KOHINOOR SUGAR MILLS LIMITED. Page #

Transcription

1 Page #

2 2

3 BOARD OF DIRECTORS MR. GYIAS UL HASSAN MR. M. FAROOQUE SAIGOL MR. M. SALEEM SAIGOL MR. M. NAEEM SAIGOL MR. ATIF ZAHEER FAROOQI MR. FAROOQ AHMED SHEIKH ASIM RAFIQ Chief Executive NIT Nominee AUDIT COMMITTEE MR. ATIF ZAHEER FAROOQI MR. GYIAS UL HASSAN MR. FAROOQ AHMED Chairman Member Member COMPANY SECRETARY AUDITORS BANKERS MR.FAROOQ AHMED M/S. UHY HASSAN NAEEM & CO. Chartered Accountants FAYSAL BANK LIMITED HABIB BANK LIMITED SHARE REGISTRAR M/S. CORPLINK (PVT) LIMITED WINGS ARCADE, 1K COMMERCIAL, MODEL TOWN, LAHORE. TEL : , FAX: LEGAL ADVISOR Mr. ANWAAR HUSSAIN REGISTERED OFFICE MILLS OFFICE # 1112, 4 TH FLOOR, ALI TOWER, M.M. ALAM ROAD GULBERG III, LAHORE. Internet: secretary@ksml.com.pk JAUHARABAD, DISTRICT KHUSHAB. 3

4 Notice is hereby given that the Forty Fifth Annual General Meeting of the Kohinoor Sugar Mills Limited will be held on Friday, January 31, 2014 at 11:30 a.m., at Office No. 1112, 4th Floor, Ali Tower, M.M. Alam Road, GulbergIII, Lahore, the registered office of the Company to transact the following business: ORDINARY BUSINESS 1. To confirm the minutes of the Annual General Meeting held on January 31, To review and adopt the audited accounts together with Directors' and Auditors' report for the year ended September 30, To appoint Auditors and to fix their remuneration. 4. Any other business with the permission of the chair. By order of the Board Lahore: January 08, (Farooq Ahmed) Company Secretary 1. The share transfer books of the Company will remain closed from January 24, 2014 to January 31, 2014 (both days inclusive). 2. A member entitled to attend and vote at the meeting may appoint another member as his / her proxy to attend and vote. Proxies, in order to be affective, must be received at the registered office of the Company, not later than 48 hours before the time of holding of the meeting. 3. CDC Shareholders entitled to attend and vote for this meeting, must bring with them their CNIC/ Passports in original along with Participant's ID Numbers and their identity, and in case of Proxy, must enclose an attested copy of his/ her CNIC or Passport. Representatives of Corporate members should bring usual documents (Power of Attorney/ Resolution) required for such purpose. 4. Shareholders are requested to notify the Company's Share Registrar of any change in their addresses. 4

5 5

6 Your Directors are pleased to present the Forty Fifth report together with audited accounts for the year ended September 30, FINANCIAL RESULTS Profit / (loss) before taxation Taxation Current Deferred Profit / (loss) after taxation 434,804 (138,961) 295,843 (276,430) (16,855) 95,688 (197,597) Operating results for the year and comparative figures are as under: Crushing days Nos Average recovery % Cane crushed M. Tons 321, , , ,977 Sugar produced M. Tons 26,420 35,646 30,673 21,470 Shortage of liquidity combined with previous years losses caused gross loss situation. The recovery remained low due to procurement of unapproved sugarcane with insufficient resources. Higher support price of cane and stagnant sugar rates combined to cause heavy gross loss. The Company is able to report profit mainly due to volunteer writing off the sponsors' interest free loans to improve the strength of the Company. The liquidity is injecting through sponsor s and other associates resources in the Company. PROSPECTS FOR Marginal improvement in availability of sugarcane is expected with increase in approved varieties. This will improve recovery and so as sugar production. Sugar sale rates, however, will remain either at present levels or improve marginally due to sugar glut. The exports allowed by the government and assurance to procure through TCP may help in improving the margins which is warmly welcomed by the industry. 6

7 AUDITORS' REPORT AUDITORS In reply to auditors' observations, your Directors have to comment as follows: The Company though has suffered operational loss but with the writing off the substantial loan of the sponsors' the financial strength of the Company has significantly improved which has been benefited into the equity and current ratio. This would help the operations through availability of working capital to meet the operational requirements. The write off advances from customers is on account of final settlement with the parties. The Company's management believes that there would be no claims in this respect. The Company has an operating loss and profit after tax has been generated by writing off sponsors' loan and advances from customers. The Company's management believes that this profit is not related to operational activity and does not justify such provision. The retiring auditors M/s. UHY Hassan Naeem & Co., Chartered Accountants are eligible for the ensuing period, and have offered themselves for reappointment. APPRECIATION Management and employee relations remained highly satisfactory and your Directors place on record their appreciation to all concerned. BOARD OF DIRECTORS MEETINGS During the year , four meetings of the Board of Directors were held. The attendance by each Director is as follows: No. of Meetings Attended 1. Mr. Gyias Ul Hassan 2 2. Mr. M. Farooque Saigol 2 3. Mr. Atif Zaheer Farooqi 1 4. Mr. M. Saleem Saigol 3 5. Mr. M. Naeem Saigol 2 6. Mr. Farooq Ahmed 1 7. Mr. Tariq Rehman (Resigned) 1 8. Khawaja Khurshid Anwar (Resigned) 9. Mr. Zahid Sultan Sheikh (Resigned) 10. Mrs. Ghazala Amjad (Resigned) Sheikh Asim Rafiq NIT Nominee 4 During the year Mr. Zahid Sultan Sheikh, Mr. Tariq Rehman, Khawaja Khurshid Anwar and Mrs. Ghazala Amjad had resigned from Board on 26Apr2013, 27Apr2013, 27Apr2013 and 13Jun2013 respectively. The casual vacancies are filled accordingly. PATTERN OF SHAREHOLDING The pattern of shareholding of the Company is annexed with the financial statements. COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE The management is fully aware of the compliance with the Code of Corporate Governance and steps have been taken for its effective implementation. The various statements, as required by the Code, are given below: PRESENTATION OF FINANCIAL STATEMENTS The financial statements, prepared by the management of the Company, fairly present its state of affairs, the results of its operations, cash flow and changes in equity. 7

8 BOOKS OF ACCOUNT The Company has maintained proper books of Account as required by the Companies Ordinance, ACCOUNTING POLICIES Appropriate accountings policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. INTERNATIONAL ACCOUNTING STANDARDS (IAS) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. INTERNAL CONTROL SYSTEM The system of internal control is sound in design and has been effectively implemented and monitored. The review will continue in future for the improvement in controls. GOING CONCERN There are no doubts upon the Company's ability to continue as a going concern, as stated in note 1.2. SUMMARIZED FINANCIAL DATA Operating and financial summarized data for the last six years is annexed with financial statements. INVESTMENTS IN PROVIDENT FUND Value of Investments based on last audited accounts of Provident Fund is Rs million. AUDIT COMMITTEE The Board of Directors in compliance to the Code of Corporate Governance has established an Audit Committee. Following directors are its members. Mr. Atif Zaheer Farooqi Mr. Gyias Ul Hassan Mr. Farooq Ahmed SAFETY AND ENVIRONMENTS Chairman Member Member The Company strictly complies with the standards of the safety rules & regulations. It also follows environmental friendly policies. TRADING COMPANY'S SHARES None of the Directors, CEO, CFO, Company Secretary and their spouses and minor children has made transaction of Company's shares during the year. OUTSTANDING STATUTORY DUES Detail of outstanding statutory dues is given in Note 23 to the accounts. COMMUNICATION Communication with the shareholders is given high priority. Annual, Half Yearly and Quarterly Accounts are distributed to them within the time specified in the Companies Ordinance, Every opportunity is given to the individual shareholders to attend and freely ask questions about the Company's operations at the Annual General Meeting. LAHORE : November 11, (GYIAS UL HASSAN) 8

9 STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE Year Ended: September 30, 2013 This statement is being presented to comply with the Code of Corporate Governance (CCG) Contained in Regulation No. 35 of listing regulations of Karachi Stock Exchange Limited and Lahore Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the CCG in the following manner: 1. The company encourages representation of independent, nonexecutive directors and executive directors representing minority interests on its board of directors. At present the board includes: Category Independent Directors Executive Directors NonExecutive Directors i ii iii i ii i ii Names Mr. Gyias Ul Hassan Mr. Atif Zaheer Farooqi Shiekh Asim Rafiq Mr. M. Farooque Saigol Mr. M. Saleem Saigol Mr. M. Naeem Saigol Mr. Farooq Ahmed The Independent Directors meet the criteria of independence under clause i (b) of the CCG. The Chief Executive and Directors have voluntarily forgone their remuneration and allowances with effect from April, The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this. 3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. During the year the following Directors had resigned: a. Mr. Zahid Sultan Sheikh dated 26Apr2013 b. Mr. Tariq Rehman dated 27Apr2013 c. Khawaja Khurshid Anwar dated 27Apr2013 d. Mrs. Ghazala Amjad dated 13Jun2013 and the following Directors have filled the casual vacancies: a. Mr. Gyias Ul Hassan Appointed on 29Apr2013 b. Mr. Atif Zaheer Farooqi Appointed on 29Apr2013 c. Mrs. Ghazala Amjad Appointed on 29Apr2013 d. Mr. Farooq Ahmed Appointed on 13Jun2013 9

10 5. The company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. 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, other executive and nonexecutive directors, have been taken by the board/shareholders. 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. Orientation course has been arranged during the year. 10. The appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment has been duly approved by the Board. 11. The directors' report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the board. 13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the CCG. 15. The board has formed an Audit Committee. It comprises of three members; all of them are nonexecutive directors and the chairman of the committee is an independent Sr. Names Category Position i Mr. Atif Zaheer Farooqi Independent Directors Chairman ii Mr. Gyias Ul Hassan NonExecutive Directors Member iii Mr. Farooq Ahmed NonExecutive Directors Member 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the CCG. The terms of reference of the committee have been formed and advised to the committee for compliance. 10

11 17. The board has formed an HR and Remuneration Committee. It comprises of three members; all of them are nonexecutive directors and the chairman of the committee is an independent director. Sr. Names Category Position i Independent Mr. Atif Zaheer Farooqi Directors Chairman ii Mr. Gyias Ul Hassan NonExecutive Directors Member iii Mr. Farooq Ahmed NonExecutive Directors Member 18. The Board has setup effective internal audit function. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 20. 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. 21. The 'closed period', prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of Company's securities, was determined and intimated to directors, employees and stock exchange(s). 22. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s). 23. We confirm that all other material principles enshrined in the CCG have been complied with. LAHORE: November 11, 2013 (GYIAS UL HASSAN) 11

12 We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance, prepared by the Board of Directors of Kohinoor Sugar Mills Limited to comply with the Listing Regulations 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 the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control system sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement of internal controls covers all controls and the effectiveness of such internal controls. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance for the year ended September 30, Date : November 11, Place : LAHORE 12

13 We have audited the annexed balance sheet of Kohinoor Sugar Mills Limited as at September 30, 2013 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the 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, 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) (b) (c) (d) (e) During the year advances from customers amounting to Rs million has been written off, confirmation from the related parties in this regard was not provided for verification. Provision for sum of Rs million on account of Worker s Profit Participation Fund has not been made in the Financial Statements. In our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984; 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; In our opinion, except for the effect, if any, of the matter referred to in paragraph (a) and (b) above and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at September 30, 2013 and of the profit, its cash flows and changes in equity for the year then ended; and (f) In our opinion, no Zakat was deductible at source under the Zakat and Usher Ordinance, 1980 (XVIII of 1980). Without qualifying our opinion we draw attention to financial statements, which state that as on September 30, 2013 the Company during the year suffered a gross loss and operating loss of Rs million and Rs million respectively. Though the loss has been converted into net profit after tax of Rs million and net positive equity of Rs million. Such losses cast doubt on the Company s ability to continue as going concern. Date : November 11, Place : LAHORE 13

14 BALANCE SHEET AS AT SEPTEMBER 30, NON CURRENT ASSETS Property, plant and equipment Long term deposits Deferred tax asset CURRENT ASSETS 24 2,245,285, ,811 2,245,684,592 2,279,236,947 1,027, ,991,793 2,451,255,791 Stores, spare parts and loose tools Stock in trade Trade debtsunsecuredconsidered good Loans and advances Trade deposits and short term prepayments Other receivablesunsecuredconsidered good Taxation Cash and bank balances CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowingssecured Current portion of long term liabilities Provision for taxation ,033, ,688,478 53,171, ,646 25,557,376 31,916,795 4,902, ,733, ,312,747 28,856, ,449, ,322, ,800,968 22,862,761 21,985, ,877 14,077,226 41,940,868 5,621, ,949, ,465,874 61,529, ,000, ,816,575 16,855,324 CURRENT ASSETS LESS CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES 655,618,655 50,114,920 2,295,799,512 1,185,667,132 (598,717,273) 1,852,538,518 CONTINGENCIES AND COMMITMENTS NON CURRENT LIABILITIES Long term finances Liabilities against assets subject to finance lease Sponsors and other associates loans Long term advances Long term provision Deferred taxation NET ASSETS ,347, ,368, ,000,000 1,309, ,340,585 1,186,366,131 1,109,433, ,993,750 2,179, ,095, ,000,000 1,309, ,577,227 1,038,961,291 REPRESENTED BY: Share capital Capital reserve premium on right shares Revenue reserves General reserve Accumulated balance ,097,970 26,879,210 62,000,000 (176,949,950) (114,949,950) 109,097,970 26,879,210 62,000,000 (497,253,147) (435,253,147) TOTAL CAPITAL AND RESERVES SURPLUS ON REVALUATION OF ASSETS 26 21,027,230 1,088,406,151 (299,275,967) 1,338,237,258 1,109,433,381 1,038,961,291 The annexed notes from 1 to 43 form an integeral part of these financial statements Date : November 11, Place : LAHORE ATIF ZAHEER FAROOQI GYIAS UL HASSAN 14

15 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER 30, Sales Cost of Sales GROSS PROFIT / (LOSS) OPERATING EXPENSES Distribution cost Administrative expenses Other operating expenses OPERATING PROFIT / (LOSS) FINANCE COST OTHER INCOME / (EXPENSES) PROFIT / (LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT / (LOSS) AFTER TAXATION OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR EARNING/(LOSS) PER SHARE 1,143,758,430 1,485,980,606 (342,222,176) 3,493,452 74,115, ,000 (78,198,686) (420,420,862) (45,125,997) 900,351, ,804,468 (138,961,252) 295,843, ,843, ,963,708,283 2,060,071,986 (96,363,703) 5,884,412 76,738, ,000 (83,212,630) (179,576,333) (95,230,808) (1,622,449) (276,429,590) 78,832,333 (197,597,257) (197,597,257) (18.11) The annexed notes from 1 to 43 form an integeral part of these financial statements Date : November 11, Place : LAHORE ATIF ZAHEER FAROOQI GYIAS UL HASSAN 15

16 CASH FLOW STATEMENT FOR THE YEAR ENDED SEPTEMBER 30, CASH FLOW FROM OPERATING ACTIVITIES Profit / (loss) before taxation Adjustments for : Depreciation Balances Written off Provision for surcharge Finance cost Gain / (loss) on disposal of property, plant and equipment 434,804,468 61,509,447 (907,511,882) 10,668,240 45,125,997 2,738,771 (276,429,590) 26,697,130 95,230,808 (3,043) Operating profit before working capital changes (352,664,959) (154,498,609) (Increase) / Decrease in current assets Stores, spare parts and loose tools Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables 12,289,136 (121,887,510) 22,862,761 (31,185,998) (124,769) (11,480,150) (5,722,873) 260,605,014 (21,979,163) 6,745,800 6,234 1,475,825 Increase / (Decrease) in current liabilities Trade and other payables Cash (Used in)/ generated from operations (482,191,489) 2,719,624 (479,471,865) 86,632, ,283, ,916,099 Taxes paid/adjusted Dividend paid Finance cost paid Net Cash (used in)/generated from operating activities (6,831,251) (10,619) (76,578,624) (562,892,359) (16,762,981) (147) (91,519,473) 297,633,498 CASH FLOW FROM INVESTING ACTIVITIES Addition to property, plant and equipment Sale proceeds on disposal of property, plant and equipment Long term deposits Long term advances Net Cash (used in)/generated from investing activities (35,699,267) 8,280, , ,000,000 88,209,160 (13,462,147) 291,945 (13,170,202) CASH FLOW FROM FINANCING ACTIVITIES Long term finances (paid) / disbursed Lease liabilities paid Short term borrowings (paid) / disbursed Sponsors' loan (paid) / disbursed (173,156,000) (3,036,722) (300,000,000) 950,157,180 17,042,000 (731,856) (297,763,315) (2,310,000) Net cash (used in)/ generated from financing activities Net increase/(decrease) in cash & cash equivalents Cash & cash equivalents at beginning of the year Cash & cash equivalents at close of the year (Note 13) 473,964,458 (718,741) 5,621,163 4,902,422 (283,763,171) 700,125 4,921,038 5,621,163 The annexed notes from 1 to 43 form an integeral part of these financial statements Date : November 11, Place : LAHORE ATIF ZAHEER FAROOQI GYIAS UL HASSAN 16

17 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED SEPTEMBER 30, 2013 Balance as at October 01, ,097,970 26,879,210 62,000, ,341,256 (299,655,890) 546,662,546 Surplus on revaluation of assets arised during the year 689,896, ,896,002 Loss after taxation for the year (197,597,257) (197,597,257) Balance as at September 30, ,097,970 26,879,210 62,000,000 1,338,237,258 (497,253,147) 1,038,961,291 Surplus on revaluation of assets realized through incremental depreciation (net of tax) 24,459,981 24,459,981 Provision for deferred taxation (249,831,107) (249,831,107) Profit after taxation for the year 295,843, ,843,216 Balance as at September 30, ,097,970 26,879,210 62,000,000 1,088,406,151 (176,949,950) 1,109,433,381 ATIF ZAHEER FAROOQI GYIAS UL HASSAN 17

18 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, THE COMPANY AND ITS OPERATIONS 1.1 Kohinoor Sugar Mills Limited (the Company) was incorporated in Pakistan in 1968 under the repealed Companies Act 1913 (now Companies Ordinance, 1984). The shares of the Company are listed on the Karachi and Lahore Stock Exchanges. The registered office of the Company is situated at Office # 11&12, 4th Floor, Ali Tower, M.M Alam Road, Gulberg III, Lahore, and the mills are located at Jauharabad, District Khushab, Pakistan. The principal activity of the Company is manufacturing and sale of sugar and its byproducts. 1.2 Although the company attained profitability however this was mainly attributable towards the writing off the sponsors' loan resulting in decrease in accumulated losses. However due to low sugar sale prices because of surplus availability in the Country gross loss situation still prevails. Further the equity remains positive due to surplus on revaluation of assets as reflected in the statement of changes in equity. The management expects that with the removal of bottle necks in the machinery and replacement of unapproved variety cane, sustainable situation will be achieved in future. 1.3 The company is in the process of change of management by way of sale of sponsors share. To this effect an advertisement in a daily newspaper on October 11, 2013 showing intention of Cane Processing (Pvt) Ltd of acquisition of shares has appeared. Necessary intimation to Security and Exchange Commission of Pakistan as well as Karachi and Lahore Stock Exchanges has been made. 2 BASIS OF PREPARATION 2.1 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, Approved Accounting Standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, Wherever, the requirements of the Companies Ordinance, 1984 or the directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 2.2 Standards, interpretations and amendments to published approved accounting standards Standards, interpretations and amendments to published approved accounting standards that are effective in the current year IAS 12, Income Taxes (Amendments). These are applicable on accounting periods beginning on or after January 01, IAS 12, Income taxes, currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, Investment Property. This amendment therefore introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, Income taxes recovery of revalued nondepreciable assets, will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn. Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) (effective for annual periods beginning on or after 1 July, 2012). The amendments require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendments do not address which items are presented in other comprehensive income or which items need to be reclassified. The requirements of other IFRSs continue to apply in this regard. The amendments have no impact on financial statements of the Company. 18

19 2.2.2 Standards, interpretations and amendments to existing standards that are not yet effective The following standards, amendments and interpretations of approved accounting standards are only effective for accounting periods beginning from the dates specified below. These standards are either not relevant to the Company s operations or are not expected to have significant impact on the Company s financial statements other than increased disclosures in certain cases: IAS 19 Employee Benefits (amended 2011) (effective for annual periods beginning on or after 1 January 2013). The amended IAS 19 includes the amendments that require actuarial gains and losses to be recognized immediately in other comprehensive income; this change will remove the corridor method and eliminate the ability for entities to recognize all changes in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed under IAS 19; and that the expected return on plan assets recognized in profit or loss is calculated based on the rate used to discount the defined benefit obligation. The Company s policy was to account for actuarial gains and losses using the corridor method and with the change unrecognized actuarial losses amounting to Rs million at 30 June 2013 would need to be recognized in other comprehensive income in next financial year. IAS 27 Separate Financial Statements (2011) (effective for annual periods beginning on or after 1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). Three new standards IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interest in Other Entities dealing with IAS 27 would be applicable effective 1 January IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. The amendments have no major impact on financial statements of the Company. IAS 28 Investments in Associates and Joint Ventures (2011) (effective for annual periods beginning on or after 1 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the amendments to apply IFRS 5 to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale; and on cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture. The amendments have no impact on financial statements of the Company. Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) (effective for annual periods beginning on or after 1 January 2014). The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation. The amendments clarify the meaning of currently has a legally enforceable right of setoff ; and that some gross settlement systems may be considered equivalent to net settlement. Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) (effective for annual periods beginning on or after 1 January 2013). The amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting agreement or similar arrangement. IAS 39 Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective for annual periods beginning on or after 1 January 2014). The narrowscope amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract agree to replace their original counterparty with a new one). The amendments have no impact on financial statements of the Company. IFRIC 21 Levies an Interpretation on the accounting for levies imposed by governments (effective for annual periods beginning on or after 1 January 2014). IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The Interpretation has no impact on financial statements of the Company. 19

20 IFRIC 20 Stripping cost in the production phase of a surface mining (effective for annual periods beginning on or after 1 January 2013). The interpretation requires production stripping cost in a surface mine to be capitalized if certain criteria are met. The amendments have no impact on financial statements of the Company. Amendment to IAS 36 Impairment of Assets Recoverable Amount Disclosures for NonFinancial Assets (effective for annual periods beginning on or after 1 January 2014). These narrowscope amendments to IAS 36 Impairment of Assets address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments have no impact on financial statements of the Company. Annual Improvements (effective for annual periods beginning on or after 1 January The new cycle of improvements contains amendments to the following standards, with consequential amendments to other standards and interpretations. IAS 1 Presentation of Financial Statements is amended to clarify that only one comparative period which is the preceding period is required for a complete set of financial statements. If an entity presents additional comparative information, then that additional information need not be in the form of a complete set of financial statements. However, such information should be accompanied by related notes and should be in accordance with IFRS. Furthermore, it clarifies that the third statement of financial position, when required, is only required if the effect of restatement is material to statement of financial position. IAS 16 Property, Plant and Equipment is amended to clarify the accounting of spare parts, standby equipment and servicing equipment. The definition of property, plant and equipment in IAS 16 is now considered in determining whether these items should be accounted for under that standard. If these items do not meet the definition, then they are accounted for using IAS 2 Inventories. IAS 32 Financial Instruments: Presentation is amended to clarify that IAS 12 Income Taxes applies to the accounting for income taxes relating to distributions to holders of an equity instrument and transaction costs of an equity transaction. The amendment removes a perceived inconsistency between IAS 32 and IAS 12. IAS 34 Interim Financial Reporting is amended to align the disclosure requirements for segment assets and segment liabilities in interim financial reports with those in IFRS 8 Operating Segments. IAS 34 now requires the disclosure of a measure of total assets and liabilities for a particular reportable segment. In addition, such disclosure is only required when the amount is regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the company Standards, interpretations issued by the IASB that are applicable to the company but are not yet notified by the SECP: IFRS 9, Financial Instruments, addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until January 01, 2013 but is available for early adoption. This is the first part of a new standard on classification and measurement of financial assets and financial liabilities that will replace IAS 39, Financial Instruments Recognition and measurement. IFRS 9 has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements. These include amortizedcost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions. There will be no impact on the company s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss, and the company does not have any such liabilities. 20

21 IFRS 10, 'Consolidated Financial Statements', applicable from January 01, 2013, build on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. IFRS 11, 'Joint Arrangements', applicable from January 01, 2013, is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement; joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. IFRS12, 'Disclosures of interests in other entities', this standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. IFRS 13, 'Fair value measurement', this standard provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP Standards, interpretations and amendments to published standards that are effective but not relevant to the company The other new standards, amendments and interpretations that are mandatory for accounting periods beginning on or after July 1, 2012 are considered not to be relevant or to have any significant impact on the Company s financial reporting and operations Financial statement except for cash flow information have been prepared under the accrual basis of accounting 3 BASIS OF MEASUREMENT These financial statements have been prepared under historical cost convention except for freehold land which is stated at revalued amount. The Company's significant accounting policies are stated in note 4. Not all of these significant policies require the management to make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies the management considers critical because of their complexity, judgment of estimation involved in their application and their impact on these financial statements. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates. The areas involving higher degree of judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows. 3.1 Property, plant and equipment The Company reviews the useful lives and residual values of property, plant and equipment on a regular basis. Any change in the estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding effect on the depreciation charge and the impairment. 3.2 Taxation The Company takes into account the current income tax law and decisions taken by the taxation authorities. Instances where the Company's view differs from the views taken by the income tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities. 21

22 3.3 Provision for Inventory obsolescence and doubtful receivables The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence if there is any change in usage pattern and physical form of related stores and spares. Further the carrying amounts of trade and other receivables are assessed on a regular basis and if there is any doubt about the reliability of these receivables, appropriate amount of provision is made. 3.4 Other areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows Estimation of net realizable value Computation of deferred taxation Disclosure of contingencies 4 SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. 4.1 Staff retirement benefits Defined contribution plan The Company operates a defined contribution provident fund scheme (the Fund) for its permanent employees. Equal monthly contributions are made to the fund both by the Company and employees at the rate of 10% of basic salary. The Company's contribution is charged to the profit and loss account. 4.2 Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognized in the profit and loss account, except to the extent that it relates to items recognized directly in equity or below equity, in which case it is recognized in equity or below equity respectively. Current Provision for current taxation is based on taxable income, as adjusted for tax purposes, at the current rate of tax after taking into account all tax credits, rebates and available tax losses determined in accordance with prevailing tax laws. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments made during the year for such years. Deferred Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses and tax credits to the extent that it is probable that future taxable profits will be available against which deferred tax asset can be utilized, except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability that, at the time of transaction, affects neither the accounting nor taxable profits. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax asset and liability is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. 22

23 4.3 Property, plant and equipment owned Recognition Property, plant and equipment except for freehold land, buildings, plant and machinery are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land, buildings, plant and machinery are stated at revalued amount. Cost of tangible assets consists of historical cost pertaining to erection / construction period and other directly attributable cost of bringing the asset to working condition. Subsequent cost are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred. Depreciation Depreciation on all items of property, plant and equipment except for freehold land is charged to income applying the reducing balance method so as to write off the historical cost/revalued amounts of an asset over its estimated useful life at the rates as disclosed in note 5. Depreciation on addition is charged from the date the asset is available for use and on disposal up to date when the asset is derecognized. Derecognition An item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on Derecognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in the income statement in the year the asset is derecognized. 4.4 Accounting for leases and assets subject to finance lease Finance lease Recognition Leases where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Assets subject to finance lease are initially recognized at the commencement of the lease term at the lower of present value of minimum lease payments under the lease agreements and the fair value of the leased assets, each determined at the inception of the lease. Subsequently these assets are stated at cost less accumulated depreciation and any identified impairment loss. The related rental obligations, net off finance cost, are included in liabilities against assets subject to finance lease. The liabilities are classified as current and non current depending upon the timing of payments. Financial charges Lease payments are allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The finance cost is charged to income over the lease term. Depreciation Assets acquired under a finance lease are depreciated in the same manner and at the same rates used for similar owned assets, so as to depreciate these assets over their estimated useful lives in view of certainty of ownership of these assets at the end of lease term. Depreciation of the leased assets is charged to income. Deferred income Income arising from sale and lease back transaction, if any, which results in finance lease, is deferred and amortized equally over the lease period Operating lease Leases where significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income on a straightline basis over the period of lease. 23