAWAJA IFTIKHAR-UD-DIN 500 MR. MUHAMMAD ASIF (NIT NOMINEE) 0

- Shares of the Company Held by the Executives of the Company 1,244,574 - Shares Held by Investment Coporation of Pakistan 1,100 - Shareholders having holding more than 10% 0 National Bank of Pakistan Trustee Department 707,298


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FINANCIAL HIGHLIGHTS Seven Years at a Glance

(All amounts in thousand)

2009 2008 2007 2006Nine Months

Ended30-06-2005

2010Particulars

Turnover (Net)(Rupees)

Profit/Loss before taxation(Rupees)

Profit/Loss after taxation(Rupees)

Paid up capital(Rupees)

Number of Shares (Ordinary Shares)

Owner's equity(OrdinaryShareholders)(Rupees)

Break up value ofShare of Rs. 10 each (Rupees)

Earning pershare-basic(Rupees)

Total assets(Rupees)

655,468

(77,229)

(57,741)

107,000

10,700,000

35,660

3.33

(5.40)

682,004

431,304

(94,104)

(95,904)

107,000

10,700,000

(15,322)

(1.43)

(8.96)

545,760

492,753

(46,002)

(36,394)

107,000

10,700,000

69,863

6.53

(3.40)

491,048

421,978

(38,419)

(32,582)

107,000

10,700,000

92,302

8.62

(3.05)

507,073

297,849

(6,811)

(10,729)

107,000

10,700,000

104,447

9.76

(1.00)

520,472

2011

724,343

(25,146)

(6,421)

107,000

10,700,000

18,262

1.71

(0.60)

580,858

1,110,715

(51,568)

(50,796)

107,000

10,700,000

(14,351)

(1.34)

(4.75)

528,185


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AUDITORS' REPORT TO THE MEMBERS

NAZIR CHAUDHRI & CO.Chartered Accountants

Nazir Ahmad Chaudhri

We have audited the annexed balance sheet of KHALID SIRAJ TEXTILE MILLS LIMITED as at 30 June 2011 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

(a) in our opinion, proper books of accounts 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 accounts and are further in accordance with accounting policies consistently applied;

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

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

(c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company's affairs as at 30 June 2011 and of the loss, total comprehensive loss, its cash flows and changes in equity for the year then ended; and

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

Without qualifying our opinion, we draw attention to note 1.2 in the financial statements which indicates that the company incurred a net loss of Rs. 50.796 million during the year ended 30 June 2011 resulting in unappropriated loss of Rs. 121.351 million at the close of the year and, as of that date, the company's sum of total liabilities and surplus on revaluation of fixed assets exceeded its total assets by Rs. 14.351 million. These conditions, along with other matters as set forth in note 1.2, indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern.

The financial statements of the company for the year ended 30 June 2010 were audited by another auditor who expressed an unmodified opinion on those statements on 30 September 2010.

NAZIR CHAUDHRI & CO. CHARTERED ACCOUNTANTS

Gardee Investment Building, Napier Road, Lahore-54000.Tel: 042-37359251-53, Fax: 042-37359254, E-mail: [email protected]

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PLACE : LAHOREDATE 04 October 2011:

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BALANCE SHEET AS AT 30 JUNE 2011

CHIEF EXECUTIVE DIRECTOR

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

Long term deposits

Due from ex-associated undertakings

CURRENT ASSETS

Stores, spares and packing material

Stock-in-trade

Trade debts

Advances

Trade deposits and short term prepayments

Other receivables

Tax refunds due from the government

Cash and bank balances

Total assets

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Share capital

Revenue reserves-unappropriated loss

Surplus on revaluation of fixed assets

NON-CURRENT LIABILITIES

Sponsors' loan

Sponsors' unclaimed dividend

Due to ex-associated undertakings

Staff retirement benefits-gratuity

Deferred taxation-net

CURRENT LIABILITIES

Trade and other payables

Accrued mark-up

Short term borrowings

Current portion of long term liabilities

Current portion of liabilities against assets subject to finance lease

CONTINGENCIES AND COMMITMENTS

Total equity and liabilities

The annexed notes from 1 to 40 form an integral part of these accounts.

Note 2011 2010

4 388,862,098

419,089,491

1,979,700

1,979,700

5 15,650,727

15,650,727

406,492,525

436,719,918

6 38,824,540

39,484,628

7 24,991,842

18,000,767

8 8,435,220

11,328,767

9 174,409

1,599,743

10 2,228,952

14,624,099

11 1,723,116

2,720,910

39,621,457

42,978,606

12 5,692,505

13,400,222

121,692,041

144,137,742

528,184,566

580,857,660

13 107,000,000 107,000,000

(121,350,841) (88,737,847)

(14,350,841)

18,262,153

14 146,023,974

164,207,310

15 156,072,362

150,648,612

16 24,058,182

24,058,182

17 32,329,798

32,329,798

18 7,218,446

5,542,934

19 35,798,224

48,047,338

255,477,012

260,626,864

20 67,631,135

65,221,180

5,024,011

4,205,275

21 68,379,275

59,865,816

-

8,193,422

22 -

275,640

141,034,421 137,761,333

23 - -

528,184,566 580,857,660

(R u p e e s)


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PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 JUNE 2011

Sales

Cost of sales

Gross profit/(loss)

Distribution cost

Administrative expenses

Other operating income

Finance cost

Loss before taxation

Taxation

Loss after taxation

Loss per share-basic and diluted


Note 2011 2010

24 1,110,714,542 724,343,478

25 1,127,119,681 712,682,367

(16,405,139) 11,661,111

26 1,890,187 4,188,460

27 14,876,863 13,694,293

16,767,050 17,882,753

(33,172,189) (6,221,642)

28 630,190 99,256

(32,541,999) (6,122,386)

29 19,026,004 19,023,172

(51,568,003) (25,145,558)

30 (771,673) (18,724,073)

(50,796,330) (6,421,485)

31 (4.75) (0.60)

(R u p e e s)



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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Loss after taxation

Transferred from surplus on revaluation of fixed assets on

account of incremental depreciation-net of deferred tax

Total comprehensive income/(loss) for the year


2011 2010

(50,796,330) (6,421,485)

18,183,336 40,006,042

(32,612,994) 33,584,557

(R u p e e s)



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CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011

2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (51,568,003) (25,145,558)

Adjustments for:

Depreciation 38,854,321 40,515,481

Provision for staff retirement benefits-gratuity 3,519,356 2,700,855

Finance cost 19,026,004 19,023,172

Exchange loss on currency fluctuation - 400,604

Profit on disposal of property, plant and equipment (630,190) (499,860)

Profit before working capital changes 9,201,488 36,994,694

Decrease in stores, spares and packing material 660,088 4,402,996

Increase in stock-in-trade (6,991,075) (15,504,469)

(Increase)/decrease in trade debts 2,893,547 (11,482,171)

(Increase)/decrease in advances 1,425,334 (12,020)

(Increase)/decrease in trade deposits and short term prepayments 12,395,147 (9,750,226)

(Increase)/decrease in other receivables 997,794 (2,720,870)

Increase in trade and other payables 2,409,955 19,752,142

Cash generated from operations 22,992,278 21,680,076

Decrease in long term deposits - 411,736

Gratuity paid (1,843,844) (2,397,825)

Finance cost paid (18,164,073) (17,920,057)

Income tax paid (8,120,292) (4,902,885)

Net cash used in operating activities (5,135,931) (3,128,955)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (8,711,738) (5,951,178)

Proceeds from sale of property, plant and equipment 715,000 619,962

Net cash used in investing activities (7,996,738) (5,331,216)

CASH FLOWS FROM FINANCING ACTIVITIES

Sponsors' loans 5,423,750 43,800

Lease rentals paid (318,835) (3,575,271)

Repayment of long term loans (8,193,422) (8,193,426)

Short term borrowings 8,513,459 31,922,208

Net cash from financing activities 5,424,952 20,197,311

Net increase/(decrease) in cash and cash equivalents (7,707,717) 11,737,140

Cash and cash equivalents at the beginning of the year 13,400,222 1,663,082

Cash and cash equivalents at the end of the year 5,692,505 13,400,222


(R u p e e s)



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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Balance as at 30 June 2009

Total comprehensive income for the

year ended 30 June 2010


Total comprehensive income for the

year ended 30 June 2011



107,000,000 (122,322,404) (15,322,404)

- 33,584,557 33,584,557

107,000,000 (88,737,847) 18,262,153

- (32,612,994) (32,612,994)

107,000,000 (121,350,841) (14,350,841)

(R u p e e s)

TOTAL

SHARE

CAPITAL

UNAPPROPRIATED

LOSS



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NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2011

1.

1.1

1.2

(i)

(ii)

2.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Accounting convention

3.2

-

-

-

-

3.3 Property, plant and equipment and depreciation

Owned assets:

Property, plant and equipment are stated at cost or revalued amount less accumulated depreciation and impairment losses if any,except freehold land which is stated at revalued amount. Capital work in progress is stated at cost. These are transferred to property,plant and equipment as and when the assets are available for intended use.

The areas where various assumptions and estimates are significant to company's financial statements or where judgments wereexercised in application of accounting policies are as follows:

Residual values and useful lives of property, plant and equipment (note 3.3)

COMPANY AND ITS OPERATIONS

During the current year, the company incurred a gross loss of Rs. 16,405,139 and a net loss of Rs. 50,796,330 during the year ended30 June 2011 resulting in unappropriated loss of Rs. 121,350,841 at the close of the year and, as of that date, the company’s currentliabilities exceeded its current assets by Rs. 19,342,380 and the sum of total liabilities and surplus on revaluation of fixed assetsexceeded its total assets by Rs. 14,350,841. These factors cast significant doubt on the company's ability to continue as a goingconcern, and therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business.

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approvedaccounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International AccountingStandards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the CompaniesOrdinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

Depreciation charge commences from the month in which asset is available for use and continues until the month of disposal.

These accounts have been prepared under the historical cost convention modified by the adjustment of revaluation of certain assetsas stated in note 4.

STATEMENT OF COMPLIANCE

Use of estimates and judgments

The preparation of financial statements in conformity with approved accounting standards requires management to make judgment,estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions and judgments are based on historical experience and various otherfactors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments aboutcarrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from theseestimates.

Depreciation is calculated using reducing balance method at the rates stated in note 4.

Taxation (note 3.10)

Provisions (note 3.23)

However, anticipating improved market conditions in the near future, the management is committed to enhance its operations withmore operational efficiencies. In order to deal with this situation the company has taken the following measures:

Staff retirement benefits (note 3.12)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in theperiod in which the estimate is revised if revision affects only that period, or in the period of revision and future periods if revisionaffects both current and future periods.

The company, therefore, believes that the going concern assumption is appropriate and has, as such, prepared these financialstatements on this basis.

the ex-directors and associated undertakings have agreed to continue financing the operations of the company.

switching over from manufacturing of fine cotton yarn counts to course yarn counts.

The company is a Public Limited Company incorporated in Pakistan on 17 January 1988 under the Companies Ordinance, 1984 andis listed on Karachi and Lahore Stock Exchanges in Pakistan. The registered office of the company is situated at 467-M Block, ModelTown Extension, Lahore. The company is engaged in the manufacturing and sale of cotton yarn.

Useful lives, methods and rates of depreciation and residual values are reviewed and adjusted, if appropriate on regular basis. Anychange in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment withcorresponding effect on depreciation charge and impairment.

The carrying amounts of the assets are reviewed at each balance sheet date to determine whether there is any indication ofimpairment loss. If any such indication exists the asset's recoverable amount is estimated in order to determine the extent ofimpairment loss, if any. Impairment losses are recognised in the profit and loss account.


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Leased assets:

3.4 Stores

3.5 Stock-in-trade

These are valued at lower of cost and net realisable value. Cost is determined as follows:

Raw material Weighted average cost

Work in process Estimated manufacturing cost including appropriate overheads

Finished goods Average manufacturing cost including appropriate overheads

Waste Net realisable value

3.6

3.7

3.8

3.9

3.10 Taxation

Current:

3.11 Financial instruments

Financial assets:

a. Financial assets at fair value through profit or loss

Transactions with the related parties are carried out at an arm's length price determined in accordance with comparable uncontrolledprice method.

Financial assets at fair value through profit or loss are financial assets held for trading and financial assets designated uponinitial recognition as at fair value through profit or loss. A financial asset is classified as held for trading if acquired principally forthe purpose of selling in the short term. Assets in this category are classified as current assets.

Trade debts

Related party transactions and transfer pricing

Provision for current taxation is based on taxable income at the current rates of taxation after taking into account applicable taxcredits, rebates and exemptions, if any.

Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in future for goods andservices received.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates thathave been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement,except where deferred tax arises on the items credited or charged to equity in which case it is included in equity.

The company classifies its financial assets into: at fair value through profit or loss, loans and receivables, available for sale and heldto maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines theclassification of its financial assets at initial recognition.

Trade debts are carried at original invoice amount less an estimate made for doubtful receivables, if any, based on a review of alloutstanding amounts at the year end. Bad debts are written off when identified.

These are carried in balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise of cash inhand and balance with banks on current account.

Cash and cash equivalents

Trade and other payables

Deferred:

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and theestimated costs necessary to make the sale.

Assets subject to finance lease are stated at lower of present value of minimum lease payments under the lease agreements and thefair value of the assets less accumulated depreciation. Depreciation is charged at the rates and basis applicable to owned assets.

Normal repairs and maintenance is charged to revenue as and when incurred, while major renewals and replacements are capitalised.

The outstanding obligation under the lease less financial charges allocated to the future periods is shown as liability. The financialcharges are calculated at the interest rate implicit in the lease and charged to profit and loss account.

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

These are valued at cost using moving average method except for items in transit which are valued at cost comprising invoice valueplus other charges paid thereon.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognised.

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of the assets and liabilities in the financial statements and corresponding tax basis used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised.


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b. Loans and receivables

c. Held to maturity

d. Available-for-sale financial assets

Financial liabilities:

3.12 Staff retirement benefits

3.13 Borrowing cost

3.14 Off setting

3.15 Foreign currency transactions

3.16 Share capital

3.17 Functional and presentation currency

3.18 Standards, amendments to published standards and interpretations effective in current year

Following are the amendments that are applicable for accounting periods beginning on or after 01 January 2010:

-

Loans and receivables are non-derivative financial assets with fixed or determinable payments date that are not quoted in anactive market. They are included in current assets, except for maturities greater than twelve months after the balance sheetdate, which are classified as non-current assets.

Financial assets with fixed or determinable payments and with fixed maturity, where management has intention and ability tohold till maturity are classified as held to maturity.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. Where the terms of anexisting liability are modified, such a modification is treated as a derecognition of original liability and the recognition of a new liability,and the difference in respective carrying amounts is recognised in the profit and loss account.

Ordinary shares are classified as equity and are recorded at their face value.

Financial assets and financial liabilities are set off and net amount is reported in financial statements when there is legally enforceableright to set off and the company intends either to settle on net basis, or to realize the assets and settle the liabilities simultaneously.

Transactions in foreign currencies are converted into Pak rupees at the rate of exchange prevailing on the date of transaction.Monetary assets and liabilities in foreign currencies are translated into Pak rupees at the rates of exchange prevailing at the balancesheet date. Exchange gains and losses are included in current year's income.

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of theother categories. They are included in non-current assets unless management intends to dispose off the investments withintwelve months from the balance sheet date.

All financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of instrument.

Borrowing costs are recognised as expense in the period in which these are incurred except to the extent of borrowing costs that aredirectly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs, if any, are capitalized aspart of cost of that asset.

The company operates an unfunded defined benefit gratuity scheme covering all of its permanent employees who are eligible underthe scheme. Gratuity is based on employees' last drawn salary and the amount recognised in the balance sheet represents thepresent value of defined benefit obligation as adjusted for unrecognised actuarial gains and losses. Provision is made annually tocover the obligation under the scheme on the basis of Projected Unit Credit (PUC) method. The most recent valuation was carried outas on 30 June 2011. The company's policy with regard to actuarial gains/(losses) is to follow minimum recommended approach underIAS-19 'Employee Benefits'.

The financial statements are presented in Pakistan Rupees which is also the company's functional currency.

The company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financialassets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised inother comprehensive income shall be reclassified from equity to profit and loss account as reclassification adjustment. Impairmentlosses recognised in the profit and loss account on equity instruments classified as available-for-sale are not reversed through theprofit and loss account.

All financial assets are recognised at the time when the company becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of investments are recognised on trade date-the date on which the company commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the profit and loss account. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investment are carried at amortized cost using the effective interest rate method.

IAS 1 (amendment), 'Presentation of Financial Statements'. The amendment provides clarification that the potential statement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least twelve months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. It does not have a material impact on the company's financial statements.


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-

-

Following are the amendments that are applicable for accounting periods beginning or after 01 July 2010:

-

-

3.19 Standards, interpretations and amendments to published standards that are effective but not relevant to the company

-

-

3.20 Standards interpretations and amendments to existing standards that are applicable to the company but are not effective

-

-

The standards and amendments and interpretation that are mandatory for accounting periods beginning on or after 01 July 2010 butare considered not to be relevant or to have any significant impact on the company's financial reporting and operations are as follows:

IAS 24 (revised), 'Related Party Disclosures', is effective for annual periods beginning on or after 01 January 2011. Thedefinition of related party has been clarified to simplify the identification of related party relationships, particularly in relation tosignificant influence and joint control. This is not expected to have material impact on company's financial statements.

These amendments require an entity (in a business combination) to account for the replacement of the acquiree's share-basedpayment transactions (whether by obligation or voluntarily), i.e., split between consideration and post-combination expenses.However, if the entity replaces the acquiree's awards that expire as consequence of the business combination, these arerecognised as post-combination expenses. These amendments do not have a material impact on the company's financialstatements.

IFRS 8, 'Operating Segments', effective from annual periods beginning on or after 01 January 2010. The amendment providesthat the requirement for disclosing a measure of segment assets is only required when the Chief Operating Decision Maker(CODM) reviews that information. It does not have a material impact on the company's financial statements.

IAS 7, 'Statement of Cash Flows'. The guidance has been amended to clarify that only expenditure that results in a recognised asset in the statement of financial position can be classified as a cash flow from investing activities. This amendment results in an improvement in the alignment of the classification of cash flows from investing activities in the statement of cash flows and presentation of recognised assets in the statement of financial position. It does not have a material impact on the company's financial statements.

IAS 17, 'Leases'. The amendment provides that when a lease includes both land and buildings, classification as a finance or operating lease is performed separately in accordance with IAS 17's general principles. Prior to amendment, IAS 17 generally required a lease of land with an indefinite useful life to be classified as an operating lease, unless title passed at the end of the lease term. However, the IASB has concluded that this is inconsistent with the general principles of the lease classification, so the relevant guidance has been deleted. A lease newly classified as finance lease should be recognised retrospectively. This amendment does not have a material impact on the company’s financial statements.

IFRS 3 (amendments), 'Business Combinations'. These amendments clarify that amendments to IFRS 7 'Financial Instruments: Disclosures', IAS 32 'Financial Instruments: Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement', that eliminate the exemption for contingent consideration, do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the application of IFRS 3 (as revised in 2008). Moreover, these amendments limit the scope of the measurement choices that only the components of non-controlling interest (NCI) that are present ownership interests which entitle their holders to a proportionate share of the entity’s net assets, in the event of liquidation, shall be measured either at fair value, or at the present ownership instruments’ proportionate share of acquiree’s identifiable net assets.

IFRIC 19 (amendment), 'Extinguishing Financial Liabilities with Equity Instruments'. IFRIC 19 clarifies that equity instruments issued to a creditor to extinguish a financial liability are consideration paid in accordance with the paragraph 41 of IAS 39 'Financial Instruments: Recognition and Measurement'. The equity instruments issued are measured at their fair value, unless this cannot be reliably measured, in which case they are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. This interpretation does not have a material impact on the company's financial staments.

Amendments to IFRS 2 'Share-based Payment'. Group Cash-settled Share-based Payment Transactions became effective from 01 July 2010 which requires an entity receiving goods or services (receiving entity) in either an equity-settled or a cash-settled share-based payment transaction to account for the transaction in its separate or individual financial statements. This amendment does not have a material impact on the company's financial statements.

IFRS 5 (amendment) 'Non-Current Assets Held for Sale and Discontinued Operations', effective from annual periods beginning on or after 01 January 2010. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirements of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. This amendment does not have a material impact on the company's financial statements.

IAS 27 (amendment), 'Consolidated and Separate Financial Statements' effective from annual periods beginning on or after 01 July 2010. The amendment clarifies that the consequential amendments from IAS 27 made to IAS 21 'The Effect of Changes in Foreign Exchange Rates', IAS 28 'Investments in Associates' and IAS 31 'Interests in Joint Ventures' apply prospectively for the annual periods beginning on or after 01 July 2009 or earlier when IAS 27 is applied earlier.

-

-

The following amendments and interpretations to existing standards have been published and are mandatory for the company's accounting periods beginning on or after their respective effective dates:

IAS 1 (amendment), 'Presentation of Financial Statements', is effective for annual periods beginning on or after 01 January 2011. The amendment clarifies that an entity may choose to present the required analysis of items of other comprehensive income either in statement of changes in equity or in the notes to the financial statements. The amendment is not expected to have a material impact on the company's financial statements.


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-

3.21 Standards, interpretations and amendments to existing standards that are not applicable to company and are not yet effective

-

3.22 Earnings per share

3.23 Provisions

3.24

Revenue from sales is recognised on despatch of goods to the customers. However, export goods are considered despatched whenshipped on board.

The company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividingthe profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstandingduring the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weightedaverage number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

Revenue recognition

The following amendments and interpretations to existing standards have been published and are mandatory for accounting periodsbeginning on or after respective effective dates but are not applicable to the company:

A provision is recognised when the company has a present legal or constructive obligation as a result of past event and it is probablethat an outflow of resources embodying economic benefits will be requires to settle the obligation of which reliable estimate can bemade.

IAS 34 (amendment), 'Interim Financial Reporting', is effective for annual periods beginning on or after 01 January 2011. The amendment provides guidance to illustrate how to apply disclosure principles in IAS 34 and add disclosure requirements around the circumstances likely to affect fair values of financial instruments and their classification, transfers of financial instruments between different levels of fair value hierarchy, changes in classification of financial assets and changes in contingent liabilities and assets. This amendment is not expected to have material impact on company's financial statements.

IFRIC 14 (amendment), 'Payments of Minimum Funding Requirement', is effective for annual periods beginning on or after 01 January 2011. IFRIC 14 provides further guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement of an asset. This amendment is not expected to have material impact on the financial statements.

IFRS 7 (amendment), 'Financial Instruments: Disclosures', is effective for annual periods beginning on or after 01 January 2011. The amendment emphasises the interaction between quantitative and qualitative disclosures and the nature and the extent of risks associated with financial instruments. The amendment is not expected to have a material impact on the company's financial statements.

IFRS 7 (amendment), 'Financial Instruments: Disclosures', is effective for annual periods beginning on or after 01 July 2011. The amendment requires additional qualitative and quantitative disclosures relating to transfers of financial assets, where financial assets are derecognised in their entirety, but where the entity has a continuing involvement in them (e.g., options and guarantees on the transferred assets) or where financial assets are not derecognised in their entirety. This amendment is not expected to have any impact on the company's financial statements.

-

-

-

IFRS 1 (amendments), 'First-Time Adoption of International Financial Reporting Standards', is effective for annual periods beginning on or after 01 January 2011.

IFRIC 13 (amendment), 'Customer loyalty programmes', is effective for annual periods beginning on or after 01 January 2011.

IFRS 1(amendment), 'First-Time Adoption of International Financial Reporting Standards-Severe hyperinflation and removal of fixed dates for first-time adopters', is effective for annual periods beginning on or after 01 July 2011.

-

-


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24

4. P

rop

ert

y, p

lan

t a

nd

eq

uip

me

nt

Tota

l

Land

Furn

iture

To

olsCy

cles

Arm

s Tu

be w

ellVe

hicles

Sub-

tota

lM

achin

ery

Facto

ryOt

hers

Texti

le

mac

hiner

y

Elec

trica

l

insta

llatio

n

Labo

rato

ry

equip

men

ts

Conc

rete

mixe

r

Weig

hing

scale

san

dan

dan

d

fixtu

res

equip

men

tam

mun

ition

As a

t 01

July

2010

Cost

27,3

48,7

50

123,

842,

469

24,2

49,8

72

601,

502,

508

21,6

18,9

27

24,9

88,3

24

300,

000

233,

200

5,79

9,52

715

4,96

011

,880

27,3

5069

8,25

014

,797

,043

845,

573,

060

13,8

10,7

2585

9,38

3,78

5

Accu

mula

ted

depr

eciat

ion-

48,8

95,8

44

6,29

6,04

1

337,

452,

508

11,6

18,9

27

13,9

88,3

24

267,

594

205,

883

3,94

8,70

613

8,07

611

,006

20,3

7247

3,04

513

,056

,822

436,

373,

148

3,92

1,14

644

0,29

4,29

4

Net b

ook v

alue

27,3

48,7

50

74,9

46,6

25

17,9

53,8

31

264,

050,

000

10,0

00,0

00

11,0

00,0

00

32,4

06

27,3

17

1,85

0,82

116

,884

874

6,97

822

5,20

51,

740,

221

409,

199,

912

9,88

9,57

941

9,08

9,49

1

Year

end

ed 3

0 Ju

ne 2

011

Open

ing n

et b

ook v

alue

27,3

48,7

5074

,946

,625

17,9

53,8

3126

4,05

0,00

010

,000

,000

11,0

00,0

0032

,406

27,3

171,

850,

821

16,8

8487

46,

978

225,

205

1,74

0,22

140

9,19

9,91

29,

889,

579

419,

089,

491

Addit

ions

-2,

753,

543

-13

,694

,592

560,

992

--

-46

0,78

0-

--

594,

630

536,

780

18,6

01,3

17-

18,6

01,3

17

Disp

osals

Cost

--

--

--

--

--

--

-1,

499,

056

1,49

9,05

613

,810

,725

15,3

09,7

81

Depr

eciat

ion-

--

--

--

--

--

--

1,41

4,24

61,

414,

246

3,92

1,14

65,

335,

392

--

--

--

--

--

--

-84

,810

84,8

109,

889,

579

9,97

4,38

9

Depr

eciat

ion

for t

he ye

ar-

7,56

3,50

189

7,69

227

,639

,742

1,04

8,74

81,

100,

000

3,24

12,

732

226,

095

1,68

817

569

837

,386

332,

623

38,8

54,3

21-

38,8

54,3

21

Clos

ing n

et b

ook v

alue

27,3

48,7

5070

,136

,667

17,0

56,1

3925

0,10

4,85

09,

512,

244

9,90

0,00

029

,165

24,5

852,

085,

506

15,1

9669

96,

280

782,

449

1,85

9,56

838

8,86

2,09

8-

388,

862,

098

As a

t 30

June

201

1

Cost

27,3

48,7

5012

6,59

6,01

224

,249

,872

615,

197,

100

22,1

79,9

1924

,988

,324

300,

000

233,

200

6,26

0,30

715

4,96

011

,880

27,3

501,

292,

880

13,8

34,7

6786

2,67

5,32

1-

862,

675,

321

Accu

mula

ted

depr

eciat

ion-

56,4

59,3

457,

193,

733

365,

092,

250

12,6

67,6

7515

,088

,324

270,

835

208,

615

4,17

4,80

113

9,76

411

,181

21,0

7051

0,43

111

,975

,199

473,

813,

223

-47

3,81

3,22

3

Net b

ook v

alue

27,3

48,7

5070

,136

,667

17,0

56,1

3925

0,10

4,85

09,

512,

244

9,90

0,00

029

,165

24,5

852,

085,

506

15,1

9669

96,

280

782,

449

1,85

9,56

838

8,86

2,09

8-

388,

862,

098

Depr

eciat

ion ra

te

per a

nnum

-10

510

1010

1010

1010

2010

1015

10

Leas

ed a

sset

s

Build

ing

Tang

ible

Owne

d as

sets

2011

Tang

ible

( R u

p e

e s

)


i

tt

e

fa

q

25

Total

Land

Tools

Cycle

sAr

ms

Tube

well

Vehic

lesSu

b-tota

lMa

chine

ry

Vehic

lesSu

b-tota

l

Facto

ryOt

hers

Texti

le

mach

inery

Electr

ical

instal

lation

Labo

ratory

equip

ments

Conc

rete

mixe

r

Weig

hing

scale

san

dan

d

Furni

ture

and

fixtur

eseq

uipme

ntam

munit

ion

As at

01 Ju

ly 20

09

Cost

27,26

9,703

117,9

01,62

010

,621,7

6959

3,590

,966

20,44

5,818

23,08

6,718

300,0

00

233,2

00

5,799

,527

154,9

60

11,88

0

27,35

0

698,2

50

14,93

1,771

815,0

73,53

213

,810,7

251,4

16,30

615

,227,0

3183

0,300

,563

Accu

mulat

ed de

precia

tion

-41

,161,8

396,0

68,37

130

8,603

,244

10,61

1,141

12,97

7,391

263,9

93

202,8

48

3,743

,059

136,2

00

10,78

7

19,59

7

448,0

22

13,60

7,223

397,8

53,71

52,8

22,30

453

3,726

3,356

,030

401,2

09,74

5

Net b

ook v

alue

27,26

9,703

76,73

9,781

4,553

,398

284,9

87,72

29,8

34,67

7

10,10

9,327

36,00

7

30,35

2

2,056

,468

18,76

0

1,093

7,753

250,2

28

1,324

,548

417,2

19,81

710

,988,4

2188

2,580

11,87

1,001

429,0

90,81

8

Year

ende

d 30 J

une 2

010

Open

ing ne

t boo

k valu

e27

,269,7

0376

,739,7

814,5

53,39

828

4,987

,722

9,834

,677

10

,109,3

27

36,00

7

30,35

2

2,0

56,46

8

18

,760

1,093

7,753

25

0,228

1,324

,548

417,2

19,81

710

,988,4

2188

2,580

11,87

1,001

429,0

90,81

8

Addit

ions

-76

5,577

-4,8

75,00

931

0,592

-

-

-

-

-

-

-

-

882,5

80

6,8

33,75

8-

--

6,833

,758

Appre

ciatio

n79

,047

5,175

,272

13,62

8,103

3,036

,533

862,5

17

1,901

,606

-

-

-

-

-

-

-

-

24,68

3,078

--

-24

,683,0

78

Disp

osals

Cost

--

--

-

-

-

-

-

-

-

-

-

1,551

,034

1,551

,034

-1,4

16,30

61,4

16,30

62,9

67,34

0

Depre

ciatio

n-

--

-

-

-

-

-

-

-

-

-

-

1,430

,932

1,430

,932

-53

3,726

533,7

261,9

64,65

8

--

--

-

-

-

-

-

-

-

-

-

120,1

02

120,1

02-

882,5

8088

2,580

1,002

,682

Depre

ciatio

n for

the ye

ar-

7,734

,005

227,6

7028

,849,2

641,0

07,78

6

1,010

,933

3,601

3,035

205,6

47

1,876

219

775

25,02

3

346,8

05

39,41

6,639

1,098

,842

-1,0

98,84

240

,515,4

81

Clos

ing ne

t boo

k valu

e27

,348,7

5074

,946,6

2517

,953,8

3126

4,050

,000

10,00

0,000

11,00

0,000

32,40

6

27,31

7

1,850

,821

16,88

4

874

6,978

225,2

05

1,740

,221

409,1

99,91

29,8

89,57

9-

9,889

,579

419,0

89,49

1

As at

30 Ju

ne 20

10

Cost

27,34

8,750

123,8

42,46

924

,249,8

7260

1,502

,508

21,61

8,927

24,98

8,324

300,0

00

233,2

00

5,799

,527

154,9

60

11,88

0

27,35

0

698,2

50

14,26

3,317

845,0

39,33

413

,810,7

25-

13,81

0,725

858,8

50,05

9

Accu

mulat

ed de

precia

tion

-48

,895,8

446,2

96,04

133

7,452

,508

11,61

8,927

13,98

8,324

267,5

94

205,8

83

3,948

,706

138,0

76

11,00

6

20,37

2

473,0

45

12,52

3,096

435,8

39,42

23,9

21,14

6-

3,921

,146

439,7

60,56

8

Net b

ook v

alue

27,34

8,750

74,94

6,625

17,95

3,831

264,0

50,00

010

,000,0

0011

,000,0

00

32,40

6

27,31

7

1,850

,821

16,88

4

874

6,978

225,2

05

1,740

,221

409,1

99,91

29,8

89,57

9-

9,889

,579

419,0

89,49

1

Depre

ciatio

n rate

per a

nnum

-10

510

1010

1010

1010

2010

1015

1015

Leas

ed as

sets

2010

Tang

ible

Build

ing

(Rup

ees )

Owne

d ass

ets

Tang

ible


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e

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26

4.1

4.2

Note 2011 2010

4.3 Depreciation for the year has been allocated as under:

Cost of sales 25 37,688,691

39,300,017

Distribution cost 26 388,542

405,155

Administrative expenses 27 777,088

810,309

38,854,321

40,515,481

4.4

(R u p e e s)

Cost CostAccumulated depreciation

Carryingamount

Accumulated depreciation

Carryingamount

Land 1,064,297

-

1,064,297

1,064,297

-

1,064,297

Building-factory 33,735,504

22,268,603

11,466,901

30,981,961

21,223,965

9,757,996

Building-others 7,380,828

5,237,390

2,143,438

7,380,828

5,124,577

2,256,251

Textile machinery 318,323,222

237,444,366

80,878,856

300,707,484

244,686,369

56,021,115

Electrical installation 5,965,235

4,035,396

1,929,839

5,404,243

3,829,137

1,575,106

Laboratory equipments 6,692,987

6,020,170

672,817

6,692,987

5,945,413

747,574

373,162,073 275,005,925 98,156,148 352,231,800 280,809,461 71,422,339

4.5

4.6 Property, plant and equipment, exceeding the book value of Rs. 50,000 disposed of during the year are as follows:

Cost Book ValueSale

ProceedsMode of Disposal

Vehicle 1,499,056

84,810

715,000

Qasim Jaan Negotiation

Peer Khail,

Amaan Kot

Distt. Sawaat2011 1,499,056

84,810

715,000

2010 1,551,034

120,102 619,962

5. DUE FROM EX-ASSOCIATED UNDERTAKINGS-Unsecured

6. STORES, SPARES AND PACKING MATERIAL

Stores 1,027,149 1,462,808Spares 24,189,615 25,255,825Packing material 13,607,776 12,765,995

38,824,540 39,484,628

Additions to owned textile machinery include transfer of machinery of Rs. 9,889,579 (at cost less accumulated depreciation) fromleased assets (2010: Nil).

(R u p e e s)

Additions to owned vehicles include transfer of vehicle of Nil (at cost less accumulated depreciation) from leased assets (2010:Rs. 882,580).

(R u p e e s)

BuyerDescription

This represents the amount receivable from various companies which were previously associated undertakings but have now beenallocated by the Honourable Lahore High Court, Lahore to other families of ex-Ittefaq Group. However, the matter is still under litigation.

If the items of property, plant and equipment that have been carried at revalued amount were measured at cost model, thecarrying amounts would be as follows:

20102011

The land-freehold, buildings, textile machinery, electric installation and laboratory equipment were revalued as on 30 September2001, 30 April 2008 and 30 June 2010 by an independent valuer resulting in increase in the value of assets by Rs. 196,585,134,Rs. 264,328,930 and Rs. 24,683,078 respectively, using market replacement and current values.


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27

2011 2010

7. STOCK-IN-TRADE

Raw material:Cotton 11,402,177 3,732,601Cotton waste purchased 1,841,560

3,816,618

Work in process 7,396,933

5,412,062

Finished goods and waste 2,678,940

4,650,400

Cotton waste produced 1,672,232

389,086

24,991,842

18,000,767

8. TRADE DEBTS-Unsecured and considered good

9. ADVANCES-Considered good

Advances to:Suppliers -

1,307,384

Staff against salary -

27,900

Contractors -

60,000

Others 174,409

204,459

174,409

1,599,743

10. TRADE DEPOSITS AND SHORT TERM PREPAYMENTS

Trade deposits 979,814 11,600,390 Short term prepayments 1,249,138

3,023,709

2,228,952

14,624,099

11. OTHER RECEIVABLES

Excise duty 300,713

276,311

Sales tax-net 1,422,403

2,444,599

1,723,116

2,720,910

12. CASH AND BANK BALANCES

Cash in hand 990,008

952,720

Balance with banks on current account 4,702,497

12,447,502

5,692,505

13,400,222

13. SHARE CAPITAL AND RESERVES

Authorised capital

12,000,000 (2010: 12,000,000) ordinary shares of Rs. 10 each 120,000,000

120,000,000

Issued, subscribed and paid up capital

10,000,000 (2010: 10,000,000) ordinary shares of Rs. 10 each fully paid in cash 100,000,000 100,000,000700,000 (2010: 700,000) ordinary shares of Rs. 10 each issued as fullypaid bonus shares 7,000,000 7,000,000

107,000,000 107,000,000

(R u p e e s)

This includes balance receivable from an associated undertaking amounting to Rs. 7,665,796 (2010: Rs. 9,880,923).


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28

Note 2011 2010

14. SURPLUS ON REVALUATION OF FIXED ASSETS

Balance as on 01 July 164,207,310

177,263,219

Add: revaluation during the year-net of deferred tax -

16,044,001

18,183,336

29,099,910

146,023,974

164,207,310

15. SPONSORS' LOAN

Sponsors 15.1 30,400,000

30,400,000

Ex-directors 125,672,362

120,248,612

156,072,362

150,648,612

15.1

16. SPONSORS' UNCLAIMED DIVIDEND

17. DUE TO EX-ASSOCIATED UNDERTAKINGS

18. STAFF RETIREMENT BENEFITS-Gratuity

Balance as at 01 July 5,542,934

5,239,904

Amount recognised for the year 18.2 3,519,356

2,700,855

Benefit payments during the year (1,843,844)

(2,397,825)

Balance as at 30 June 18.1 7,218,446

5,542,934

18.1 Present value of defined benefit obligation as at 01 July 18.1.1 7,567,801

6,143,913

Actuarial gains/(losses) to be recognised in later periods 18.1.2 (18,745)

60,242

7,549,056

6,204,155

Less: unrecognised transitional liability 330,610

661,221

Balance sheet liability as at 30 June 7,218,446

5,542,934

18.1.1 Present value of defined benefit obligation as at 01 July 6,143,913

6,493,370

Current service cost 2,451,475

1,629,665

Interest cost 737,270

740,579

Benefit payments during the year (1,843,844)

(2,397,825)

Actuarial (gain)/loss 78,987

(321,876)

Present value of defined benefit obligation as at 30 June 7,567,801 6,143,913

18.1.2 Unrecognised actuarial gains/(losses) as at 01 July 60,242 (261,634)

Actuarial gains/(losses) arising during the year (78,987) 321,876

Unrecognised actuarial gains/(losses) as at 30 June (18,745)

60,242

This amount is related to sponsors of the company and this matter is also subjudice before the Honourable Lahore High Court, Lahorealongwith the case of sponsors' loan.

(R u p e e s)

This amount was provided by the sponsors of the company, terms and conditions of which are still unsettled. Matter of sponsors'loan is subjudice before the Honourable Lahore High Court, Lahore.

Less: transfer to unappropriated loss/statement of comprehensive income on account of incremental depreciation-net of deferred tax

This amount includes principal amount of Rs. 13,440,113 (2010: Rs. 13,440,113) and mark up payable of Rs. 18,889,685 (2010: Rs. 18,889,685) on unsecured loans of various companies which were previously associated undertakings but have now been allocated by the Honourable Lahore High Court, Lahore to other families of ex-Ittefaq Group. However, the matter is still under litigation.


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Note 2011 2010

18.2 330,611

330,611

Current service cost 2,451,475

1,629,665

Interest cost 737,270

740,579

Total amount recognised 3,519,356

2,700,855

18.3 Recent actuarial valuation of plan was carried out on 30 June 2011 by Nauman Associates.

18.4 Significant actuarial assumptions used for valuation of these plans are as follows:

Discount rate 14% 12%

Expected rate of salary increase 13% 11%

Average expected remaining working life time of employees 7 Years 7 Years

19. DEFERRED TAXATION-Net

The liability for deferred taxation comprises of temporary difference relating to:

Taxable temporary difference-accelerated tax depreciation 112,753,568

124,912,804

Deductible temporary difference-unused tax losses, provision for staff retirement benefits-gratuity and others (76,955,344)

(76,865,466)

35,798,224

48,047,338

19.1 The movement for the year in company's net deferred tax position is given below:

Deferred tax liability

Accelerated tax

depreciation

Unused tax losses

Balance as at 01 July 2009 127,257,456

(46,139,432)

(8,445,356)

72,672,668

Credited to profit and loss account (2,344,652)

(22,078,144)

(202,534)

(24,625,330)

Balance as at 30 June 2010 124,912,804

(68,217,576)

(8,647,890)

48,047,338

Charged/(credited) to profit and loss account (12,159,236)

(6,211,312)

6,121,434

(12,249,114)

Balance as at 30 June 2011 112,753,568

(74,428,888)

(2,526,456)

35,798,224

20. TRADE AND OTHER PAYABLES

Creditors 38,326,924

28,913,313

Accrued liabilities 9,164,404

14,439,530

Refundable securities 500,000

300,000

Due to associated undertaking 20.1 19,434,250

21,478,000

Income tax deducted at source 205,557

90,337

67,631,135

65,221,180

20.1 This represents unsecured and interest free loan from an associated undertaking.

21. SHORT TERM BORROWINGS

From banking companies-Secured:

Cash finance/overdraft 21.1 53,379,275

44,865,816

Finance against trust receipts 21.2 15,000,000

15,000,000

68,379,275

59,865,816

Net liability

Deferred tax asset

Provision for staff retirement benefits-gratuity

and others

(R u p e e s)

Liability charged due to application of IAS 19


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30

21.1

first pari passu charge of Rs. 67 million on fixed assets of the company

hypothecation of stores, spares and packing material

floating charge on all movable assets

pledge of cotton bales and yarn

ranking charge of Rs. 178 million on current assets of the company

personal guarantees of the directors of the company

21.2

first pari passu charge of Rs. 25 million on fixed assets of the company

personal guarantees of the directors of the company

22. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Payments Interest Principal Payments Principal

Less than one year -

-

-

- -

-

Between one and

five years -

-

-

279,433

3,793

275,640

-

-

-

279,433

3,793

275,640

Less: current maturity -

275,640

-

-

23. CONTINGENCIES AND COMMITMENTS

2011 2010

24. SALES-Net

Sales:

Local 1,088,269,212 634,980,829

Export -

83,944,682

Cotton waste 25,401,263 7,914,856

1,113,670,475 726,840,367

Less: commission 2,955,933 2,496,8891,110,714,542 724,343,478

Commitments in respect of letters of credit other than for capital expenditure were Nil (2010: Rs. 972,454) as on balance sheet date.

(R u p e e s)

Interest

This includes an amount of Rs. 3,275,981 being an unfourable balance of current account maintained by the company with bank.

2011

This facility against an aggregate limit of Rs. 15 million (2010: Rs. 15 million) is a sub-limit of Cash Finance (pledge) with limit ofRs. 120 million. It carries mark-up at the rate of 6 months KIBOR + 3.0% with a floor of 5.5% (2010: 6 months KIBOR + 3.0%with a floor of 5.5%) per annum payable on quarterly basis and is secured against:

This facility has been obtained against the aggregate sanctioned limit of Rs. 160 million (2010: Rs. 160 million). It carries mark-up at the rate of 6 months KIBOR + 3.0% with a floor of 5.5% (2010: 6 months KIBOR + 3.0% with a floor of 5.5%) per annumpayable on quarterly basis and is secured against:

2010

(R u p e e s)

The implicit rate of interest used as discounting factor is 1.2948% (2010: 1.2948%) per month. The amount of future payments andperiod during which they fall due are:


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Note 2011 2010

25. COST OF SALES

Raw material consumed 918,196,788

521,170,936

Stores, spares and packing material consumed 14,688,654

14,982,369

Fuel and power 89,195,921

89,051,895

Salaries and wages 63,063,575

53,592,054

Insurance 1,999,615

970,001

Repairs and maintenance 1,266,261

918,171

Factory expense 2,155,779

3,120,272

Depreciation 4.3 37,688,691

39,300,017

1,128,255,284 723,105,715

Effect of work in process inventory:

Opening 5,412,062

-

Closing (7,396,933)

(5,412,062)

(1,984,871)

(5,412,062)

Cost of goods manufactured 1,126,270,413 717,693,653

Effect of finished goods and waste inventory:

Opening 5,039,486

28,200

Purchases 160,954

-

Closing (4,351,172)

(5,039,486)

849,268

(5,011,286)

1,127,119,681 712,682,367

26. DISTRIBUTION COST

Salaries and other benefits 847,963 543,400

Inland transportation 168,800 661,500 Export development surcharge - 206,678 Postage, telephone and telegram 291,563 289,169 Electricity 187,789

110,648

Freight and octroi 5,530

401,965

Freight on export -

1,569,946

Depreciation 4.3 388,542

405,154

1,890,187

4,188,460

27. ADMINISTRATIVE EXPENSES

Directors' remuneration 840,000

700,000

Salaries and other benefits 7,180,090

6,572,574

Repairs and maintenance 632,944

89,269

Electricity 187,789

198,035

Travelling and conveyance 191,887

27,683

Printing and stationery 239,640

266,299

Telephone and fax 220,772

169,690

Postage and courier 59,176

113,479

Newspaper and periodicals 11,615

6,000

Entertainment 252,794

134,339

Vehicle running and maintenance 734,677

957,575

Fee, taxes and subscription 464,278

329,506

Legal and professional 617,004

570,080

Auditors' remuneration 27.1 597,400

370,000

Charity and donation 27.2 10,000 -

Advertisement 88,668 245,835

Depreciation 4.3 777,088 810,310

Miscellaneous 1,771,041 2,133,61914,876,863 13,694,293

(R u p e e s)


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2011 2010

27.1 Auditors' remuneration

Annual audit fee 500,000

300,000

Half year review 40,000

40,000

Code of corporate governance review 30,000

30,000

Out of pocket expenses 27,400

-

597,400

370,000

27.2 The directors and their spouses do not have any interest in the donee.

28. OTHER OPERATING INCOME

Income from financial assets:

Exchange loss on currency fluctuation -

(400,604)

Income from assets other than financial assets:

Profit on disposal of property, plant and equipment 630,190

499,860

630,190

99,256

29. FINANCE COST

Mark-up on long term financing 1,041,339

2,370,114

Mark-up on short term borrowings 17,348,105

14,793,426

Lease finance charges 43,195

402,685

Bank charges 593,365 1,456,947 19,026,004 19,023,172

30. TAXATION

Current: for the year 11,477,441

3,634,202

Deferred (12,249,114)

(22,358,275)

(771,673)

(18,724,073)

30.1 Relationship between accounting profit and tax expense

Accounting loss before taxation 51,568,003

25,145,558

Tax at the applicable tax rate of 1% (2010: 0.5%) 11,136,705

3,634,202

Tax effects of:

Flood surcharge levied 340,736

-

Deferred tax (12,249,114)

(22,358,275)

(771,673)

(18,724,073)

31. LOSS PER SHARE

Loss after taxation (50,796,330)

(6,421,485)

Weighted average number of ordinary shares in issue during the year (Numbers) 10,700,000

10,700,000

Loss per share - basic (4.75)

(0.60)

31.1 There is no dilutive effect on basic earnings per share of the company.

(R u p e e s)


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2011 2010

32. TRANSACTIONS WITH RELATED PARTIES

Associated undertakings: (Restated)

Purchases 967,555

1,010,777

Sales 74,691,018

18,070,923

Transfer of funds 7,900,000

7,100,000

Receipt of funds 5,856,250

9,600,000

Key management personnel:

Remuneration including fees 560,000

466,000

Housing and utilities 280,000

234,000

33. REMUNERATION OF CHIEF EXECUTIVE AND DIRECTORS

(R u p e e s)

Managerial remuneration - - 466,000 House rent -

-

187,000 Utilities -

-

47,000 Board meeting fee -

-

15,000

Total

560,000 224,000

56,000 20,000

860,000

- 715,000

No. of persons 2 1 2

33.1

2011 2010

34. PLANT CAPACITY AND ACTUAL PRODUCTION

Plant capacity:

- Number of spindles installed 17,280

17,280

- Number of spindles operated during the year 17,280

17,280

- Installed capacity at 20/s count based on 364 days and three shifts per day (Kgs) 4,668,224

4,668,224

- Number of days worked during the year 359

322

- Weight of yarn counts actually produced during the year converted into 20/s

based on three shifts per day (Kgs) 3,944,171

3,901,473

35. UNAVAILED CREDIT FACILITY

Short term running finance 91,620,725 100,134,184

The related parties comprise associated undertakings, other related parties, directors, key management personnel and employees'funds. Amount due from and due to these undertakings are shown under receivables and payables. Transactions with related partiesduring the year, other than those which have been disclosed elsewhere in these financial statements, are as follows:

The aggregate amount charged in these financial statements on account of managerial remuneration in respect of the chief executiveand directors of the company is as follows:

2010

(R u p e e s)

1

The Chief Executive Officer has been provided with company maintained car.

-

DirectorsChief ExecutiveDirectorsChief Executive

2011


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36. FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES

36.1 Financial risk factors

36.2 Market risk

(i) Currency risk

(ii) Cash flow and fair value interest rate risk

Fair value sensitivity analysis

Cash flow sensitivity analysis

(iii) Other price risk

36.3 Credit risk

2011 2010

Long term deposits 1,979,700 1,979,700

Trade debts 8,435,220 11,328,767

Advances 174,409 1,599,743

Trade deposits 979,814 11,600,390

Other receivables 1,723,116 2,720,910

Balance with banks on current account 4,702,497 12,447,502

17,994,756 41,677,012

The company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at balance sheet date would not affect profit or loss of the company.

The company does not have any variable rate instruments at the reporting date. Therefore, a change in interest rate at the reporting date would not affect profit or loss of the company.

The company finances its operations through equity, borrowings and management of working capital with a view tomaintaining an appropriate mix between various sources of finance to minimise risk and provide maximum return toshareholders.

The company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest raterisk and cash flow interest rate risk), credit risk and liquidity risk. The company's overall risk management programme focuseson the un-predictability of financial markets and seeks to minimize potential adverse effects on the company's financialperformance. Risk management is carried out by the company's finance department under policies approved by the board ofdirectors. The company's finance department evaluates and hedges financial risks. The board provides principles for overallrisk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk andinvestment of excess liquidity.

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because ofchanges in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables andpayables that exist due to transactions in foreign currencies.

(R u p e e s)

Interest rate risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company does not have long term interest bearing assets. The company's interest rate risk arises from short term borrowings. Borrowings obtained at variable rates expose the company to cash flow interest rate risk.

Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuatebecause of changes in market prices (other than those arising from interest rate risk or currency risk), whether thosechanges are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similarfinancial instruments traded in the market. The company is not exposed to commodity price risk since it has a diverseportfolio of commodity suppliers.

Credit risk represents the risk that one party to a financial instrument will cause the financial loss for the other party by failingto discharge an obligation. The carrying amount of assets represents the maximum credit exposure. The maximum exposureto credit risk at the reporting date was as follows:


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35

36.6 Financial assets and liabilities

TOTALMaturity Maturity

upto one after one

Maturity

upto one

year

Maturity

after one

year

Sub

Totalyear year

Sub

Total

Financial assets

Loans and receivables

Long term deposits -

-

-

-

1,979,700

1,979,700

1,979,700

Due from ex-associated

undertakings -

-

-

-

15,650,727

15,650,727

15,650,727

Trade debts -

-

-

8,435,220

-

8,435,220

8,435,220

Advances -

-

-

174,409

-

174,409

174,409

Trade deposits -

-

-

979,814

-

979,814

979,814

Cash and bank balances -

-

-

5,692,505

-

5,692,505

5,692,505

Total -

-

-

15,281,948

17,630,427

32,912,375

32,912,375

Financial liabilities

Financial liabilities at amortised cost

Sponsors' loan -

-

-

-

156,072,362

156,072,362

156,072,362

Due to ex-associated

undertakings - - - - 32,329,798 32,329,798 32,329,798

Staff retirement gratuity - - - - 7,218,446 7,218,446 7,218,446

Trade and other payables - - - 67,425,578 - 67,425,578 67,425,578

Accrued mark up - - - 5,024,011 - 5,024,011 5,024,011

Short term borrowings 68,379,27568,379,275

- 68,379,275 - - - 68,379,275Total - 68,379,275 72,449,589 195,620,606 268,070,195 336,449,470

(R u p e e s)

INTEREST/ MARK UP BEARING NON-INTEREST/ MARK UP BEARING

2011

Short term

Al-Baraka Islamic Investment Bank PACRA A2 A

Askari Bank Ltd. PACRA A1+ AA

Bank Alfalah Ltd. PACRA A1+ AA

Habib Bank Ltd. JCR-VIS A1+ AA+

MCB Bank Ltd. PACRA A1+ AA+

National Bank of Pakistan Ltd. JCR-VIS A1+ AAA

Soneri Bank Ltd. PACRA A1+ AA-

Standard Chartered Bank Ltd. PACRA A1+ AAA

Faysal Bank Ltd. PACRA A1+ AA

36.4 Liquidity risk

36.5 Fair value estimation

The credit risk on liquid funds is limited because the counter parties are banks with reasonable high credit ratings. Thecompany believes that it is not exposed to major concentration of credit risk as its exposure is spread over a significantnumber of counter parties.

Rating agency

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligation associated with financial liabilities. Thecompany manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount ofcommitted credit facilities. At reporting date, the company had Rs. 160 million available borrowing limits from financialintitutions and Rs. 5.693 million cash and bank balances.

Rating

Long term

The carrying value of financial instruments reflected in the financial statements approximate their fair values. Fair value isdetermined on the basis of objective evidence at each reporting date. The fair value of financial instruments traded in activemarkets is based on quoted market price at the balance sheet date. However, the company does not hold any quotedfinancial instrument.

The credit quality of company's bank balances can be assessed with reference to external credit ratings as follows:


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36

(Restated)

TOTALMaturity Maturity

upto one after oneSubTotal

year year

Financial assets

Loans and receivables

Long term deposits -

-

Maturity

upto oneyear

-

Maturity

after oneyear

-

1,979,700

1,979,700

SubTotal

1,979,700

Due from ex-associated undertakings -

-

-

-

15,650,727

15,650,727

15,650,727

Trade debts -

-

-

11,328,767

-

11,328,767

11,328,767

Advances -

-

-

1,599,743

-

1,599,743

1,599,743

Trade deposits -

-

-

11,600,390

-

11,600,390

11,600,390

Cash and bank balances -

-

-

13,400,222

-

13,400,222

13,400,222

Total -

-

-

37,929,122

17,630,427

55,559,549

55,559,549

Financial liabilities

Financial liabilities at amortised cost

Sponsors' loan -

-

-

-

-

-

-

150,648,612

150,648,612

150,648,612

Due to ex-associatedundertakings - 32,329,798

32,329,798

32,329,798

Medium term loan 8,193,422

-

8,193,422

8,193,422

Liabilities against assets

subject to finance lease 275,640 - 275,640 275,640 Staff retirement gratuity - - - -

-

-

-

-

-

-

5,542,934 5,542,934 5,542,934

Trade and other payables - - - 65,130,843 - 65,130,843 65,130,843 Accrued mark up -

-

-

4,205,275

-

4,205,275

4,205,275 Short term borrowings 59,865,816 -

59,865,816

-

-

-

59,865,816 Total 68,334,878 -

68,334,878

69,336,118

188,521,344

257,857,462

326,192,340

37. CAPITAL RISK MANAGEMENT

2011 2010

(Restated)

Borrowings 194,051,637 188,583,490

Total equity (14,350,841) 18,262,153

Total capital employed 179,700,796 206,845,643

Gearing ratio (%) 107.99 91.17

38. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue on 04 October 2011 by the board of directors.

INTEREST/ MARK UP BEARING NON-INTEREST/ MARK UP BEARING

2010

(R u p e e s)

(R u p e e s)

The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order toprovide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost ofcapital. In order to maintain or adjust the capital structure, the company may adjust the amount of dividend paid to shareholders, issuenew shares and other measures commensurating to the circumstances. The company monitors the capital structure on the bases ofgearing ratio. This ratio is calculated as borrowings divided by total capital employed. Borrowings represent long term financingobtained by the company from ex-directors of the company and short term borrowings from banks as referred to in the notes 15 and21. Total capital employed includes 'total equity' as shown in the balance sheet plus 'borrowings'.


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39. CORRESPONDING FIGURES

-

-

-

-

-

-

-

-

40. GENERAL

Figures have been rounded off to the nearest rupee.

Corresponding figures have been re-arranged and re-classified, wherever necessary, for the purpose of better presentation. Significantre-classifications are as follows:

'Loans & advances' has been re-named as 'Advances'.

Distribution cost of Rs. 4,188,460 has been re-classified from 'Administrative and selling expenses' to 'Distribution cost'.

'Staff retirement gratuity' has been re-named as 'Staff retirement benefits-gratuity'.

Exchange loss on currency fluctuation has been re-classified from 'Other operating expenses' to 'Other operating income'.

'Provision for taxation' amounting to Rs. 5,795,863 has been set-off with 'Advance income tax' amounting to Rs. 48,774,469 andre-classified from 'Trade deposits, short term prepayments and other receivables' to 'Tax refunds due from the government'.

Sales tax refundable of Rs. 2,444,599 and advance excise duty of Rs. 276,311 have been re-classified from 'Trade deposits,short term prepayments and other receivables' to 'Other receivables'.

Prepayments of Rs. 14,624,099 has been re-classified from 'Trade deposits, short term prepayments and other receivables' to'Trade deposits and short term prepayments'.

Current portion of liabilities against assets subject to finance lease of Rs. 275,640 has been re-classified from 'Current portion oflong term liabilities' to 'Current portion of liabilities against assets subject to finance lease'.

37



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FORM OF PROXY

No. of Shares Please Quote Folio No.

I/We

a member(s) of KHALID SIRAJ TEXTILE MILLS LIMITED and holding

ordinary shares, as per Register folio / CDC A/c No.

hereby appoint Mr.

of failing his

who is also a member of the company vide Register Folio / CDC A/c No.

proxy to vote for me/us and on my/our behalf at the 24th Annual General Meeting of

on 31st October 2011 at 10:30 a.m. and at any adjournment thereof

the Company to held

of

of

of

as my/our

As witness my/our hand this day of 2011.

REVENUE

STAMP 1. Witness

2. Witness

SIGNATURE OF MEMBER (S)

A member entitled to attend a General Meeting is entitled to appoint a proxy to attend and vote instead of his behalf. No person shall act as proxy (except for a corporation) unless he is entitled to be present and vote in his own right.

The instrument appointing a proxy should be signed by the member or by his attorney duly authorised in writing. If the member is a corporation its common seal (if any) should be affixed to the instrument.

The proxies shall be lodged with the company not later than 48 hours before the time of meeting.

For CDC account holders:

-

-

-

The proxy form shall be witnessed by two persons where names, addresses and CNIC numbershall be mentioned on the form.

Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form.

The proxy shall produce his/her original CNIC or original passport at the time of meeting.


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