Ktml Annual 2007

8/9/2019 Ktml Annual 2007

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KOHINOORT E X T I L E M I L L S L I M I T E D

A Kohinoor Maple Leaf Group Company


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CONTENTS

KOHINOOR TEXTILE MILLS LIMITED

Company ProfileCompany InformationMission StatementStatement of Ethics and Business PracticesNotice of Annual General MeetingDirectors ReportStatement of Compliance with Best Practices of

Code of Corporate GovernanceReview Report to the Members on Statement of

Compliance with Best Practices of Code ofCorporate Governance

Auditors ReportBalance SheetProfit and Loss AccountCash Flow StatementStatement of Changes in EquityNotes to the AccountKey Operating and Financial Data Six Years Summary

Pattern of Holding of the Shares

CONSOLIDATED FINANCIAL STATEMENT

Auditors ReportBalance SheetProfit and loss AccountCash Flow StatementStatement of Changes in EquityNotes to the Accounts

FROM OF PROXY

234567

16

181920222324255758

636466676869


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P E R

C E N T A

G E

10090

80706050403020100 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

EQUITY % DEBT %

DEBT: EQUTY RATIO

27

73

35

65

41

59

18

82

33

67

37

63

TANGIBLE FIXED ASSETS

R U P E E

S I N M I L L I O N

S

2006-07

4,000

35,003,000

2,500

2,000

1,500

1,000

500

-

1,615

3,971

2001-02 2002-03 2003-04 2004-05 2005-06

2,036 2,077

2,666

3,591

FIXED ASSETS

COMPANY PROFILE

THEN AND NOW

The Company commenced operation in 1953 as aprivate limited Company and became a PublicLimited Company in 1968. The initial capacity ofits Rawalpindi unit comprised 25,000 spindles and600 looms. Later, fabric processing facilities wereadded and spinning capacity was augmented.Additional production facilities were acquired on the Raiwind-Manga Road near Lahore in DistrictKasur and on the Gulyana Road near Gujar Khan,by way of merger.

The Companys production facilities now comprise149,220 ring spindles capable of spinning a widerang of counts using cotton and Man-made fibers.The weaving facilities at Raiwind comprise 204looms capable of weaving wide range of greigefabrics.

The processing facilities at the Rawalpindi unit are

capable of dyeing and printing fabrics for the home textile market. The stitching facilities produce adiversified range of home textiles for the exportmarket. Both the dyeing and stitching facilities arebeing augmented to take advantage of greater marketaccess.

Fully equipped laboratory facilities for quality controland process optimization have been up at all threesites. The Company has been investing heavily inInformation Technology, training of its human

resources and preparing its management to meet the challenges of market integration.

Kohinoor Textile Mills Limited continues to ensure that its current competitive position is maintainedas well as supporting the ongoing improvementprocess in our endeavour to maintain world bestpractice manufacturing.


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COMPANY INFORMATION

BOARD OF DIRECTORS

MR. TARIQ SAYEEDSAIGOL Chairman / Chief ExecutiveMR. SAYEED TARIQ SAIGOLMR. WALEED TARIQ SAIGOLMR. USMAN SAID MR. ZAMIRUDDIN AZARMR. S.M. IMRAN MR. ABDUL HAI MEHMOOD BHAIMIA

COMPANY SECRETARY MR. MUHAMMAD ASHRAF

AUDIT COMMITTEE MR. ZAMIRUDDIN AZAR ChairmanMR. WALEED TARIQ SAIGOL MemberMR. S.M. IMRAN MemberMR. MUHAMMAD ASHRAF Secretary CHIEF FINANCIAL OFFICER

MR. USMAN SAID

AUDITORS M/S. RIAZ AHMAD & COMPANYChartered Account ants

BANKERS

AL BAR AKA ISL AMIC BANK B.S.C. (E.C.) ALLIED BANK LIMITED

ASKARI BANK LIMITEDBANK ALFAL AH LIMITEDF A YSAL BANK LIMITED

MCB BANK LIMITEDMEEZAN BANK LTD

NATIONAL BANK OF P AKISTANNIB

BANK

LIMITED

PICIC COMMER CIAL BANK LIMITED ST ANDARD CHARTERED BANK (P AKIST AN) LIMITED THE HONGK ONG & SHANGHAI BANKING CORPOR A TION LTD THBANK OF PUNJAB

MANAGER INTERNAL AUDIT

MR . ZEESHAN AHMAD

REGISTERED OFFICE &

SHARES DEPARTMENT 42-LAWRENCE ROAD, LAHORE.TEL: (92-042) 6302261-62 FAX: (92-042) 6368721

MILLS

PESHAWAR ROAD, RAWALPINDI. TEL: (92-051) 5473940-3 FAX: (92-051) 5471795

8th K.M., MANGA RAIWIND ROAD, DISTRICT KASUR.TEL: (92-042) 5394133-34 FAX: (92-042) 5391947

GULYANA ROAD, GUJAR KHAN, DISTRICT RAWALPINDI.TEL: (92-0513) 564472-73 FAX: (92-0513) 564337 WEB SITE: www.kmlg.com

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The Kohinoor Textile Mills Limited stated mission is to

achieve and then remain as the most progressive and profitable

Company in Pakistan in terms of industry standards and

stakeholders interest.

The Company shall achieve its mission through a continuous

process of having sourced, developed, implemented and managed the best leading edge technology, industry best

practice, human resource and innovative products and

services and sold these to its customers, suppliers and

stakeholders.


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Mission Statement Mission Statement


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The following principles constitute the code of conduct which all Directors and employeesof Kohinoor Textile Mills are required to apply in their daily work and observe in the conductof Companys business. While the Company will ensure that all employees are fully awareof these principles, it is the responsibility of each employee to implement the Companyspolicies. Contravention is viewed as misconduct.

The code emphasizes the need for a high standard of honesty and integrity which are vitalfor the success of any business.

PRINCIPLES

1. Directors and employees are expected not to engage in any activity which can causeconflict between their personal interest and the interest of the Company such as interestin an organization supplying goods/services to the Company or purchasing its products.In case a relationship with such an organization exists the same must be disclosed to the Management.

2. Dealings with third parties which include Government officials, suppliers, buyers, agentsand consultants must always ensure that the integrity and reputation of the Company

is not in any way compromised.

3. Directors and employees are not allowed to accept any favours, gifts or kickbacksfrom any organization dealing with the Company.

4. Directors and employees are not permitted to divulge any confidential informationrelating to the Company to any unauthorized person. Nor should they issue anymisleading statements pertaining to the affairs of the Company.

5. The Company has strong commitment to the health and safety of its employees andpreservation of environment and the Company will persevere towards achievingcontinuous improvement of its HSE performance by reducing potential hazards preventing

pollution and improving awareness. Employees are required to operate the Companysfacilities and processes keeping this commitment in view.

6. Commitment and team work are key elements to ensure that the Companys work iscarried out effectively and efficiently. Also all employees will be equally respected andactions such as sexual harassment and disparaging remarks based on gender, religion,race or ethnicity will be avoided.

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Statement of Ethics and Business Practices Statement of Ethics and Business Practices


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Notice is hereby given that the 39th Annual General Meeting of the members ofKOHINOOR TEXTILE MILLS

LIMITEDwill be held on Monday, October 29, 2007 at 3:00 p.m. at its Registered Office, 42-LawrenceRoad, Lahore, to transact the following business: -

1. To confirm the minutes of the Extra Ordinary General Meeting held on February 28, 2007.

2. To receive, consider and adopt the audited accounts of the Company for the year ended June30, 2007 together with the Directors and Auditors Reports thereon.

3. To appoint Auditors for the ensuing year and fix their remuneration.

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

By order of the Board

(Muhammad Ashraf)Lahore: October 08, 2007 Company Secretary

Notes:

1. Share transfer books of the Company will remain closed from 20-10-2007 to 29-10-2007 (bothdays inclusive) and no transfer will be accepted during this period. The members whose namesappear in the register of members as at the close of business on 19-10-2007 will be consideredin time.

2. A member eligible to attend and vote at this meeting may appoint another member as his/her proxy to attend and vote instead of him/her. Proxies in order to be effective must reach theCompany's Registered Office not less than 48 hours before the time for holding the meeting.

3. CDC Shareholders, entitled to attend and vote at this meeting, must bring with them their NationalIdentity Cards / Passports in original alongwith Participants ID Numbers and their AccountNumbers to prove his/her identity, and in case of Proxy, must enclose an attested copy of his/her NIC or Passport. Representatives of corporate members should bring the usual documentsrequired for such purpose.

4. Shareholders are requested to immediately notify the change in address, if any.

NOTICE OF ANNUAL GENERAL MEETING


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The Directors feel pleasure in presenting the 39th annual report along with audited financial accounts for

the year ended June 30, 2007.OPERATIONS REVIEW

The changing global market environment created severalnew challenges. Severe competition from rivalmanufacturers who undercut prices made sales difficult.Prices of furnace oil kept surging and gas rates had alreadyincreased in the previous year. Load shedding of gasforced disrupted operations of cloth processing and power generation. This forced the increased use of furnace oilwhich resulted in higher costs.

The government raised minimum wages with effect fromJuly 01, 2006 leading to an across the board increase inworkers wages and other charges by approximately 35per cent. Cost of financing was substantially higher due to increase in rates of mark up and additional borrowingfor fixed assets. Difficult market conditions and interruptionin gas supply caused under utilization of capacity in bothcloth processing and cut and sew facilities. These factorsincreased cost of production and eroded profit marginsquite considerably. Had the Governments Textile Packagenot been announced, results would have been worse.

In order to off set effect of higher cost of power generation due to unpalatable prices of furnace oil, themanagement decided to install gas based generators at Rawalpindi and Raiwind sites. These generators

became functional during the year under review and have started producing cheaper electricity, steam andhot water from recycling of waste heat of the engines. A further capacity increase in gas based generationof power is under way and will be operational by early December, 2007 after which furnace oil basedengines would be on standby or will cater to local demand by sale to the WAPDA grid.

In view of the need to add value to our products, theCompany augmented its made up production facilities byadding new cut and sew sections and by establishing a training centre for sewing personnel. The first batch of trained staff from this centre has already been transferred to production departments and is working well. This centrewill impart much needed technical expertise to the locallyavailable labour force.

Due to weakness in housing and retail sectors in theUnited States of America, the future outlook is difficultwith unit rates decreasing again. This is being countered by cost cutting exercises in the productiondepartments. Some success is being seen in this endeavour. These efforts will continue so that productivityincreases and costs reduce.

The new cotton season in Northern Hemisphere is upon us, albeit opening at very high rates. This is mainlydue to trading by Hedge Funds abroad but we feel these prices can not be sustained. Therefore, much carewill be exercised in purchases this year as has been done in the past.

DIRECTORS REPORT TO THE SHAREHOLDERS

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2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

P E R

C E N T A

G E

G.P % TO SALE

YEARS

1 4 . 8 0 %

1 4 . 2 6 %

1 5 . 7 7 %

1 5 . 9 5 %

1 4 . 0 1 %

1 4 . 6 4 %

Yarn spinning results have been encouraging in the past year and the results after modernization have beenimproved. Compact spinning attachments have been successfully commissioned at Gujar Khan site andyarn results are quite good. More investment is planned in the year to enhance compact spinning capacityboth at Rawalpindi and Gujar Khan sites. The addition of new combing capacity at Gujar Khan has beensuccessfully commissioned leading to improved quality and better yield.

Weaving operations at the Raiwind site have been fullymodernized and running satisfactorily. Speeds andefficiency improvements have been as planned. Power from new gas based generation facility at that sitealong with heat recovery installation is working well andenergy costs have decreased.

Cloth processing and cut and sew facilities could notachieve their performance targets mainly due to under utilization of the available capacity.

FINANCIAL REVIEW

During the year under review, the Company achieved salesof Rs. 7,140.167 million (2006: Rs. 6,903.625 million)showing an increase of 3.43%. Gross Profit amounted toRs. 1,045.526 million (2006: Rs. 1,021.807 million) withan increase of 2.32% over the last year. Profit fromoperations of the year amounted to Rs. 524.974 million(2006: Rs. 482.825 million) indicating an increase of8.73% over the previous year.

Surge in finance cost Rs. 603.951 million as compared to Rs. 448.072 million for the last year - was the mainfactor which eroded profit margins.

After adjusting other operating income and financial cost, loss before taxation for the year amounted toRs. 28.293 million and loss after taxation amounted to Rs. 39.822 million.

There being loss from operations for the year and nil Earnings Per Share, the Directors express inability to pay any dividend for the year. However, management of the Company in committed to ensure the efficientoperation of the Company to deliver value to the customers and watch interest of the stakeholders.

The Directors recommend as under:Rs. 000

Loss before taxation (28,293)Provision for taxation 11,529

Loss after taxation (39,822)Un appropriated profit brought forward 3,896

Add: Transfer from Dividend Equalization Reserve 9,509

(26,417)


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SHARE HOLDERS EQUITY

R U P E E

S I N M I L L I O N

S

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

7,2948,000

7,0006,000

5,000

4,000

3,000

2,000

1,000

-

EQUITY

1,683 1,838

3,799

4,717 4,707

INCREASE IN SHARE CAPITAL

The Company issued fully paid bonus share @ 10% andright shares @25 % to the entitled members.

INVESTMENTS

During the year, the Company subscribed to the rightshares issued by Maple Leaf Cement Factory Ltd.

INFORMATION TECHNOLOGY

The Company is in process of developing and upgradingits management information systems. The IT infrastructurehas been set up utilizing state of the art equipment andhigh speed network on Fiber Optic Technology.

The Company has selected Oracle as the main platformfor these systems and is utilizing Oracle Financials whichis a well known tool for financial systems. At the same time, systems are being developed in house that will beintegrated with Oracle Financials to provide better reportingand paper free environment within the Company. Thesesystems will integrate financials, cost and managementaccounting, production, marketing and human resourcefunctions.

Installation and implementation of systems is in progress

and is at varying stages of completion. Certain modulesare now in use.

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SOCIAL COMPLIANCE AND HUMAN RESOURCES

The Company believes that highly skilled and motivated workforce is essential for success. It gives priority to human resource development.

Human resource policy has been based on the underlying values of fairness, merit, equal opportunity andsocial responsibility. These values manifest themselves in the companys polices of recruitment, performanceappraisal, training and development, health and safety and industrial relations.

Complying with our human resource polices, the Company does not employ any child labour and is anequal opportunity employer. Company maintains a high standard of employees working and living conditions;providing free, safe and clean residential facilities, utilities medical care, life insurance and education.

The Company has taken a number of measures to develop its employees to meet the challenges of todayscompetitive corporate world. The Company has invested extensively in employee development programsby providing technical, computer, management, health & safety training in our in house training facilityinstalled with the latest audio / visual equipment.

As a commitment to comply with international standards, the Company opted to adopt Social AccountabilityStandard SA-8000:2001 and is now a cer tificated Company.


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QUALITY MANAGEMENT SYSTEMS

Your company is ISO-9001:2000 certificated. The surveillance audits are being regularly and successfullycompleted on six monthly bases.

Conforming to the Companys Quality Management Systems, product quality is consistently maintainedand monitored at every stage. Yarn fabric is tested in most modern textile testing laboratories working atall divisions. These laboratories are equipped with latest equipments and are environmentally control to the most stringent of international standards. Quality control in made ups production facilities is basedon AQL system, ensuring high control on quality of products. Internal / external audits and managementreviews, clearly demonstrate control improvements and Companys long term commitment to improve itsmanagement system to any reputed international standard.

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SAFETY, HEALTH AND ENVIRONMENT

Your Company provides and maintains, so far as practicable equipment, systems and working conditionswhich are safe and without risk to the health of all employees, visitors, contractors and public. Management

has maintained its strong commitment to a safe environment in its operations through out the year.The Company is well aware of the relation ship between the textile production and related environmentissues. Keeping in view the ethical obligations to the environment, it has started working on implementationof ISO-14001-2004 Environment Management System the documentation and environment monitoringprocess has been completed. Certification process is targeted to be completed at the earliest possible.

Setting up of effluent treatment plant has already been approved in principle by management. Waste water is being analyzed regularly and commercial and technical proposals have been sought. However, it hasbeendecided to review the change in pollution load after the new machines in the processing departmentare fully operational. The installation process will be completed in the year 2007-08.

The Company takes care and applies appropriates procedures to design /manufacture textile products soas to ensure that no harmful substances are present in its products. It adopts recognized environmentfriendly working methods and makes careful selection of dye stuffs, optimizes dye baths, uses chlorine

free bleaching techniques, low formaldehyde finishing methods and heavy metal free materials. By employing these recognized methods, the Company produces safe products and has been able to comply withrequirements of European legislation regarding use of azo dyes and been certificated under OEKO Tex 100Standard which is now valid till April 30, 2008, confirming the Companys commitment to using harmlessdyes and chemicals in its production processes.


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SECURITY

Kohinoor is dedicated to the principles of social responsibility in the workplace. We believe in the dignityof our employees, are convinced that all employees must work in safe and healthful workplaces, and arecommitted to workplace practices that are not harmful to the environment we all share.

Therefore, KTML participates in all social responsibility education and monitoring activities. Further, inresponse to the events of September 11, 2001, the US Customs Service implemented the Customs TradePartnership Against Terrorism (C - TPAT) for importers to improve supply chain security. KTML supportsC- TPAT and is committed to improve security conditions within the organization as well as throughoutits supply chain from the factory to overseas.

KTML is proud to announce that C. TPAT certification has been acquired by implementing all requirementsof this security standard.

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FUTURE PROSPECTS

The Company plans to invest in the following areas to improve productivity and quality and to improvemarketing posture.

Spinning: a) Replacement of two auto winders, b) Replacement of seventeen old ring frames, c) Addition of compact spinning attachments on approximately 25,000 spindles,d) Modernization of Blow Room facilities at Rawalpindi, e) Addition of fur ther 6,000 spindles at Rawalpindi f) Replacement of old draw frames at Rawalpindi and Gujar Khan.

Cut and sew depar tment: Addition of a wadding manufacturing line to reduce costs of the quilting operation,

COMPLIANCE OF CODE OF CORPORATE GOVERNANCE

The Board of Directors periodically reviews the Companys strategic direction. Business plans and targetsare set by the Chief Executive and reviewed by the Board. The Board is committed to maintain a highstandard of corporate governance. The Board has reviewed the Code of Corporate Governance and confirmsthat:

a) The financial statements, prepared by the management of the Company, present fairly its stateof affairs, the result of its operations, cash flows and change in equity.

b) Proper books of account of the company have been maintained. c) Appropriate accounting policies have been consistently applied in preparation of financial statements

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

of financial statements and any depar ture there from, has been adequately disclosed. e) The system of internal control is sound in design and has been effectively implemented and

monitored. f) There are no significant doubts upon the companys ability to co ntinue as a going concern. g) There has been no material depar ture from the best practices of corporate governance, as detailed

in the listing regulations of the stock exchanges. h) Outstanding taxes and other government levies are given in related note(s) to the audited accounts.i) Key operating and financial data of last six years is annexed.

Value of investment of provident fund trust, based on their un audited accounts of June 30, 2007is as under:

(Rs. in thousand)Provident fund 121,740

DIRECTORS AND BOARD MEETINGS

During the year under repor t, the Board of directors met five times. The number of meetings attended byeach director during the year is shown below: -

Names of Directors Meetings Attended

Mr. Tariq Sayeed Saigol 5 Mr. Sayeed Tariq Saigol 3 Mr. Waleed Tariq Saigol 2 Mr. Usman Said 5 Mr. Zamiruddin Azar 5 Mr. S. M. Imran 4 Mr. Abdul Hai Mehmood Bhaimia 5

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

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TRADE OF COMPANYS SHARES

Shares traded by Directors, CEO, CFO, Company Secretar y and theirspouses and minor children are givenas under : -

No. of SharesPurchased

Mr. Tariq Sayeed Saigol Chairman/Director 4,889,517Mr. Muhammad Ashraf Company Secretar y 8

PATTERN OF SHAREHOLDING

The statement of shareholding of the Company as at June 30, 2007 is annexed. This statement is in accordance with the Code of Corporate Governance and Companies Ordinance, 1984.

AUDIT COMMITTEE

Name Designation

Mr. Zamiruddin Azar ChairmanMr. Waleed Tariq Saigol MemberMr. S. M. Imran MemberMr. Muhammad Ashraf Secretar y

AUDITORS

The auditors of the Company M/s. RiazAhmad & Company , Char tered Accountants, have retired and offered their ser vices again. The Audit Committee has recommended their appointment as auditors of theCompany for the accounting year ending June 30, 2008.

ACKNOWLEDGEMENT

The Directors are grateful to the Companys members, financial institutions and customers for their cooperation and suppor t. They also appreciate hard work and dedication of all the employees working atvarious divisions.

For and on behalf of the Board

Lahore September 29, 2007 Chief Executive

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This statement is being presented to comply with the Code of Corporate Governance contained in Listing

Regulations of Stock Exchanges in Pakistan 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 the representation of non-executive directors on its Board of Directors. Atpresent the Board of Directors includes five independent non-executive directors.

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

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

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

5. The Company has prepared a Statement of Ethics and Business Practices, which has been signedby all the directors and employees of the Company.

6. The Board has developed a vision/mission statement, overall corporate strategy and significant policiesof 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, includingappointment and determination of remuneration and terms and conditions of employment of the CEOand 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 noticesof the Board meetings, along with agenda and working papers, were circulated at least seven daysbefore the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The Board arranged Orientation Course for its Directors during the year to apprise them of their dutiesand responsibilities.

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.

11. The directors report for this year has been prepared in compliance with the requirements of the Code

and fully describes the salient matters required to be disclosed.

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

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE


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15. The Board has formed an audit committee. It comprises three members. Two of them are non-executivedirectors including the chair man of the committee.

16. The meetings of the audit committee were held at least once ever y quarter prior to approval of interim

and final results of the Company and as required by the Code. The terms of reference of the committeehave been formed and advised to the committee for compliance.

17. The Board has set-up an effective internal audit function.

18. The statutor y auditors of the Company have confir med that they have been given a satisfactor y ratingunder the Quality Control Review programme of the Institute of Char tered Accountants of Pakistan,that they or any of the par tners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its par tners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Char tered Accountantsof Pakistan.

19. The statutor y auditors or the persons associated with them have not been appointed to provide otherser

vices

except

in

accordance

with

the

listing

regulations

and

the

auditors

have

confir med

that

theyhave obser ved IFAC guidelines in this regard.

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

For and on behalf of the Board

Lahore: September 29, 2007 Chief Executive

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We have reviewed the statement of compliance with best practices in the code of corporate governanceprepared by the Board of Directors of Kohinoor Textile Mills Limited, for the year 30 June 2007, to complywith the respective listing regulation of the three stock exchange where the Company is listed.

The responsibility for compliance with the code of corporate Governance is that of the Board of Directorsof the Company. Our responsibility is to review, to the extent where such compliance can be objectivelyverified, whether the statement of compliance reflects the status of the Companys compliance with theprovision of the code of corporate governance and report if it does not. A review is limited primarily toinquiries of the Company personnel and review of various documents prepared by the Compamy to complywith the code.

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

Based on our review, nothing has come to our attention which causes us to believe that the statementof compliance does not appropriately reflect the Companys compliance, in all material respects, with thebest practices contained in the code of corporate governance, effective as at 30 June 2007.

Islamabad: RIAZ AHMAD & COMPANY September 29, 2007 Chartered Accountants

REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BESTPRACTICES OF CODE OF CORPORATE GOVERNANCE


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AUDITORS REPORT TO THE MEMBERS

We have audited the annexed balance sheet ofKOHINOOR TEXTILE MILLS LIMITEDas at 30 June 2007

and the related profit and loss account, cash flow statement, and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all theinformation and explanations which, to the best of our knowledge and belief, were necessary for thepurposes 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 standardsand the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

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

a) in our opinion, proper books of account have been kept by the company as required by the CompaniesOrdinance, 1984;

b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon, have been drawnup in conformity with the Companies Ordinance, 1984 and are in agreement with the books ofaccount and are further in accordance with accounting policies consistently applied except for the change as stated in note 3.9 with which we concor;

(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 werein accordance with the objects of the company;

c) in our opinion and to the best of our information and according to the explanations given to us, thebalance 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 inPakistan, and, give the information required by the Companies Ordinance, 1984, in the manner sorequired and respectively give a true and fair view of the state of the Company's affairs as at 30 June2007 and of the loss, its cash flows and changes in equity for the year then ended; and

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

Islamabad: RIAZ AHMAD & COMPANY September 29, 2007 Chartered Accountants

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BALANCE SHEET

EQUITY AND LIABILITIES

Note2007 2006(R upees in thousand)

SHARE CAPITAL AND RESERVES

Authorized share capital 120,735,325 (2006: 120,735,325)

ordinar y shares of Rupees 10 each 1,207,353 1,207,35330,000,000 (2006: 30,000,000)

preference shares of Rupees 10 each 300,000 300,000

1,507,353 1,507,353

Issued, subscribed and paid up share capital 4 1,455,262 1,058,374Reserves 5 4,575,057 3,649,034

Total equity 6,030,319 4,707,408Surplus on revaluation of investment property 16 1,263,592 -

NON-CURRENT LIABILITIES Long term financing 6 2,460,638 2,500,599Term finance cer tificates 7 - 71,250Liabilities against assets subject to finance lease 8 227,643 151,387Deferred tax liability 9 270,812 53,749

2,959,093 2,776,985

CURRENT LIABILITIES Trade and other payables 10 475,000 835,990Accr ued mark-up 11 59,219 80,849Shor t term borrowings 12 2,775,505 2,236,834Current por tion of non-cur rent liabilities 13 921,325 701,923

4,231,049 3,855,596 CONTINGENCIES AND COMMITMENTS 14 - -

14,484,053 11,339,989

The annexed notes form an integral par t of these financial statements.

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AS AT 30 JUNE 2007

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 15 3,971,021 3,561,259Investment property 16 1,384,577 -Long term investment 17 4,553,255 3,821,749Long term deposits 18 28,135 17,564

9,936,988 7,400,572

CURRENT ASSETS

Stores and spares 19 284,228 502,870Stock -in- trade 20 1,755,097 1,607,795Trade debts 21 1,062,320 887,407Advances 22 137,776 225,912Security deposits and short term prepayments 23 14,463 20,006Accrued Interest 386 581Other receivables 24 285,382 229,438Short term investments 25 904,327 7,000Taxation recoverable 39,355 21,597Cash and bank balances 26 63,731 436,811

4,547,065 3,939,417

14,484,053 11,339,989

2007 2006(Rupees in thousand)Note

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2007


SALES 27 7,140,167 6,903,625COST OF SALES 28 6,094,641 5,881,818

GROSS PROFIT 1,045,526 1,021,807

SELLING AND DISTRIBUTION EXPENSES 29 372,793 401,276ADMINISTRATIVE EXPENSES 30 135,347 124,327OTHER OPERATING EXPENSES 31 12,412 13,379

520,552 538,982

PROFIT FROM

OPER

ATIONS

524,974 482,825

OTHER OPERATING INCOME 32 50,684 320,231

575,658 803,056

FINANCE COST 33 603,951 448,072

PROFIT / (LOSS) BEFORE TAXATION (28,293) 354,984

PROVISION FOR TAXATION 34 11,529 56,780

PROFIT / (LOSS) AFTER TAXATION (39,822) 298,204

EARNINGS PER SHARE - RUPEES 38 (0.32) 2.49


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CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 35 463,127 233,077Finance cost paid (625,581) (410,209)WPPF paid (5,431) (7,370)Taxes paid (47,774) (42,198)

Net cash used in operating activities (215,659) (226,700)

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure on proper ty, plant and equipment (718,843) (1,128,381)Long term deposits (10,571) 3,203Purchase of right shares (466,522) -Return on bank deposits 1,242 445Proceeds from sale of proper ty, plant and equipment 30,230 81,840Proceeds from sale of investments - 403,795Dividend received 8,531 2,275

Net cash used in investing activities (1,155,933) (636,823)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from: Long term financing - secured 1,138,617 1,815,308Shor t term borrowing 538,671 121,679Right issue of ordinar y shares 435,970 -

Repayment of: Long term financing - secured (965,392) (595,503)Finance leases (78,089) (118,032)Term finance cer tificates (71,250) (71,250)

Dividend paid (15) (208)

Net cash from financing activities 998,512 1,151,994

Net increase / (decrease) in cash and cash equivalents (373,080) 288,471

Cash and cash equivalents at the beginning of the year 436,811 148,340

Cash and cash equivalents at the end of the year 26 63,731 436,811


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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED30 JUNE 2007

Share Capital Reser ve

Surplus on

Reserves

RevenueReser ves

Capital Capital Share revaluation Reser ve General Dividend Un-

Reser ve premium of for Bonus Sub Total Reser ve Equalizationappropriated

investmentShares Reser ve Profit

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

Balance as at 30 June 2005 962,158 18,901 15 1,855 1,429,0 49 - 1,599,805 1,090,491 9,509 136,989 Transfer to general reserves - - - - - - 100,000 - (100,000)

Bonus shares issued 96,216 - (96,216) - - (96,216) - - -

Surplus on revaluation of investment to fair value - - - 863,151 - 863,151 - - -

Adjustment of fair value on disposal of investment - - - (252,899) - (252,899) - - -

Net profit for the year - - - - - - - - 298,204

Balance as at 30 June 2006 1,058,3 74 18,901 5 5,6 39 2,039,3 01 - 2,113,841 1,190,491 9,509 335,193 Transfer to general reserves - - - - - - 300,000 - (300,000)

Reserve for bonus shares - (18,901) (55,639) - 105,837 31,297 - - (31,297)

Bonus shares issued 105,837 - - - (105,837) (105,837) - - -

Right shares issued at premium 291,051 - 144,919 - - 144,919 - - -

Revaluation of investment to fair value - - - 926,763 - 926,763 - - -

Net loss for the year - - - - - - - - (39,822)

Balance as at 30 June 2007 1,455,262 - 144,919 2,966,064 - 3,110,983 1,490,491 9 ,509 (35 ,926 )


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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2007

1. THE COMPANY AND ITS OPERATIONS

Kohinoor Textile Mills Limited is a public limited company incorporated in Pakistan under the CompaniesAct,1913 (now Companies Ordinance, 1984) and listed on the Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the Company is situated at 42- Lawrence Road, Lahore. Theprincipal activity of the company is manufacturing of yarn and cloth, processing and stitching thecloth and trade of textile products.

2. STATEMENT OF COMPLIANCE

2.1 These financial statements have been prepared in accordance with approved accountingstandards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984.Approved accounting standards comprise of such International Accounting Standards (IAS)as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirementsof the Companies Ordinance, 1984 or directives issued by the Securities and ExchangeCommission of Pakistan (SECP) differ with the requirements of these standards, the requirementsof Companies Ordinance, 1984 or the requirements of the said directives take precedence.

2.2 Standards, interpretations and amendments to published approved accounting standardsthat are not yet effective

The following standards, amendments and interpretations of approved accounting standardseffective for annual periods beginning on or after 01 July 2007, relevant to the operations of the Company, are not expected to have significant impact on the Companys financial statementsand may only result in certain increased disclosures:

a) IFRS-7 Financial Instruments: Disclosures Effective from 01 January 2007

b) IFRS-5 Non current assets held for sale Effective from 01 January 2007and discontinued operations

c) IAS-1 Presentation of Financial Statements Effective from 01 January 2007- amendments relating to capitaldisclosures

d) IAS-23 Borrowing Costs Effective in case of borrowing costsrelating to qualifying asset for which thecommencement date for capitalisationis on or after 01 January 2009

e) IFRIC-10 Interim Financial Reporting Effective for annual periods beginningand impairment' on or after 01 January 2007

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of Preparation

These financial statements have been prepared under the historical cost convention, exceptfor financial instruments which are carried at their fair value.

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3.2 Critical accounting estimates and judgments

The preparation of financial statements in conformity with the approved accounting standardsrequires the use of certain critical accounting estimates. It also requires the management to

exercise its judgment in the process of applying the Company's accounting policies. Estimatesand judgments are continually evaluated and are based on historical experience, includingexpectation of future events that are believed to be reasonable under the circumstances. Theareas where various assumptions and estimates are significant to the Company's financialstatements or where judgments were exercised in application of accounting policies are asfollows:

3.2.1 Useful lives, patterns of economic benefits and impairments

Estimates with respect to residual values, depreciable lives and pattern of flow of economicbenefits are based on the analysis of the management of the Company. Further, the Companyreviews the value of assets for possible impairments on an annual basis. Any change in theestimates in the future might affect the carrying amount of respective item of property, plantand equipment, with a corresponding effect on the depreciation charge and impairment.

3.2.2 Financial instruments

The fair value of financial instruments that are not traded in an active market is determined byusing valuation techniques based on assumptions that are dependent on market conditionsexisting at balance sheet date.

3.2.3 Taxation

In making the estimates for income tax currently payable by the Company, the management takes into account the current income tax law and the decisions of appellate authorities oncertain issues in the past.

3.3 Employee benefits

The Company operates an approved defined contribution provident fund for all its employees.Equal monthly contributions are made both by the company and employees at the rate of 8.33percent of basic salary and cost of living allowance to the fund.

3.4 Taxation

Current

The company falls in the ambit of presumptive tax regime regarding export sales under section154 of the Income Tax Ordinance, 2001. Provision for income tax is made in the financialstatements accordingly. However, provision for tax on local sales and other income is basedon taxable income at the prevailing current rates after considering the rebates and tax creditsavailable, if any, or one-half percent of turn over, which ever is higher.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary timing differences arising from difference between the carrying amount of the assets andliabilities in the financial statements and corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences anddeferred tax assets are recognized for all deductible temporary differences to the extent that itis probable that taxable profit will be available against which the deductible temporary differences,unused tax losses and tax credits can be utilized.


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

equity.3.5 Trade and other payables

Liabilities for trade and other amounts payable are initially recognized at fair value which isnormally the transaction cost.

3.6 Provisions

Provisions are recognized when the Company has a legal or constructive obligation as a resultof past event, if it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate of the amount can be made. Provisionsare reviewed at each balance sheet date and are adjusted to reflect the current best estimates.

3.7 Finance leases

Leases where the company has substantially all the risks and rewards of ownership are classifiedas finance leases. Assets subject to finance lease are stated at the lower of present value ofminimum lease payments under the lease agreements and the fair value of the assets. Therelated rental obligations, net of finance charges, are included in liabilities against assets subject to finance lease.

Each lease payment is allocated between the liability and finance charge so as to achieve aconstant rate on the balance outstanding. Finance charge of the rental is charged to profit over the lease term.

3.8 Property, plant, equipment and depreciation

Owned

a) CostProperty, plant and equipment except freehold land and capital work in progress are statedat cost less accumulated depreciation and impairment losses, if any. Freehold land andcapital work in progress are stated at cost. Cost of tangible assets consists of historicalcost, borrowing cost pertaining to erection/construction period and other directly attributablecost of bringing the asset to working condition.

Subsequent costs are included in the assets carrying amount or recognized as a separateasset, as appropriate, only when it is probable that future economic benefits associatedwith 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.

b) DepreciationDepreciation on all operating property, plant and equipment is charged to income onreducing balance method after taking into account residual value, if any, so as to writeoff the depreciable amount of an asset over its estimated useful life at the rates given inNote 15.1. Depreciation on additions is charged from the month the assets are availablefor use while no depreciation is charged in the month in which the assets are disposedoff. The residual values and useful lives of assets are reviewed by the management ateach financial year end and adjusted if impact on depreciation is significant.

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c) Derecognition

An item of property, plant and equipment is derecognized on disposal or when no futureeconomic benefits are expected from its use or disposal. Any gain or loss arising onderecognition of the asset (calculated as the difference between the net disposal proceedsand carrying amount of the asset) is included in the income statement in the year theasset is derecognized.

Leased

Finance lease

Leases where the Company has substantially all the risk and rewards of ownership are classifiedas finance lease. Assets subject to finance lease are capitalized at the commencement of thelease term at the lower of present value of minimum lease payments under the lease agreementsand the fair value of the leased assets, each determined at the inception of the lease.

The related rental obligation net of finance cost, is included in liabilities against assets subject to finance lease. The liabilities are classified as current and long term depending upon the timing

of payments.Each lease payment is allocated between the liability and finance cost so as to achieve aconstant rate on the balance outstanding. The finance cost is charged to income over the lease term.

Depreciation of assets subject to finance lease is recognised in the same manner as for ownedassets. Depreciation of the leased assets is charged to income.

3.9 Investment Property

Change in accounting policy

During the current year, the Company has changed its accounting policy to recognize the owner-occupied property as investment property (Note 16) in accordance with the requirements of

International Accounting Standard IAS-40 "Investment Property". Previously, these propertieswere presented as property, plant and equipment in accordance with the accounting policygiven in note 3.8 to the financial statements. Had there been no change in accounting policy the carrying value of property, plant and equipment would have been higher by Rupees 120.985million.

Investment properties are carried at fair value which is based on active market prices, adjusted,if necessary, for any difference in the nature, location or condition of the specific asset. Thevaluation of the property is carried out with sufficient regularity.

Gain or losses arising from a change in the fair value of investment properties are included in the income currently.

3.10 Intangible assets

Intangible assets, which are non-monetary assets without physical substance, are recognizedat cost, which comprise purchase price, non-refundable purchase taxes and other directlyattributable expenditures relating to their implementation and customization. After initial recognitionan intangible asset is carried at cost less accumulated amortization and impairment losses, ifany. Intangible assets are amor tized from the month, when these assets are available for use,using the straight line method, whereby the cost of the intangible asset is amortized over itsestimated useful life over which economic benefits are expected to flow to the Company. Theuseful life and amortization method is reviewed and adjusted, if appropriate, at each balancesheet date.


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3.11 Investments

The Company's management determines the appropriate classification of its investments at the time of purchase.

Investments are initially measured at fair value plus transaction costs directly attributable toacquisition, except for "investments at fair value through profit and loss account".

Investments at fair value through profit and loss account

Investments classified as held-for-trading and those designated as such are included in thiscategory. Investments are classified as held-for-trading if they are acquired for the purpose ofselling in the short term.

Gains or losses on investments held-for-trading are recognised in profit and loss account.

Held-to-maturity

Investments with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the company has the positive intention and ability to hold to maturity. Investmentsintended to be held for an undefined period are not included in this classification. Other long term investments that are intended to be held to maturity are subsequently measured at amortisedcost. This cost is computed as the amount initially recognised minus principal repayments,plus or minus the cumulative amortisation using the effective interest method of any differencebetween the initially recognised amount and the maturity amount. For investments carried atamortised cost, gains and losses are recognised in income when the investments are derecognisedor impaired, as well as through the amortisation process.

Available-for-sale

Other investments not covered in any of the above categories are classified as available-for-sale.

After initial recognition, investments which are classified as available-for-sale are measuredat fair value. Gains or losses on available-for-sale investments are recognised directly in equityuntil the investment is sold, derecognised or is determined to be impaired, at which time thecumulative gain or loss previously reported in equity is included in income. Upon impairment,gain / loss including that had been previously recognised directly in equity, is included in theprofit and loss account for the year.

For investments that are actively traded in organised financial markets, fair value is determinedby reference to stock exchange quoted market bids at the close of business on the balancesheet date. For investments where there is no quoted market price, fair value is determined byreference to the current market value of another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net asset base of the investment

or based on other appropriate valuation techniques.All purchases and sales of investments are recognized on the trade date which is the date that the Company commits to purchase or sell the investment.

Equity investment in subsidiary and associated companies

The investments in associates in which the Company does not have significant influence andsubsidiary are classified as "Available for Sale".

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3.17 Foreign currencies

Transactions in foreign currency during the year are translated into Pak Rupees at the ratesof exchange prevailing on the date of transaction. All monetary assets and liabilities in foreigncurrencies are translated into Pak Rupees at the rate of exchange prevailing on the balancesheet date except where forward exchange contracts have been made, in which case thecontracted rates are applied. All exchange gains and losses are taken to the profit and lossaccount.

3.18 Financial assets and liabilities

Financial assets and liabilities are recognized at fair value when the Company becomes party to the contractual provisions of the instrument by following trade date accounting. Any gainor loss on the subsequent measurement is charged to the profit and loss account. The Companyderecognizes a financial asset or a portion of financial asset when, and only when, the enterpriseloses the control over contractual right that comprises the financial asset or a portion of financialasset. While a financial liability or a par t of financial liability is derecognized from the balancesheet when, and only when, it is extinguished, i.e. when the obligation specified in contract is

discharged, cancelled or expired.The particular measurement methods adopted are disclosed in the individual policy statementsassociated with each item.

Financial assets are long term investments, long term deposits, trade debts, loans and advancesand other receivables, short term investments and cash and bank balances.

Financial liabilities are classified according to the substance of the contractual agreementsentered into. Significant financial liabilities are long term financing, short term borrowings and trade and other payables.

3.19 Impairment

The carrying amounts of the Company's assets are reviewed at each balance sheet date todetermine whether there is any indication of impairment loss. If any such indication exists, therecoverable amount of such assets is estimated and impairment losses are recognized in theprofit and loss account. Where an impairment loss subsequently reverses, the carrying amountof the asset is increased to the revised recoverable amount but limited to the extent of the initialcost of the asset. A reversal of the impairment loss is recognized in profit and loss account.

3.20 Dividend and other appropriations

Dividend to the shareholders is recognized in the period in which it is declared and other appropriations are recognized in the period in which these are approved by the Board of Directors.

3.21 Off setting of financial assets and liabilities

Financial assets and liabilities are set off and the net amount is reported in the financial statementswhen there is legally enforceable right to set off and the Company intends either to settle on anet basis, or to realize the asset and settle the liability simultaneously.

3.22 Mark up bearing borrowings

Borrowings are recognized initially at fair value and are subsequently stated at amortized cost;any difference between the proceeds and the redemption value is recognized in the incomestatement over the period of the borrowing using the effective interest rate method.

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4. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL

1,596,672 1,596,672 Ordinary shares of Rupees 10 eachallotted on reorganisation ofKohinoor Industries Limited 15,967 15,967

26,156,000 26,156,000 Ordinary shares allotted under schem eof arrangement of m erger of Part IIof Maple Leaf Electric Comp any Limited261,560 261,560

26,858,897 26,858,897 Ordinary shares allotted under schem eof arrangement of m erger of KohinoorRaiwind Mills Limited and KohinoorGujar Khan M ills Limited. 268,589 268,589

38,673,628 28,089,904 Ordinary shares of Rupees 10 eachissued as bonus shares 386,736 280,900

52,241,019 23,135,776 Ordinary shares of Rupees 10 eachissued for cash 522,410 231,358145,526,216 105,837,249 1,455,262 1,058,374

4.1 Reconciliation of the number of shares outstanding;

Number of shares outstanding at the beginning of the year 105,837,249 96,215,681

Add: 10% Bonus issue of shares during the year 10,583,724 9,621,56825% Right issue of shares during the year 29,105,243 -

39,688,967 9,621,568

145,526,216 105,837,2494.2 Zimpex (Private) Limited, which is an associated company, held 22,510,635 (2006: 16,371,371)

ordinary shares of Rupees 10 each at 30 June 2007.

5. RESERVES

Capital:

Capital reserve - 18,901Share premium 5.1 144,919 55,639Surplus on revaluation of investments - net of deferred tax 5.2 2,966,064 2,039,301

3,110,983 2,113,841Revenue:

General reserve 1,490,491 1,190,491Dividend equalization reserve 9,509 9,509Unappropriated profit (35,926) 335,193

1,464,074 1,535,193

4,575,057 3,649,034

2007 2006(Rupees in thousand)

2007 2006Number of shares



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5.1 This reserve can be utilized by the company only for the purposes specified in section 83(2)of the Companies Ordinance, 1984.

5.2 Surplus on revaluation of investments - net of deferred tax

Balance as at July 01 2,039,301 1,429,049Add : Fair value adjsutments on investments :

Maple Leaf Cement Factory Limited 264,985 863,151Kohinoor Weaving Mills Limited - (252,899)Security General Insurance Company Limited 897,327 -

1,162,312 610,252Less : Deferred tax liability

Security General Insurance Company Limited 235,549 -Balance as at June 30 2,966,064 2,039,301

6. LONG TERM FINANCINGFrom banking companies and other

financial institutions - SecuredNational Bank of Pakistan (NBP) 6.1 14,761 31,986MCB Bank Limited (MCB - 1) 6.2 25,000 75,000The Bank of Punjab (BOP - 1) 6.3 218,709 320,754The Bank of Punjab (BOP - 2) 6.4 300,000 200,000Standard Chartered Bank (Pakistan) Limited (SCBPL)6.5 75,225 102,725Albaraka Islamic Bank Limited (ABIB) 6.6 100,000 100,000United Bank Limited (UBL) 6.7 62,500 112,500Allied Bank Limited (ABL -1 ) 6.8 235,115 281,568Allied Bank Limited (ABL - 2) 6.9 375,000 500,000Allied Bank Limited (ABL - 3) 6.10 250,000 -The Bank of Khyber (BOK) 6.10 80,000 -Orix Leasing Pakistan Ltd (OLPL) 6.10 25,000 -Faysal Bank Limited (FBL - 1) 6.11 300,000 300,000Faysal Bank Limited (FBL - 2) 6.12 137,500 -

Saudi Pak Industrial and Agricultural Investment Co.(Pvt) Limited (SPIAICPL-1) 6.13 43,334 57,778Saudi Pak Industrial and Agricultural Investment Co.

(Pvt) Limited (SPIAICPL-2) 6.14 40,000 -Saudi Pak Industrial and Agricultural Investment Co.

(Pvt) Limited (SPIAICPL-3) 6.15 250,000 40,000Bank Alfalah Limited (BAL) 6.16 272,222 350,000Pakistan Industrial Credit and Investment Corporation

Limited (PICIC-1) 6.17 23,464 44,850Pakistan Industrial Credit and Investment Corporation

Limited (PICIC-2) 6.18 292,786 292,786NIB Bank Limited (NIB - 1) 6.19 10,000 30,000NIB Bank Limited (NIB - 2) 6.20 92,727 -MCB Bank Limited (MCB - 2) - 10,171Askari Bank Limited (ACBL) - 200,000

3,223,343 3,050,118Less: Current portion 13 770,182 556,996

2,453,161 2,493,122Other loans - UnsecuredKohinoor Sugar Mills Limited (KSML) 6.21 4,794 4,794Kohinoor Industries Limited (KIL) 6.22 2,683 2,683

7,477 7,4772,460,638 2,500,599

2007 2006

(Rupees in thousand)Note

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6.1 National Bank of Pakistan (NBP)

This represents demand finance facility of Rupees 60 million, obtained for import of textilemachinery for Balancing, Modernization and Replacement (BMR) and is allowed for a period

of four and a half years including a grace period of six months. The tentative expiry period of the facility is March, 2008. The facility is repayable in sixteen (16) quarterly installments. It issecured by first exclusive charge on machinery amounting to Rupees 80 million and personalguarantee of sponsor directors. It carries mark up at the rate of 6-months KIBOR plus 1.50%with a floor of 4% per annum.

6.2 MCB Bank Limited (MCB - 1)

This represents demand finance loan of Rupees 200 million, obtained for import of Picanol Air jet Looms and is repayable in sixteen (16) equal quarterly installments commencing from March31, 2004. It is secured by first registered pari passu charge on fixed assets of the company(Raiwind Division) and personal guarantees of sponsor directors of the Company. It carriesmark up at the rate of 6 months KIBOR plus 175 bps per annum.

6.3 The Bank of Punjab - (BOP-1)

This represents demand finance facility of Rupees 400 million, obtained for import of state ofart machinery and is allowed for a period of four years with a grace period of six months. Theloan is repayable in 7 equal half yearly installments commencing after conclusion of graceperiod. It is secured by bank's exclusive hypothecation charge on machinery imported andpersonal guarantee of sponsor directors. Facility amounting to Rupees 300 million carries mark up at the rate of 6 months average KIBOR plus 100 bps and additional facility of Rupees 100million carries mark up at the rate of 6 months average KIBOR plus 275 basis points (bps)with a floor of 4.25% per annum, payable quarterly. On November 29, 2006 loans amountingRupees 150.431 million were converted to LTF-EOP consisting of Rupees 61.725 million at 6% per annum and Rupees 88.706 million at 7 % fixed rate of mark up.

6.4 The Bank of Punjab - (BOP-2)

This represents term finance facility of Rupees 300 million obtained for debt reprofiling for aperiod of five years including a grace period of one year. The facility is repayable in sixteenequal quarterly instalments, first payment being due at the end of 15th month from the dateof disbursement. It is initially secured by ranking charge for Rupees 400 million on fixed assetsand surplus land situated at Rawalpindi and personal guarantees of the sponsor directors. Oncompleting the requisite formalities charge will be upgraded as first pari passu charge on thesurplus land situated at Rawalpindi and the existing charge on fixed assets will be vacated. Itcarries mark up at the rate of 3 months KIBOR plus 275 bps per annum with quarterly repricing.

6.5 Standard Chartered Bank (Pakistan) Limited (SCBPL)

This represents the term finance facility of Rs. 110 million, obtained for import of state of artmachinery and is allowed for a period of five years including a grace period of one year. Thefacility is payable in sixteen (16) equal quarterly installments. It is secured by first exclusivecharge on machinery and personal guarantees of sponsor directors. It carries mark up at therate of 6-months KIBOR plus 2.25% per annum with no floor and cap.

6.6 Albaraka Islamic Bank Limited (ABIB)

This represents Murabaha finance facility of Rupees 100 million, obtained for construction ofbuildings. The facility is allowed for a period of four years with a grace period of one year. Thefacility is repayable in sixteen (16) equal quarterly installments commencing with first paymentbeing due at the end of 15th month from the date of disbursement. It is secured by pari passucharge and hypothecation on fixed assets i.e. land and building constructed for ring spinningand stitching. It carries mark up at the rate of 3-years KIBOR plus 2% per annum with floor of12.75% per annum.


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6.7 United Bank Limited (UBL)

This represents the term Loan facility of Rs. 200 million, to finance BMR at Kohinoor TextileMills Limited (Rawalpindi and Gujar Khan Divisions) and to refinance loans of other banks. The

term loan facility is allowed for a period of five years with one year grace period and is repayablein sixteen equal quarterly installments, commencing from December 31, 2004. It carries mark up at rate of 6 months treasury bills cut-off rate plus 275 basis points with a floor of 4.5% per annum. It is secured by first pari passu charge for Rupees 266 million on all existing and futurefixed assets of Kohinoor Textile Mills Limited (Raiwind Division) and personal guarantees of thesponsor directors.

6.8 Allied Bank Limited (ABL-1)

This represents term finance facility of Rupees 300 million , obtained for import of state of artmachinery and is allowed for a period of five years with a grace period of one year. The facilityis repayable in sixteen (16) equal quarterly installments commencing after conclusion of graceperiod. It is secured by first exclusive charge on machinery imported. Facility amounting toRupees 100 million carries mark up at the rate of 6 months KIBOR plus 1.25% per annum,facility of Rupees 125 million carries mark up at the rate of 6 months KIBOR plus 1.75% per annum and facility of Rupees 75 million carries mark up at the rate of 6 months KIBOR plus2.50% per annum with no floor and cap. On December 28, 2006 loans amounting Rupees124.732 million were converted to LTF-EOP at 7% per annum fixed rate of mark up.

6.9 Allied Bank Limited (ABL-2)

This represents the demand finance facility of Rupees 500 million, obtained for BMR and isallowed for a period of five years with a grace period of one year. The facility is repayable insixteen (16) equal quarterly installments commencing after conclusion of grace period. It issecured by first pari passu charge over land at Rawalpindi. It carries mark up at the rate of 6months KIBOR plus 2% per annum.

6.10 Allied Bank Limited, The Bank of Khyber, Orix Leasing Pakistan Limited and Saudi Pak Commercial Bank Limited

This represents a syndicated finance facility aggregating Rupees 405 million inclusive ofunavailed limit of Rupees 50 million of Saudi Pak Commercial Bank Limited under green shoeoption. The facility is arranged through Allied Bank Limited (Arranger) for debt reprofiling froma syndicate of Allied Bank Limited (arranger), The Bank of Khyber, Orix Leasing Pakistan Limitedand Saudi Pak CommercialBank Limited for a period of 5 years inclusive of grace period of oneyear. The facility is repayable in 8 equal semi annual instalments. It is secured by charge onland held by Rawalpindi division of the Company. The facility carries mark up at the rate of 6months KIBOR plus 275 bps with semi annual repricing.

6.11 Faysal Bank Limited (FBL - 1)

This represents Morabaha finance facility of Rupees 300 million, obtained for purchase of local / imported textile machinery, tools spares and other related equipment. It is allowed for a periodof five years with a grace period of one year. The facility is repayable in sixteen (16) equalquarterly installments commencing with first payment being due at the end of 15th month from the date of first disbursement. It is secured by first registered parri passu mortgage andhypothecation charge of Rupees 400 million over all present and future fixed assets (excludingsurplus land) of Kohinoor Textile Mills Limited ( Rawalpindi Division) and personal guaranteesof sponsoring directors. It carries mark up at the rate of 6 months average KIBOR (Asking) plus2.50% per annum with semi annual repricing.

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6.12 Faysal Bank Limited (FBL - 2)

This represents Long term finance against export oriented projects (LTF-EOP) facility of Rupees137.500 million for import of 36 Picanol Omni plus wide width high speed looms and a warping

machine and is allowed for a period of three years with one year grace period. It is repayablein equal quarterly installments. The facility is secured by exclusive charge on the aforesaidimported machinery, first pari passu charge of Rupees 47.5 million on fixed assets of Raiwinddivision of the Company and personal guarantees of the sponsor directors. It carries mark upat a fixed rate of 6 % per annum.

6.13 Saudi Pak Industrial and Agricultural Investment Co. (Private) Limited (SPIAICPL - 1)

This represents the term finance facility of Rupees 65 million for import of textile machineryand is allowed for a period of five years with a grace period of six months. The facility isrepayable in eighteen (18) equal quarterly installments commencing from February 19, 2006.It is secured by first exclusive charge on machinery imported. It carries mark up at the rate of6-months KIBOR average ask plus 1.75% per annum.

6.14 Saudi Pak Industrial and Agricultural Investment Co. (Private) Limited (SPIACIPL - 2)

This represents a LTF - EOP facility of Rupees 40 million for import of warping and sizingmachines and is for a period of five years with a grace period of one year. It is repayable inequal quarterly installments. It carries mark up at a fixed rate of 7.75% per annum.

6.15 Saudi Pak Industrial and Agricultural Investment Co. (Private) Limited (SPIACIPL - 3)

This represents term finance facility of Rupees 250 million obtained for debt reprofiling for aperiod of five years including grace period of one year. The facility is repayable in 8 equal six monthly installments. It is secured by first parri passu charge by way of hypothecation on allpresent and future plant and machinery of the Company and by way of mortgage on landmeasuring 121 Acres, 2 kanals and 1 marla, situated at main Peshawar Road, Rawalpindi with

25% margin. Initially ranking charge will be created which will be upgraded within 90 days from the date of disbursement. The facility carries mark up at the rate of 3 months KIBOR plus 275bps per annum with quarterly repricing.

6.16 Bank Alfalah Limited (BAL)

This represents term finance facility of Rupees 350 million allowed for a period of five yearswith a grace period of six months. The facility is repayable in 18 equal quarterly installmentscommencing six months after the date of disbursement. It is secured by first pari passu mortgagecharge on 43 Acres of surplus land located at Main Peshawar Road, Rawalpindi and personalguarantees of the sponsor directors. It carries mark up at the rate of 6 months KIBOR plus 2%per annum with semi annual repricing.

6.17 Pakistan Industrial Credit and Investment Corporation Limited (PICIC-1)

This represents a loan of Rupees 100 million obtained from PICIC for import of Air Jet Loomsfor Raiwind Division. It is repayable in twenty (20) equal quarterly installments, commencingfrom October 03, 2003. It is secured by first legal mortgage ranking pari passu with the existingfirst charge already created in favour of PICIC on the company's (Raiwind Division) present andfuture immovable properties wherever situated including all buildings, fixed plants, machineryand fixtures and personal guarantees of the sponsor directors. It carries mark up at rate of 9.5%per annum.


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6.18 Pakistan Industrial Credit and Investment Corporation Limited (PICIC-2)

This represents a term finance facility of Rupees 300 million under State Bank of Pakistan (LTF-EOP) scheme for a period of five years with a grace period of one year. The financing is for

import of 72 Picanol Omni Plus wide width Air Jet Looms, other textile machinery and power generating sets. It is repayable in equal quarterly installments, commencing after expiry of graceperiod. It carries mark up at the rate of 7% per annum.

6.19 NIB Bank Limited (NIB - 1)

This represents the term finance facility of Rupees 30 million, obtained for BMR and is allowedfor a period of eighteen months from the date of disbursement . The facility is repayable in six equal quarterly installments commencing one quarter after the date of disbursement. It issecured by first pari passu charge upto extent of Rs. 40 million on fixed assets (excluding landand building) of the Company and personal guarantees of the sponsor directors. It carries mark up at the rate of 3 months KIBOR plus 2.50% per annum with floor of 11% per annum.

6.20 NIB Bank Limited (NIB - 2)

This represents LTF-EOP facility obtained for import of textile machinery for a period of threeyears including a grace period of six months. It is repayable in ten equal quar terly installments,first payment becoming due at the end of 9th month from the date of disbursement . It is securedby first exclusive hypothecation charge on the imported machinery and allied equipment,including installation and local component costs and personal guarantees of the sponsor directors. It carries mark up at fixed rate of 6 % per annum.

6.21 Kohinoor Sugar Mills Limited (KSML)

A civil suit has been filed by KSML for recovery of disputed liability which is being contestedby the Company.

6.22 Kohinoor Industries Limited (KIL)

The balance is an old one, un-reconciled, unconfirmed and disputed.

7. Term Finance Certificates (TFCs) - Secured

Term Finance Certificates 71,250 142,500Less: Current portion 13 71,250 71,250

- 71,250

The company has issued privately placed term finance certificates comprising 57 sets of Rupees 5million each (each set comprise 20 scrips of Rupees 0.250 million each) to raise Rupees 285 millions to refinance existing borrowings availed by the company.

The term finance certificates are redeemable in twenty (20) quarterly installments commencing fromAugust 01, 2003. First four redemption installments comprise of token principal redemption of Re. 1and profit on each TFC. The balance principal redemption is payable in sixteen (16) equal quarterlyinstallments alongwith profits. The rate of return on term finance certificates is to be determined atseven days before commencement of each quarter for the tenor of the relevant quarter and it will be6-months KIBOR plus 2% per annum.

(Rupees in thousand)Note

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The company may redeem the TFCs by way of exercise of the Call Option by giving written noticeand/or public notice to the TFCs holders and the trustee at least ninety (90) days prior to the optiondate(s). The first Option date fall on the fourth redemption date and each subsequent redemption dateshall also be an Option date. The date of maturity of the TFCs is May 01, 2008.

These TFCs are secured by way of first pair passu charge on all present and future fixed assets of the company amounting to 1.5 times of the outstanding coupon amount and personal guarantees ofsponsor directors.Faysal Bank Limited has been appointed as trustee under the trust deed and is paid a fee at the rateof 0.05% per annum of the outstanding coupon amount at the beginning of the year.

8. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Minimum lease payments 366,081 266,354Less: Un-amortized finance charges 58,545 41,290Present value of minimum lease payments 307,536 225,064Less: Current portion 13 79,893 73,677

227,643 151,3878.1 The present value of minimum lease payments has been discounted at an implicit interest rate

ranges from 6.00% to 16.28% (2006: from 8.50% to 17.00%) per annum to arrive at their present value.The lease rentals are payable in monthly and quar terly installments. In case of any default anadditional charge at the rate of 0.1 percent per day shall be payable. Taxes, repairs, replacementsand insurance costs are to be borne by the company. The lease agreements carry renewal andpurchase option at the end of the lease term. There are no financial restrictions in leaseagreements. These are secured by deposit of Rupees 18.050 million (2006: Rupees 22.430million) included in long term security deposits, demand promissory notes, personal guaranteesand pledge of sponsors' shares in public limited companies.

8.2 Minimum lease payments and present value of minimum lease payments are regroupedas under:

Due not later than one year 108,371 79,893 93,506 73,677Due later than one year but

not later than five years 257,710 227,643 172,848 151,387366,081 307,536 266,354 225,064

9. DEFERRED TAX LIABILITY

The liability for deferred taxation comprises timing differences relating to:Taxable temporary difference

Accelerated tax depreciation allowance 240,443 237,013Surplus on revaluation of investment 235,549 -475,992 237,013

Deductible temporary differencesTax losses carry forward 205,048 166,645Provision for doubtful debts 132 1,477Turn over tax available for carry forward - 15,142

205,180 183,264270,812 53,749


30 June 2006

Minimum leasepayments Present valueof minimumlease payments

30 June 2007

Minimum leasepayments Present valueof minimumlease payments

2007 2006(Rupees in thousand)


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9.1 The movement in deferred tax assets and liabilities during the year without taking into consideration the off setting balances within the same tax jurisdiction is as follows:

Balance as at July 01, 2005 68,414 - 68,414 37,237 698 - 37,935 30,Charged to profit and loss account 168,599 - 168,599 129,408 779 15,142 145,329

Balance as at June 30, 2006 237,013 - 237,013 166,645 1,477 15,142 183,264Charged to equity - 314,064 314,064 - - - - 314,064Charged to profit and loss account 3,430 - 3,430 38,403 (1,345) (15,142) 21,916

Balance as at June 30, 2007 240,443 314,064 554,507 205,048 132 - 205,180 349,3

10. TRADE AND OTHER PAYABLES

Creditors 389,553 495,358Accrued liabilities 57,283 50,351Customers deposit -interest free repayable on demand 16,533 11,722Workers' profit par ticipation fund 10.1 1,223 6,654Unclaimed dividend 2,682 2,697Due to subsidiary undertaking(Maple Leaf Cement Factory Limited) - 106,519Withholding tax payable 1,549 2,711Others 6,177 159,978

475,000 835,990

10.1 Workers' profit participation fundBalance at the beginning of the year 6,654 11,576Allocation for the year 31 - 2,448

6,654 14,024Interest on funds utilized in the Company's business 167 244

6,821 14,268Less: Payments to the fund 5,598 7,614

1,223 6,654

10.1.1The Company retains workers profit participation fund for its business operations till the dateof allocation to workers. Interest is paid at prescribed rate under the Companies Profit (WorkersParticipation Act, 1968) on funds utilized by the Company till the date of allocation to workers.

Deferred tax liability Deferred tax assetsNet liability

(asset)Accelerated

taxdepreciation

Surplus onrevaluation ofinvestment

Total Tax lossesProvision fordoubtful debts tax available

for carryforward

Total


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11. ACCRUED MARK UP

Long term financing - Secured 16,961 44,460Term finance cer tificates 1,332 2,529Short term borrowings 38,090 32,495Finance leases 2,836 1,365

59,219 80,849

12. SHORT TERM BORROWINGS - Secured

From banking companies:

Running finances 12.1 1,495,505 1,131,398Export refinances 12.2 1,280,000 1,105,436

2,775,505 2,236,834

12.1 The running finance facilities sanctioned by various banks aggregate to Rupees 4,603 million(2006: Rupees 3,938 million). The rates of mark-up range from 6.00% to 12.92% (2006: from4.53% to 13.00%). These arrangements are secured by pledge of raw material, charge oncurrent assets of the Company including hypothecation of work-in-process, stores and spares,letters of credit, firm contracts, book debts and personal guarantees of the sponsor directors.

12.2 The export refinance facilities obtained from various banks aggregate to Rupees 1,340 million(2006: Rupees 1,250 million). The rates of mark-up range from 7.50% to 9.00% (2006: from8.40% to 9.00%). These arrangements are secured by way of charge on current assets of theCompany and personal guarantees of the sponsor directors.

13. CURRENT PORTION OF NON-CURRENT LIABILITIES

Long term financing - secured 6 770,182 556,996

Term finance cer tificates - secured 7 71,250 71,250Liabilities against assets subject to finance lease 8 79,893 73,677

921,325 701,923




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14. CONTINGENCIES AND COMMITMENTS

14.1 Contingencies

Taxation

a) In framing the assessment for the assessment year 2002-03, the tax authorities hasassessed loss for the year at Rupees 16.486 million by charging to tax the dividendincome separately against the declared income of Rupees 5.101 million in addition todisallowing profit and loss expenses previously accepted by them. The Company hasdisputed the contention of the tax authorities for these demands and has filed appeal with the Income Tax Appellate Tribunal against the order of the tax authorities. Pending theoutcome of the appeal no provision has been made in these financial statements for theadditional demand for the assessment year 2002-03, which on the basis adopted by theauthorities would amount to Rupees 2.541 million, since the Company has strong grounds

against the assessment framed by the tax authorities.b) The Company and the tax authorities has filed appeals before different appellate authorities

regarding sales tax matters. Pending the outcome of appeals filed by the Company and tax authorities, no provision has been made in these financial statements which on thebasis adopted by the authorities would amount to Rupees 33.473 million, since theCompany has strong grounds against the assessments framed by the tax authorities.

14.2 Commitments in respect of

a) Letters of credit for capital expenditure amount to Rupees 112.411 million (2006: Rupees55.214 million).

b) Letters of credit other than for capital expenditure amount to Rupees 163.547 million(2006: Rupees 233.386 million).

15. PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 15.1 3,651,456 3,472,564Capital work in progress 15.2 319,565 88,69

Ktml Annual 2007

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