ANNUAL REPORT REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE

Transcription

1 CONTENTS ANNUAL REPORT COMPANY INFORMATION 2 NOTICE OF MEETING 3 VISION AND MISSION STATEMENT 4 DIRECTORS' REPORT 5 STATEMENT OF COMPLIANCE 8 REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE AUDITORS' REPORT TO THE MEMBERS KEY OPERATING AND FINANCIAL DATA FOR LAST SIX YEARS BALANCE SHEET PROFIT AND LOSS ACCOUNT CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS PATTERN OF SHAREHOLDING FORM OF PROXY

2 COMPANY INFORMATION 2 Chairman Chief executive Directors Audit committee Chairman: Member: Member: Secretary Auditors Bankers Head office/ Registered office Mills Mian Habib Ullah Mr. Naeem Omer Mian Habib Ullah Mr. Muhammad Saleem Omer Mr. Naeem Omer Mr. Hafeez Ullah Mr. Muhammad Zubair Mr. Muhammad Asghar Mr. Amjad Ali Mian Habib Ullah Mr. Muhammad Saleem Omer Mr. Muhammad Zubair Mr. Rizwan Aslam (ACMA) M/s Mushtaq and Company Chartered Accountants Commerce Centre, Hasrat Mohani Road, Karachi. Bank of Punjab NIB Bank Limited Silk Bank Limited Meezan Bank Limited B-403, 4 th Floor, City Tower, Main Boulevard, Gulberg II, Lahore. Telephone: Fax No info@bilalfibres.com 38th KM, Shiekhupura Road, Tehsil Jaranwala, District Faisalabad. Telephone: , Fax No mills@bilalfibres.com bilalfib@fsd.comsats.net.pk

3 NOTICE OF ANNUAL GENERAL MEETINNG Notice is hereby given to all members of that the 23rd ANNUAL GENERAL MEETING of the Company will be held on Friday 30 th of October 2009 at 11:00 A.M at the Company s registered office, situated at 403-B, Fourth Floor City Tower, Main Boulevard Gulberg II, Lahore to transact the following business: 1) To confirm the Minutes of last Annual General Meeting of the Company held on 29 th of October ) To receive, consider and adopt the Annual Audited Accounts of the Company for the year ended 30 th June 2009 together with the Directors and Auditors reports thereon. 3) To appoint auditors and fix their remuneration for the next year ending on June 30, ) To transact any other business with the permission of the chair. By order of the Board Lahore. Dated: 7 th October 2009 (Rizwan Aslam) Company Secretary NOTES: 1) The share transfer books of the company will remain closed from 24 th October 2009 to 30 th October 2009 (both days inclusive). 2) a. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy. Proxies in order to be effective must be received at the registered office of the company not less than 48 hours before the time for holding the meeting. A proxy must be a member of the company. b. For identification, CDC Account holders who wish to attend the Annual General Meeting are requested to please bring with them original/attested copy of their National Identity Card along with the participants I.D number and their account number in Central Depository Company of Pakistan to facilitate identification at Annual General Meeting. In case of proxy an attested copy proxy s Identity card, Accounts & participants I.D numbers be enclosed. In case of corporate entity, the BOD, resolution/ Power of attorney with specimen signature of the nominee shall be produced at the time of the meeting (unless it has been provided earlier). c. Shareholders are requested to notify any change in their addresses, if any, immediately. 3

4 CORPORATE VISION / MISSION STATEMENT VISION To bea customerorientedcompanyhavingwide& diversifiedcustomerbasewitha teamof professionalsworkingtogethertoaddvaluetoall thestakeholdersandcontributing tosociety to help build a strong and progressive Pakistan. MISSION To be a distinctive yarnsellerwithinternational presencedelivering bestqualit yarnthrough innovative techniquesand effectiveresourcemanagement by maintaining highethicaland professional standards. To accomplishexcellentfinancialresultswhichcanbenefitall the stakeholdersincluding members and employees of the company. To fulfill obligations toward the society, being a good corporate citizen. 4

5 DIRECTORS' REPORT Dear Shareholders rd The Director's of your company are please to welcome you the 23 Annual General Meeting and are pleased to present the annual report together with audited accounts for the year ended June 30, FINANCIAL AND OPERATING PERFORMANCE The Company has to face after tax loss of Rs Million in the current period compared to loss after tax of Rs Million in the previous period. The Net Sales registered an increase of 4.46% over the previous year but the gross profit margin could not match to the increase in sales due to the increase in raw material cost and Gas/Electricity shortage, the company has to bear production loss up to Rs Million. Raw material costs constitute % of sales as compared to previous years' %. The financial results are summarized hereunder: - OPERATING PERFORMANCE The factory remained operational throughout the year and worked on 3 shifts basis, except closed during the gas/electricity shutdown due to non availability of gas and electricity simultaneously. The total yarn produced Million Kgs ( million kgs). The 20's converted production worked out to Million Kgs ( million kgs). The local textile industry is experiencing very tough time due to the following uncontrollable factors, which also affected badly your company:- Due to Continues increase in the price of Local PSF. Local cotton rates are prevailing at a peek level of Rs. 4,300/= per mound due to shortage of local cotton crop. Imported Cotton is also not feasible due to high prices of cotton in international Market. SNGPL & WAPDA are making scheduled and unscheduled power outrages resulting in complete shut down of the project for sometimes causing huge financial losses. Gas charges have almost been doubled since the commissioning of our power house and it is increasing day by day. High markup rates on financial facilities are continuously adversely affecting the profitability of the company. DIVIDEND Due to losses incurred by the company, directors do not recommend any dividend for the year ended 30 June th 5

6 FUTURE PROSPECTS The Company is negotiating with the bank to reduce the financial cost and restructure the limits, we are very hopeful that we will achieve our objects and cut down the financial cost to increase the cash flows. Continuous devaluation of Pakistani currency has directly increased the import cost of raw material due to which our textile industry is facing unfair competition from its neighboring countries like India, China, Bangladesh. Energy crisis in the country had adversely effecting the country's growth and overall slow downed the manufacturing activities. Government is taking necessary measures to remove the side effects of these international crises and electric / gas shutdown to strengthen the economy. Despite adverse factors your management is still making best efforts for health growth of the company. Now KIBOR rate declining and we are hoping that will be major impact to grow the industry in a right way. Our Strong Marketing strategy has shown very positive results in term of order execution at premium prices. Strategy of modernization of existing plant will be continued and focus on value added products are expected to help to improve the solvency, liquidity and profitability of your company. RELATED PARTIES The Board of Directors has approved the policy for transaction/contract between Company and its related parties on an arms' length basis and relevant rates are to be determiner as per the comparable Un Controlled price method. AUDITORS The present Auditors M/s Mushtaq & Co., Chartered Accountants, being due for retirement has offered themselves for reappointment for the next year ending June 30, REMARKS IN AUDITORS REPORTS TO THE MEMBERS Quote we report that: (a) as stated in note 17.16, the company has not accounted for the overdue installments amounting to Rs million (June 30, 2008: Rs million) and current maturity amounting of Rs million (June 30, 2008: Rs million) of long term loans. Current liabilities are understated by Rs million (June 30, 2008 : Rs million), consequently long term loans are overstated by the said the amount; (b) The company did not convert the supplier credit foreign exchange liability at the exchange rate prevailing as on June 30, 2009 (note 17.15). This is in contravention of the International Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates. Had the company translated the foreign currency amount at closing rate, the loss for the year would have been higher by Rs million and consequently amount payable in rupees would have increased by the same amount; The Company has not provided for the current portion of certain long term liabilities amounting to Rs (M) - Due to following: Company has faced cash losses in the current financial year due to tough time on textile industry. In order to improve the liquidity position of the company and smooth working, the management has already applied the banks for moratorium of principal payment of Long Term Loans and the matters is currently under consideration by the banks. The management is optimistic that being a financial strategic partners and considering the current textile position banks will grant the said moratorium. 6 The Company is of the opinion that it will retranslate the supplier credit when it is finally settled with the bank after completion of 720 days and to convert this supplier credit into long term loans/lease. At that time, the company will recognize the gain or loss on foreign translation.

7 ACKNOWLEDGEMENT The Directors would like to express their profound appreciation for continued /devoted services and hard work rendered by the company's executives, staff and workers. The Directors are also thankful and wish to place on record their deep gratitude to the bankers of our company i.e. The Bank of Punjab, NIB Bank Ltd, Silk Bank Ltd and Meezan Bank Ltd. CORPORATE & FINANCIAL REPORTING FRAME WORK In compliance to new listing regulations of stock exchanges & as required under the Companies Ordinance 1984, your directors are pleased to state as under: - a) The financial statements being presented along with the report present fairly the state of affairs of the company, the results of its operations, cash flows & changes in equity. b) Proper books of accounts have been maintained by the company. c) Appropriate accounting policies have been constantly applied in preparation of financial statements and accounting estimates are based on reasonable and prudential regulations. d) International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and 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) Board is satisfied with the Company's ability to continue as a going concern. g) There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations of the Stock Exchanges. h) Significant deviations from last year operating results of the Company and reasons thereof have been explained. i) There are no statutory payments on account of taxes, duties, levies and charges those are outstanding as on June 30, 2009 except for those disclosed in the financial statements. j) There are no significant plans for corporate restructuring, business expansions and discontinuation of operations except for improvement in the normal business activities to increase the business. k) Key operating and financial data for the last six years in summarized form is included in this annual report. l) Statement showing Pattern of shareholding as on is also enclosed herewith. DIRECTORS' MEETINGS During the year 18 meetings of the Board of Directors were held. Attendance by each director is as follows: Name of Director Number of Meetings attended Mr. Mian Habib Ullah 16 Mr. Muhammad Saleem Omer 14 Mr. Naeem Omer 17 Mr. Hafeez Ullah. 17 Mr. Muhammad Zubair. 18 Mr. Muhammad Asghar 18 Mr. Amjad Ali 16 Lahore Dated: For and on behalf of the Board of Directors (Naeem Omer) Chief Executive 7

8 STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED JUNE 30, This statement is being presented to comply with the Code of Corporate Governance contained in listing regulations of Karachi, Lahore and Islamabad 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. The Board is made up of four non executive and three executives directors. Presently there is no independent non-executive directors and no directors in the board represents minority shareholder. 2) The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. 3) All the resident directors of the company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, or a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by the stock exchange. 4) Casual vacancy was filled by Mr. Muhammad Asghar inplace of Mr. Khadim Hussain in the Board during the period under report. 5) The company 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 polices along with the dates on which they were approved or emended has been maintained. 7) All the powers of the Board have been duly exercised and the Board has taken 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 Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes were appropriately recorded and circulated. 9) The board arranged an orientation course for its directors during the year to apprise them of their duties and responsibilities. More courses will follow in future. 10) 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. 8 11) The director's 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.

9 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 & financial reporting requirements of the code. 15) The Board has formed an audit committee. It comprises three members; none of them are executive directors including the Chairman of the committee. 16) The meetings of audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. 17) The Board has set-up an effective internal audit function. 18) The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan and they or any of the partners of the firm, their spouse and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan. 19) The statutory Auditors or the persons associated with them have not been appointed to provide other services expect in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 20) We confirm that all other material principles contained in the Code have been complied with. For and on behalf of the Board of Directors Faisalabad Dated: (NAEEM OMER) Chief Executive N.I.C No

10 MUSHTAQ & CO. CHARTERED ACCOUNTANTS 407-Commerce Centre Hasrat Mohani Road Karachi Tel: Fax: Branch Office: 20-B, Block-G Gulberg-III, Lahore Tel: , Fax: REVIEW REPORT TO THE MEMBERS On the Statement of Compliance with Best Practices of the Code of Corporate Governance We have reviewed the statement of compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Bilal Fibres Limited to comply with the Listing Regulation No. 35 (previously Regulation No. 37) of the Karachi Stock Exchange (Guarantee) Limited and Chapter XIII of Lahore Stock Exchange (Guarantee) Limited where the company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the statement of compliance reflects the status of the company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel and review of various documents prepared by the company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls. Further, Sub- Regulation (xiii a) of Listing Regulation No. 35 (previously Regulation No. 37) notified by the Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated 19 January 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 under taken at arm's length price. 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 respect, with the best practices contained in the Code of Corporate Governance as applicable to the company for the year ended June 30, Karachi: Dated: MUSHTAQ & COMPANY Chartered Accountants Engagement Partner: Shahabuddin A. Siddiqui

11 MUSHTAQ & CO. CHARTERED ACCOUNTANTS 407-Commerce Centre Hasrat Mohani Road Karachi Tel: Fax: Branch Office: 20-B, Block-G Gulberg-III, Lahore Tel: , Fax: AUDITORS' REPORT TO THE MEMBERS We have audited the annexed balance sheet of Bilal Fibres Limited as at June 30, 2009 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 purpose 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 the 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 verifications, we report that; (a) (b) (c) (d) As stated in note 17.16, the company has not accounted for the overdue installments amounting to Rs million (June 30, 2008 : Rs million) and current maturity amounting of Rs million (June 30, 2008 : Rs million) of long term loans. Current liabilities are understated by Rs million (June 30, 2008 : Rs million), consequently long term loans are overstated by the said amount; The company did not convert the supplier's credit foreign exchange liability at the exchange rate prevailing as on June 30, 2009 (note 17.15).This is in contravention of the International Accounting Standard 21 "The Effects of Changes in Foreign Exchange Rates". Had the company translated the foreign currency amount at closing rate, the loss for the year would have been higher by Rs million and consequently amount payable in rupees would have increased by the same amount; in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984; in our opinion; (i) (ii) (iii) (e) 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; the expenditure incurred during the year was for the purpose of the company's business; and 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 as mentioned in paragraphs (a) and (b) above and its effect on the financial statements, 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 June 30, 2009 and of the loss, 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 Ushr Ordinance, 1980 (XVIII of 1980). Karachi: Dated: MUSHTAQ & COMPANY Chartered Accountants Engagement Partner: Shahabuddin A. Siddiqui 11

12 KEY OPERATING AND FINANCIAL DATA FOR LAST SIX YEARS ( in million) Year Ended 30th June June 30, Year Ended 30th September PARTICULARS (9 Months) ASSETS EMPLOYED Property, plant and equipment Long term deposits Current assets Total assets employed , FINANCED BY Shareholders' equity (88.930) Surplus on revaluation of fixed assets Loan from directors/sponsors Long term liabilities Deferred tax liability Other deferred liabilities Current Liabilities Total funds invested , PROFIT & LOSS Turnover (net) , Gross profit Operating profit Finance cost (Loss)/profit before taxation (91.968) (60.870) (43.966) (Loss)/profit after taxation (95.629) (24.359) (33.912) Earnings per share (Rs.) (6.78) (1.73) (2.41) Number of spindle installed 29,016 29,016 29,016 29,016 24,960 24,960 20,160 Number of spindle worked 29,016 29,016 29,016 29,016 24,960 24,960 20, Number of shifts per day Actual production converted into 20's count (Kgs in million)

13 BALANCE SHEET AS AT JUNE 30, 2009 ASSETS Non - Current Assets Property, plant and equipment 5 721,687, ,389,053 Long term deposits 6 1,312,870 2,889,849 Current Assets 723,000, ,278,902 Stores, spare parts and loose tools 7 9,823,829 13,341,674 Stock in trade 8 140,026, ,199,794 Trade debts 9 35,566,468 34,614,228 Loans and advances 10 34,827,617 45,332,680 Trade deposits and short term prepayments 11 2,557,607 2,776,280 Other receivables 12 1,683,094 2,225,194 Tax refunds due from Government 13 10,484,620 17,976,707 Cash and bank balances 14 1,922,731 3,464, ,892, ,931,334 Total Assets 959,892,815 1,018,210,236 EQUITY AND LIABILITIES Share Capital and Reserve Authorized 15,000,000 ordinary shares of Rs. 10 each 150,000, ,000,000 Issued, subscribed and paid up 14,100,000 ordinary shares of Rs. 10 each allotted for consideration fully paid in cash ,000, ,000,000 Accumulated loss (229,930,241) (140,072,286) Total Equity (88,930,241) 927,714 Surplus on revaluation of property, plant and equipment ,062, ,155,977 LIABILITIES Non - Current Liabilities Long term financing from banking companies ,782, ,833,794 Long term financing from directors and associates 18 38,500,000 38,500,000 Liabilities against assets subject to finance lease 19-4,567,428 Long term murabaha 20 6,999,998 16,000,000 Deferred liabilities 21 35,051,674 7,335,238 Current Liabilities 524,333, ,236,460 Trade and other payables 22 51,575, ,695,255 Accrued interest / mark up 23 37,049,871 18,223,805 Short term borrowings ,866, ,119,082 Current portion of: long term financing from banking companies 17 61,757,398 34,433,688 liabilities against assets subject to finance lease 19 9,328,352 11,152,462 long term murabaha 20 7,000,002 - Provision for taxation 18,849,684 18,265,793 Note Contingencies and Commitments ,427, ,890, Total Equity and Liabilities 959,892,815 1,018,210,236 The annexed notes form an integral part of these financial statements. CHIEF EXECUTIVE DIRECTOR 13

14 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009 Note Sales ,591, ,213,437 Cost of goods sold 27 (934,752,335) (865,938,463) Gross profit 10,839,585 39,274,974 Other operating income , ,663 Distribution cost 29 (13,299,116) (23,738,530) Administrative expenses 30 (20,481,810) (16,446,747) Other operating expenses 31 (3,398,097) (3,407,038) Finance cost 32 (66,582,392) (57,388,978) Loss before taxation (91,967,769) (60,869,656) Provision for taxation 33 (3,661,140) 36,510,839 Loss for the year (95,628,909) (24,358,817) Earnings per share - basic and diluted 34 (6.78) (1.73) The annexed notes form an integral part of these financial statements. 14 CHIEF EXECUTIVE DIRECTOR

15 CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2009 A) CASH FLOWS FROM OPERATING ACTIVITIES Loss before taxation Adjustments for: Depreciation of property, plant and equipment Provision for staff retirement benefits - gratuity Loss on disposal of property, plant and equipment Gain on disposal of property, plant and equipment Finance cost Exchange loss Operating cash flows before changes in working capital (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 Tax refunds due from Government Increase / (decrease) in current liabilities Trade and other payables Cash used in operations Interest / mark up paid Income tax paid Gratuity paid Net cash used in operating activities (91,967,769) (60,869,656) 33,720,959 29,385,097 3,453,848 3,393,697 3,398,097 3,407,038 - (121,600) 64,902,207 56,688,001 1,680, ,977 15,187,527 32,583,554 3,517,845 (3,051,578) 28,172,987 (53,479,859) (952,240) (29,272,918) 11,820,069 5,643, ,673 (588,062) 542,100 (1,358,946) 7,492,087 (1,206,366) (104,119,567) (59,317,971) (53,308,046) (142,631,765) (38,120,519) (110,048,210) (47,756,326) (49,648,284) (1,315,010) (3,396,798) (3,137,481) (2,980,134) (90,329,337) (166,073,426) B) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Long term deposits Net cash used in investing activities (37,209,174) (108,915,072) 5,792,000 5,484,180 1,576,979 1,354,000 (29,840,195) (102,076,892) C) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term financing from banking companies Repayment of: long term loans to banking companies liabilities against assets subject to finance lease Short term borrowings Dividend paid Net cash flow from financing activities 144,272, ,144,230 (2,000,000) (13,878,352) (6,391,538) (7,420,262) (17,253,077) 106,468,649 - (14,953) 118,627, ,299,312 Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year (A+B+C) (1,542,045) (24,851,006) 3,464,777 28,315,783 Cash and cash equivalents at end of the year The annexed notes form an integral part of these financial statements. 1,922,731 3,464, CHIEF EXECUTIVE DIRECTOR

16 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2009 Issued, subscribed and paid up capital Accumulated loss Total Balance as at July 01, ,000,000 (131,165,022) 9,834,978 Surplus realized on disposal of property, plant and equipment - 7,545,488 7,545,488 Incremental depreciation on revalued assets for the year - 7,906,065 7,906,065 Loss for the year - (24,358,817) (24,358,817) Balance as at June 30, ,000,000 (140,072,286) 927,714 Surplus realized on disposal of property, plant and equipment - net of deferred tax - 151, ,811 Incremental depreciation on revalued assets for the year - net of deferred tax - 5,619,143 5,619,143 Loss for the year - (95,628,909) (95,628,909) Balance as at June 30, ,000,000 (229,930,241) (88,930,241) The annexed notes form an integral part of these financial statements. 16 CHIEF EXECUTIVE DIRECTOR

17 1 LEGAL STATUS AND NATURE OF BUSINESS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, The company is limited by shares, incorporated in Pakistan on April 13, 1987 and is quoted on stock exchanges at Karachi, Lahore and Islamabad. The principal business of the company is manufacture and sale of yarn. The registered office of the company is situated at B- 403, 4th Floor, City Tower, Main Boulevard, Gulberg II, Lahore. 1.2 The principal business of the company is manufacture and sale of yarn. The manufacturing unit is located at 38 Kilometer Sheikhupura Road, Tehsil Jaranwala, District Faisalabad in the province of Punjab. 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. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 2.2 Functional and presentation currency These financial statements are presented in Pak, which is the company's functional and presentation currency and figures are rounded to the nearest rupee. 2.3 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 IFRS - 7 Financial Instruments : Disclosures (effective for annual periods beginning on or after 28 April 2008) supersedes IAS - 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and the disclosures requirements of IAS - 32 Financial Instruments : Disclosure and Presentation. The application of the standard did not have significant impact on the company's financial statements other than increase in disclosures. IAS - 29 Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 28 April 2008). The company does not have any operations in hyperinflationary economies and therefore the application of the standard did not affect the company's financial statements IFRIC - 13 Customer Loyalty Programmes (effective for annual periods beginning on or after 01 July 2008) addresses the accounting by entities that operates or otherwise participate in customer loyalty programmes under which the customer can redeem credit for award such as free or discounted goods or services. The application of IFRIC - 13 did not affect the company's financial statements. IFRIC - 14, IAS - 19 The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction (effective for annual periods beginning on or after 01 January ). IFRIC - 14 clarifies when refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provides guidance on minimum funding requirements for such asset. The interpretation has no effect on company's financial statements. Standards, interpretations and amendments to published approved accounting standards that are not yet effective The following standards, interpretations and amendments 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. Revised IAS - 1 Presentation of Financial Statements (effective for annual periods beginning on or after 01 January 2009) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. 17

18 Revised IAS - 23 Borrowing Costs (effective for annual periods beginning on or after 01 January 2009) removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying assets as part of the cost of that asset. The application of the standard is not likely to have an effect on the company's financial statements. Amended IAS - 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 01 July 2009) requires accounting for changes in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transactions. When the group losses controls of subsidiary, any interest retained in the former a subsidiary will be measured at fair value with the gain or loss recognized in the profit or loss. The application of the standard is not likely to have an effect on the company's financial statements. IAS - 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 01 January 2009). The amendment removes the definition of the cost methods from IAS - 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The amendment is not likely to have an effect on company's financial statements. Amendments to IAS - 32 Financial Instruments : Presentation and IAS - 1 Presentation of Financial Statements (effective for annual period beginning on after 01 January 2009) - Puttable Financial Instruments and Obligations Arising on Liquidations requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which requires retrospective application, or not expected to have any impact on the company's financial statements. Amendment to IAS - 39 Financial Instruments : Recognition and Measurement - Eligible hedged items (effective for annual periods beginning on or after 01 July 2009) clarifies the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendment is not likely to have an effect on the company's financial statements. Amendments to IAS - 39 and IFRIC - 9 Embedded derivatives (effective for annual periods beginning on or after 01 January 2009). Amendments require entities to assess whether they need to separate an embedded derivative from a hybrid (combined) financial instrument when financial assets are reclassified out of the fair value. The amendments are not likely to have an effect on company's financial statements. Amendment to IFRS - 2 Share-based Payment - Vesting Conditions and Cancellations (effective for annual periods beginning on or after 01 January 2009) clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for nonvesting conditions and cancellations. The application of this standard is not likely to have any effect on the company's financial statements. Amendment to IFRS - 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions (effective for annual periods beginning on or after 01 January 2010). Currently effective IFRS requires attribution of group share-based payment transactions only if they are equity-settled. The amendments resolve diversity in practice regarding attribution of cashsettled share-based payment transactions and require an entity receiving goods or services in either an equity-settled or a cash-settled payment transactions to account for the transaction in its separate or individual financial statements. Revised IFRS - 3 Business Combinations (applicable for annual periods beginning on or after 01 July 2009) broadens among other things the definition of business resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair value, transaction costs other than share and debt issue costs to be expensed, any preexisting interest in an acquiree to be measured at fair value, with the related gain or loss recognized in profit or loss and any non-controlling (minority) interest to be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of an acquiree, on a transaction-by-transaction basis. The application of this standard is not likely to have an effect on the company's financial statements. 18 IFRS - 4 Insurance Contracts (effective for annual periods beginning on or after 01 January 2009). The IFRS makes limited improvements to accounting for insurance contracts until the Board completes the second phase of its project on insurance contracts. The standard also requires that an entity issuing insurance contracts (an insurer) to disclose information about those contracts. The standard is not applicable to the company's operations.

19 Amendment to IFRS - 7 Improving disclosures about Financial Instruments (effective for annual periods beginning on or after 01 January 2009). These amendments have been made to bring the disclosure requirements of IFRS - 7 more closely in line with US standards. The amendments introduce a three-level hierarchy for fair value measurement disclosures and require entities to provide additional disclosures about the relative reliability of fair value measurements. The International Accounting Standards Board made certain amendments to existing standards as part of its first annual improvements project. The effective dates for these amendments vary by standard and most will be applicable to the company's 2010 financial statements. These amendments are unlikely to have an impact on the company's financial statements. The International Accounting Standards Board made certain amendments to existing standards as part of its Second annual improvements project. The effective dates for these amendments vary by standard and most will be applicable to the company's 2010 financial statements. These amendments are unlikely to have an impact on the Company's financial statements. IFRS - 8 Operating Segments (effective for annual periods beginning on or after 01 January 2009) introduces the "management approach" to segment reporting. IFRS - 8 will require a change in the presentation and disclosure of segment information based on the internal reports that a regularly reviewed by the company's "chief operating decision maker" in order to asses each segment's performance and to allocate resources to them. IFRIC - 15 Agreement for the Construction of Real Estate (effective for annual periods beginning on or after 01 October 2009) clarifies the recognition of revenue by real estate developers for sale of units, such as apartments or houses, 'offplan', that is, before construction is complete. The IFRIC is not relevant to the company's operations. IFRIC - 16 Hedge of Net Investment in a Foreign Operation (effective for annual periods beginning on or after 01 October 2008) clarifies that net investment hedging can be applied only to foreign exchange differences arising between the functional currency of a foreign operation and the parent entity's functional currency and only in an amount equal to or less than the net assets of the foreign operation, the hedging instrument may be held by any entity within the group except the foreign operation that is being hedged and that on disposal of a hedged operation, the cumulative gain or loss on the hedging instrument that was determined to be effective is reclassified to profit or loss. The interpretation allows an entity that uses the step-by-step method of consolidation an accounting policy choice to determine the cumulative currency translation adjustment that is reclassified to profit or loss on disposal of a net investment as if the direct method of consolidation had been used. The IFRIC is not relevant to the company's operations. IFRIC - 17 Distributions of Non-cash Assets to Owners (effective for annual periods beginning on or after 01 July 2009) states that when a company distributes non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent changes in the fair value before the liability is discharged, this is recognized in equity. When the non cash asset is distributed, the difference between the carrying amount and fair value is recognized in the income statement. As the company does not distribute non-cash assets to its shareholders, this interpretation has no impact on the company's financial statements. IFRIC - 18 Transfers of Assets from Customers (to be applied prospectively to transfers of assets from customers received on or after 01 July 2009). This interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water). The interpretation is not relevant to the company's operations. 3 BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention except for certain items of property, plant and equipment at revalued amount, revaluation of certain financial instruments at fair value and recognition of certain staff retirement benefits at present value. 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. 19

20 3.1 Provision for taxation The company takes into account the current income tax law and decisions taken by the appellate authorities. Instances where the company's' view differs from the view 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. 3.2 Staff retirement benefits - gratuity Certain actuarial assumptions have been adopted as disclosed in relevant note to the financial statements for valuation of present value of defined benefit obligation. Any changes in these assumptions in future year might affect unrecognized gains and losses in those years. 3.3 Financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques based on assumptions that are dependent on market conditions existing at balance sheet date. 3.4 Property, plant and equipment The company reviews recoverable amount, useful life, residual value and possible impairment on an annual basis. Any changes, if material in the estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding affect on the depreciation charge and impairment. 3.5 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 theses financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. 4.1 Property, plant and equipment - owned Recognition Property, plant and equipment except for freehold land are stated at cost / revaluation less accumulated depreciation and any identified impairment loss, if any. Freehold land is stated at cost / revaluation less any identified impairment loss, if any. 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. 20 Surplus arising on revaluation of an item of property, plant and equipment is credited to surplus on revaluation of property, plant and equipment, except to the extent that it reverses deficit on revaluation of the same assets previously recognized in profit or loss, in which case the surplus is credited to profit or loss to the extent of deficit previously charged to income. Deficit on revaluation of an item of property, plant and equipment is charged to profit or loss to the extent that it exceeds the balance, if any held in surplus on revaluation of property, plant and equipment relating to previous revaluation of that item. On subsequent sale or retirement of revalued item of property, plant and equipment the attributable surplus remaining in the surplus on revaluation of property, plant and equipment is transferred directly to unappropriated profit. The surplus on revaluation of property, plant and equipment to the extent of incremental depreciation charged on the related assets is transferred to unappropriated profit.