annual report shadman 2013shadman.com.pk/financial/downloaded/annual_rep… · ·...

CONTENTS

Vision and Mission Statements .............................................................................. 2

Company Information ........................................................................................... 3

Notice of Annual General Meeting ........................................................................ 4

Directors’ Report............................................................................................... 5-7

Key Operating and Financial Data ....................................................................... 8

Statement of Compliance with the Code of Corporate Governance ............... 9-10

Pattern of Share Holding...................................................................................... 11

Auditor's Review Report on Code of Corporate Governance................................ 12

Auditor’s Report to the Members......................................................................... 13

Balance Sheet................................................................................................. 14-15

Profit and Loss Account....................................................................................... 16

Statement of Comprehensive Income....................................................................17

Statement of Changes in Equity........................................................................... 18

Statement of Cash Flow...................................................................................... 19

Notes to the Financial Statements................................................................... 20-43

1

SHADMAN COTTON

Vision Statement

MILLS LIMITED

2

Mission Statement

To be a dynamic, profitable and growth oriented organization through dedication, integrity and professionalism.

Our mission is to achieve higher levels of sustainable growth and profitability by:

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striving for excellence and sustaining position as a preferred supplier of yarns with a customer focused strategy.

providing diversified and value added textile products.

building a long term relationship with our customers, suppliers and other stake holders.

enhancing the profitability by employing latest technologies for achieving higher levels of efficiency, quality and productivity.

continuously responding to the changing needs of all our customers.

nurturing a work culture that generates creativity, enthusiasm, participation and professionalism.

developing, motivating and retaining people to achieve high team performance.

being a good corporate citizen by fulfilling our social responsibilities.

COMPANY INFORMATION

3

BOARD OF DIRECTORS : MR. ZAHID MAZHAR (Chief Executive / Chairman)

MR. OMER BIN ZAHID

MR. HASSAN BIN ZAHID

MRS. NAILA ZAHID

MR. SHAHID MAZHAR

MRS. GHAZALA SHAHID

MR. AHMED BIN SHAHID

MRS. NOUREEN REHAN

AUDITORS : M/S MUSHTAQ & CO.,

CHARTERED ACCOUNTANTS

LEGAL ADVISOR : MR. ABDUL GHANI KHAN (Advocate)

AUDIT COMMITTEE : MRS. NAILA ZAHID (Member / Chairperson)

MR. OMER BIN ZAHID (Member)

MR. HASSAN BIN ZAHID (Member)

H. R. AND REMUNERATION

COMMITTEE : MR. OMER BIN ZAHID (Chairman)MR. ZAHID MAZHAR (Member)MRS. NAILA ZAHID (Member)

CHIEF FINANCIAL OFFICER : MR. ABDUL AMIN

BANKERS : ASKARI BANK LIMITEDALLIED BANK LIMITEDSONERI BANK LIMITEDTHE BANK OF PUNJABUNITED BANK LIMITEDMCB LIMITEDBANK AL-FALAH LIMITEDHABIB BANK LIMITED

REGISTERED OFFICE : 201-202, COMMERCE CENTRE,HASRAT MOHANI ROAD,KARACHI - PAKISTAN.PHONE : (021) 32635807 - 32635809FAX : (92 -21) 32637896 - 32632712

HEAD OFFICE : 801-804, TOWER-A, 8th FLOOR LAKSON SQUARE BUILDING NO. 3SARWAR SHAHEED ROAD, KARACHI.PH NO. 021-35220481-88 FAX: 021-35220495-6

SHARE REGISTRAR : M/S. TECHNOLOGY TRADE (PVT.) LTD.

241-C, BLOCK-2, P.E.C.H.S., KARACHI.

MILLS : UNIT NO. 1: E-11 S.I.T.E., KOTRI, SINDHUNIT NO. 2 & 3 : KOT SHAH MOHAMMAD,WARBURTON ROAD, FEROZ WATOAN,TEHSIL : NANKANA SAHIB, DISTIRICT : SHEIKHUPURA.

URL : www.shadmangroup.com.pk

4

SHADMAN COTTON MILLS LIMITEDNOTICE OF ANNUAL GENERAL MEETING

thNotice is hereby given that 34 Annual General Meeting of the Company will be held at Hotel Crown Inn, Plot No. 171,

thOff 21 AM, Frere Road, Karachi, on Saturday 30 November, 2013 at 10:00 a.m. to transact the following business.

th1. To confirm the Minutes of the Extra Ordinary General Meeting of the Company held on 29 June, 2013.

th2. To receive, consider, and adopt the audited accounts for the period ended 30 June, 2013 together with the

Directors’ and Auditors’ report thereon.

3. To appoint Auditors of the Company and fix their remuneration for the next term.

4. To transact any other ordinary business as may be placed before the meeting with the permission of the Chair.

1) The share transfer books of the Company will remain closed from 23-11-2013 to 30-11-2013 (Both days inclusive). Transfers received at M/s. Technology Trade (Pvt.) Ltd., 241-C, P.E.C.H.S., Karachi the Registrar and Share Transfer Office of the Company, at the close of the business on 22-11-2013 will be treated in time for the entitlement to attend the Annual General Meeting.

2) A member entitled to attend and vote at the General Meeting may appoint another member as his/her proxy to attend and vote instead of him/her. A Proxy must be a member of the Company.

3) The instrument appointing a proxy, in order to be valid must be received at the Head Office of the Company, at th801-804, 8 Floor, Lakson Square Building No.3, Block-A, Sarwar Shaheed Road, Karachi, not less than

forty-eight (48) hours before the time fixed for the meeting.

4) Any individual beneficial owner of CDC, entitled to attend and vote at this meeting, must bring his/her participant ID number and account/sub account number along-with Computerized National Identity Card (CNIC) or original passport at the time of attending the meeting to prove his/her identity.

5) Members are requested to immediately inform of any change in their addresses to our Share Registrar M/S Technology Trade (Pvt.) Ltd., 241-C, P.E.C.H.S., Karachi.

Karachi:-thDated: 8 November, 2013

Notes:

BY ORDER OF THE BOARDSecretary

5

SHADMAN COTTON MILLS LIMITEDDIRECTORS' REPORT TO THE SHARE HOLDERS

FOR THE YEAR ENDED JUNE 30, 2013

Dear Shareholders,

SUMMARY OF FINANCIAL RESULTS

The Directors of your Company hereby present the 34th Annual Report of the Company together with audited accounts and Auditor’s Report thereon for the year ended June 30, 2013.

Following is the brief highlights of the financial results of the Company for the year ended June 30, 2013.

BREAK-UP VALUE AND EARNING PER SHARE

The break-up value of the shares as on June 30, 2013 was Rs. 35.53 as compared to Rs. 19.47 as at June 30, 2012.

The earning per share for the year ended June 30, 2013 is Rs. (0.39) as compared to Rs. (17.65) of previous year as per

computation given below:

OVERVIEWThe Company achieved a turnover of Rs. 5,690 million during the year as compared to Rs. 4,282 million of last year, showing a sizeable increase of 32.88%.

The gross profit during the year increased to Rs. 236.25 million as compared to 4.24 million of the last year. Finance costs decreased to Rs. 125.75 million as compared to Rs. 181.11 million of last year, showing better finance management.

OPERATING PERFORMANCEThe plant has continued to operate satisfactorily throughout the year on a three shifts basis and achieved the production of 19.85 million Kgs. of spun yarn after conversion into 20/s count as compared to 18.68 million Kgs. of previous year.

FUTURE OUTLOOKThe revised estimate of current cotton crop suggest a decline of about 1.25 million bales as compared to initial target of 13.22 million bales of cotton. The prices of cotton remained higher at the start of season which have started to decline afterwards.

Pakistan Textile Industry has been facing power load shedding (gas and electricity) from last few years, which is resulting in reduction in exports. In this difficult situation it is very difficult to compete in the global market. Worsening law and order situation of the country, weak economic policies, increasing prices of fuel and power and increasing inflation have made the situation worse. The Management of your Company is ready to face these challenges and making every effort to deliver good results in future.

Sales

Gross profit

Profit / (Loss) before tax

Profit / (Loss) after tax

EPS (in Rupees)

2013

Rupees

in million

5,689.89

236.25

35.41

(6.84)

% of

Sales

(0.39)

100.00%

4.15%

0.62%

(0.12)%

Profit / (Loss) after taxation

No. of ordinary shares

Earning per share

2013

Rupees

(6,841,769)

17,636,719

(0.39)

2012

Rupees

(311,287,553)

17,636,719

(17.65)

EXPANSION AND MODERNIZATIONThe company is optimizing its available resources to continue its BMR policy in various departments to gradually improve production and quality of yarn.

SALE OF SINDH SEGMENT OF THE COMPANYDuring the year, the Company sold its Sindh segment alongwith assets and liabilities at fair value to its associated company M/S Nadeem Textile Mills Limited.

DIVIDENDThe Board of Directors has not recommended any dividend due to requirement of funds for repayment of debts.

HUMAN RESOURCEThe management of the company gives high priority to the training and development of human resources of the company. The management carefully selects the most suitable candidates and continuously upgrading its manpower through training facilities and by inducting more qualified staff.

CODE OF CORPORATE GOVERNANCEThe Board of Directors hereby declares that for the period ended June 30, 2013:

• The financial statements, together with the notes thereon have been drawn up in conformity with the Companies Ordinance 1984. These Statements present fairly the Company’s state of affairs, results of its operations, cash flow, comprehensive income and changes in equity.

• The Company entered in arm length transactions with other members of the group. These transactions are in compliance with the directives issued by the Security & Exchange Commission of Pakistan (SECP) in this regard.

• Proper books of accounts of the Company have been maintained.

• Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgement.

• The International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure therefrom has been adequately disclosed.

• The system of Internal Control is sound in design and has been effectively implemented and monitored.

• There is no significant doubt upon the Company’s ability to continue as a going concern.

• There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.

• The key operating and financial data for the last six years in summarized form is annexed.

• Information about taxes and levies is given in the notes to the accounts.

• All the directors of the company are registered as tax-payer and none of the company’s directors is in default of payment of any dues to a banking company, DFI, NBFI or Stock Exchanges.

• None of the directors of the company is serving on the Board of 7 or more listed companies. The company operates an unfunded gratuity covering all its employees who have completed their qualifying period. Provision is made annually to cover current obligation under the scheme. The company has adopted the revised IAS 19 and as a result thereof actuarial valuation has been carried out as at June 30, 2013.

6

7

Karachi:

Dated: November 08, 2013

Chief Executive

BOARD MEETINGS During the period under review, three meetings of the Board of Directors were held and following were in attendance:

Name of Directors No. of Meetings Attended1- Mr. Zahid Mazhar 3 2- Mr. Omer Bin Zahid 3 3- Mr. Hassan Bin Zahid 3 4- Mrs. Naila Zahid 3 5- Mr. Shahid Mazhar 2 6- Mrs. Ghazala Shahid 2 7- Mr. Ahmed Bin Shahid 2 8- Mrs. Noureen Rehan 2

ASSOCIATED COMPANIESFollowing is the list of associated companies:(a) Nadeem Textile Mills Limited.(b) Nadeem Power Generation (Pvt.) Ltd.(c) Nadeem International (Pvt.) Ltd.

AUDIT COMMITTEEThe company has established an audit committee as required by the Code of Corporate Governance, which comprises of three members as mentioned in the company information. The audit committee has established an internal audit function to monitor and review the adequacy and implementation of internal control at each level.

AUDIT REPORTWith regards to paragraph regarding going concern added by the auditors without qualifying their opinion on the financial statements of the company for the year ended June 30, 2013, the company is confident that after successful injection of directors’ loan and equity and implementation of the strategic business plans, the company will continue as a going concern; hence, the financial statements have been prepared on going concern assumption.

AUDITORSThe Auditors of the Company M/S Mushtaq & Co. Chartered Accountants retire at the conclusion of the Annual General Meeting and being eligible; offer themselves for re-appointment as Auditors for the next term.

As suggested by the Audit Committee, The Board recommends their appointment as Auditors of the Company for the year ending June 30, 2014.

CORPORATE SOCIAL RESPONSIBILITYThe Company is extensively engaged in providing support to less privileged people in the matters related to food, shelter, health and education. The company spent Rs. 560,000/= under social commitments during the year.

PATTERN OF SHARE HOLDING The pattern of share holding of the company as at June 30, 2013 is annexed.

ACKNOWLEDGEMENTThe Directors of the Company would like to take the opportunity to thank the shareholders, valued clients and bankers for the co-operation extended by them during the course of business activities. The Directors are also pleased to record their appreciation for the continued diligence and devotion of the staff members and workers of the Company.

On behalf of the Board of Directors

8

Year (Rs. in Million)

2008 2,862 2009 3,215 2010 4,292 2011 5,445 2012 4,282 2013 5,690

TURNOVER

Year (Kgs in ‘000)

2008 25,153 2009 25,401 2010 25,574 2011 21,090 2012 18,687 2013 19,850

PRODUCTION

Net Sales Revenue

Cost Of Goods Sold

Gross Profit

Operating Profit / (Loss)

Profit/(Loss) Before Tax

Profit/(Loss) After Tax

Paid Up Capital

Current Assets

Current Liabilities

PARTICULARSJuly - June2008 - 2009

5,445,986,182

5,177,423,804

268,562,378

160,945,883

(32,322,315)

(76,839,955)

176,367,190

1,297,374,834

1,810,107,510

July - June2010 - 2011

4,292,240,669

3,812,795,807

479,444,862

361,795,767

135,119,724

93,878,058

176,367,190

1,012,624,675

1,477,676,850

July - June2009 - 2010

2,862,201,245

2,689,395,022

172,806,223

102,278,626

(59,483,264)

(74,034,620)

176,367,190

1,265,332,180

1,626,690,277

July - June2007 - 2008

Key Operating & Financial Data For the Period from June 2008 to June 2013

July - June2011 - 2012

4,281,832,449

4,277,593,476

4,238,973

(97,094,112)

(269,152,707)

(311,287,553)

176,367,190

923,325,881

1,689,819,267

July - June2012 - 2013

5,689,892,326

5,453,641,317

236,251,009

124,704,425

35,410,080

(6,841,769)

176,367,190

678,436,921

1,260,477,919

3,215,227,415

3,070,480,818

144,746,597

65,281,423

(188,110,461)

(137,069,549)

176,367,190

1,089,138,963

1,579,479,354

9

This statement is being presented to comply with the Code of Corporate Governance contained in the Regulation No. 37 of Listing Regulations of Karachi and Lahore 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 Board comprises eight directors, including the CEO. The Company encourages representation of independent non-executive directors on its Board including those representing minority interests. At present, the Board includes two non executive directors.

2. The Directors have confirmed that none of them is serving as a director in more than seven listed companies, including this Company.

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

4. During the year, no casual vacancies occurred in the Board of Directors. 5. The Company has prepared a Statement of Ethics and Business Practices which has been signed by all the directors

and senior employees of the Company.

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

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

8. The meetings of the Board were presided by the Chairman. The Board met at least once in every quarter. Written notices of the Board Meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. Four of the directors met the criteria of exemption from taking orientation course under the condition of having 14 years of education and 15 years of experience on the Board of Directors of Listed Company.

10. No new appointment of CFO, Company Secretary and Head of Internal Audit has been made during the year.

11. The Directors' Report for this period 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 the CEO and CFO before approval of the Board.

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

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

15. The Board has formed an Audit Committee. It comprises three members, two of which are non-executive Directors.

SHADMAN COTTON MILLS LIMITEDSTATEMENT OF COMPLIANCE

WITH THE CODE OF CORPORATE GOVERNANCEYEAR ENDED JUNE 30, 2013

10

Karachi:

Dated: November 08, 2013 Chief Executive

16. The Board has formed a Human Resource and Remuneration Committee. It comprises three members, two of which are non-executive Directors.

17. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code.

The terms of reference of the committee have been formed and advised to the committee for compliance.

18. The Board has setup an effective internal audit function manned by suitable qualified and experienced personnel who are conversant with the policies and procedures of the Company. They are involved in the internal audit function on full time basis.

19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the Institute of Chartered Accountants of Pakistan.

20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Listing Regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

21. The ‘closed period’ prior to the announcement of interim / final results and business decisions, which may materially affect the market price of company’s securities, was determined and intimated to directors, employees and stock exchange.

22. The company has complied with all the major corporate and financial reporting requirements to the code. All related parties transactions have been reviewed and approved by the Board and are carried out as per agreed terms.

23. We confirm that all other material principles contained in the Code have been complied with except for the requirements pertaining to change in composition of Board of Directors or some its committees.

On behalf of the Board of Directors

11

PATTERN OF SHAREHOLDING AS AT JUNE 30, 2013 (FORM-34)

640247165127

14445121211112111111111

1101501

10015001

100011500120001250015000170001

105001185001315001400001405001510001855001860001865001

110500112900011310001194000121150013755001

100500

10005000

10000150002000025000300005500075000

110000190000320000405000410000515000860000865000870000

111000012950001315000194500021200003760000

17,48156,067

116,134253,889

86,76954,23870,961

104,09929,121

102,48474,016

213,308185,872318,597401,566406,933

1,029,006858,652860,652869,500

1,105,5281,290,5121,311,3981,944,3142,119,3013,756,321

1,227

PATTERN OF SHAREHOLDING AS AT JUNE 30, 2013ADDITIONAL INFORMATION

BANKS DEVELOPMENT FINANCIAL BANKING FINANCIAL INSTITUTIONS

SUB TOTAL: INSURANCE COMPANIESSTATE LIFE INSURANCE CORP OF PAKISTAN

SUB TOTAL:

DIRECTORS, CHIEF EXECUTIVE OFFICER, AND THEIR SPOUSE AND MINOR CHILDREN.

MR. ZAHID MAZHARMR. OMER BIN ZAHIDMR. HASSAN BIN ZAHIDMRS. NAILA ZAHIDMR. SHAHID MAZHARMR. AHMED BIN SHAHIDMRS. GHAZALA SHAHIDMRS. NAUREEN REHAN

SUB TOTAL:

MUDARBAS AND MUTUAL FUNDS SUB TOTAL:

NIT AND ICP

IDBP (ICP[ UNIT)M/S. INVESTMENT CORPORATIONM/S. NATIONAL BANK OF PAKISTAN

SUB TOTAL:

FOREIGN INVESTORS

M/S. COUVILLE TRADING LIMITED.MOHAMED HAFEEDH FAIROOZUDDIN WADHWA SANDM/S. COLOMBY TRADING LIMITED.

SUB TOTAL:

OTHERSfIKREE’S (SMC- PVT) LTD.128 SECURITIES (PVT) LTD.ZHV. SECURITIES (PVT) LIMITED.MUHAMMAD AHMED NADEEM SECURITIES (SMC-PV)AWJ SECURITIES (SMC-PRIVATE) LIMITED.CAPITAL VISION SECURITIES (PVT) LTD.EXCEL SECURITIES (PVT.) LTDNH SECURITIES (PVT) LTMITED.NH HOLDINGS (PVT) LTDY.S. SECURITIES & SERVICES (PVT) LTD.FIRST CAPITAL EQUITIES LIMITEDELIXIR SECURITIES PAKISTAN (PVT) LTD.

SUB TOTAL: INDIVIDUALLOCAL - INDIVIDUALS

SUB TOTAL:

INSTITUTIONS, NON 0

0 0

3,756,321858,652860,6521,311,3984,063,6151,290,512402,866519,793

13,063,809

0

6004792,500

3,579

300

7,473100

7,873

5006639273,386 1,3613151201,07778345300

7,614

4,553,844

4,553,844

0.00

0.00

74.07

0.00

0.02

0.04

0.04

25.82

Percentage%

Category of Shareholders

G-Total 17,636,719 100.00

12

Karachi:


We have reviewed the statement of compliance with the best practices contained in the Code of Corporate Governance for the year ended June 30, 2013 prepared by the Board of Directors of Shadman Cotton Mills Limited to comply with the Listing Regulations No. 35 of the Karachi Stock Exchange Limited and Lahore Stock Exchange 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’s personnel and review of various documents prepared by the company to comply with the Code.

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

Further, Sub-Regulation (x) of Listing Regulation No. 35 of Karachi Stock Exchange Limited require the Company to place before the Board of Directors for their consideration and approval, related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm’s length transactions and transactions which are not executed at arm’s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the Audit Committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm’s length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the company’s compliance, in all material respect, with the best practices contained in the Code of Corporate Governance as applicable to the company for the year ended June 30, 2013.

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

MUSHTAQ & CO.CHARTERED ACCOUNTANTS

407-Commerce CentreHasrat Mohani Road

Karachi-74200Tel : 2638521-4

Fax : 2639843

Branch Office:20-B, Block-G

Gulberg III, LahoreTel : 5884926, 5865618

Fax : 5843360

MUSHTAQ & COMPANY


Engagement Partner

Mustaq Ahmed Vohra - FCA

13

AUDITOR'S REPORT TO THE MEMBERS

We have audited the annexed Balance sheet of Shadman Cotton Mills Limited as at June 30, 2013 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the 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, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by 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) In our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

(b) In our opinion;

(i) The balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied;

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

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

(c) In our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at June 30, 2013 and of the loss, total comprehensive loss, its cash flows and changes in equity for the year then ended; and

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

Without qualifying our opinion, we draw attention to note 1.1 in the financial statements which indicates that the company incurred a net loss of Rupees 6,841,769 during the year ended June 30, 2013 and, as of that date, the company’s current liabilities exceeds its current assets by Rupees 582,040,998. These conditions, along with other matters as explained in note 1.1 indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern. These financial statements, however, have been prepared on the going concern basis on the assumptions as detailed in aforesaid note. Attention is further drawn to note 1.2 to financial statements which describe the disposal of the sizeable part of the business and its effects on financial statements.

407-Commerce CentreHasrat Mohani Road

Karachi-74200Tel : 2638521-4

Fax : 2639843

Branch Office:20-B, Block-G

Gulberg III, LahoreTel : 5884926, 5865618

Fax : 5843360

MUSHTAQ & CO.CHARTERED ACCOUNTANTS

MUSHTAQ & COMPANY


Engagement Partner

Mustaq Ahmed Vohra - FCA

Karachi:


14

Karachi:Dated: November 08, 2013

SHADMAN COTTONBALANCE SHEET AS AT

30th, EQUITY AND LIABILITIES Note 2013 2012

PKR PKR

SHARE CAPITAL AND RESERVESAuthorized capital18,000,000 (2012: 18,000,000) Ordinary shares of Rs.10 each 180,000,000 180,000,000

Issued, subscribed and paid up capital 5 176,367,190 176,367,190Capital reserve 6 53,218,752 53,218,752Unappropriated (loss) (238,007,847) (364,421,443)

(8,421,905) (134,835,501)Surplus on revaluation of property, plant and equipment 7 635,097,915

Deferred income 8 6,742,029 1,496,255

NON-CURRENT LIABILITIESLong term financings 9 - 177,308,390Liabilities against assets subject to finance lease 10 36,309,032 28,038,375Deferred liabilities 11 171,848,413 188,840,328

208,157,445 394,187,093

CURRENT LIABILITIESTrade and other payables 12 320,476,401 346,148,757Interest / mark-up on loans 13 292,213,944 224,935,300Short term borrowings 14 474,159,905 889,243,347Current portion of: Long term financings 9 20,000,000 44,391,140Overdue bank liabilities 9 102,284,822 115,879,002Liabilities against assets subject to finance lease 10 19,306,905 26,302,581 Provision for taxation 32,035,942 42,919,141

1,260,477,919 1,689,819,268

CONTINGENCIES AND COMMITMENTS 15

2,102,053,404 2,428,773,926

The annexed notes from 1 to 44 form an integral part of these financial statements.

June 30th, June

478,106,811

....

Chief Executive

15

Director

MILLS LIMITED JUNE 30, 2013

ASSETS Note 2013 2012PKR PKR

NON-CURRENT ASSETS

Property, plant and equipment 16 1,408,043,568 1,487,130,008

Capital work in progress 17 - 4,179,522

Long term deposits 18 15,572,915 14,138,515

CURRENT ASSETS

Stores, spares and loose tools 19 78,999,842 95,541,736

Stock in trade 20 216,347,983 458,360,663

Trade debts 21 150,199,642 180,586,836

Loans and advances 22 14,785,171 52,276,813

Trade deposits and short term prepayments 23 - 899,053

Other receivables 24 116,629,094 12,476,305

Tax refund due from Government 25 71,698,566 114,149,933

Other financial assets 26 924,250 782,250

Cash and bank balances 27 28,852,373 8,252,292

678,436,921 923,325,881

2,102,053,404 2,428,773,926

30th, June 30th, June

....

....

16

SHADMAN COTTON MILLS LIMITEDPROFIT AND LOSS ACCOUNT


Note

Sales 28 5,689,892,326Cost of sales 29 (5,453,641,317)

Gross profit 236,251,009 4,238,973

Distribution cost 30 (31,803,985) (33,610,809)Administrative expenses 31 (79,742,599) (67,722,276)Other income 32 45,643,343 9,238,233Finance cost 33 (125,751,380) (181,112,606)Other operating expenses 34 (9,186,308) (184,222)

(200,840,929) (273,391,680)

Profit/(loss) before taxation 35,410,080 (269,152,707)

Taxation 35 (42,251,848) (42,134,846)

(Loss) after taxation (6,841,769) (311,287,553)

(Loss) per share - Basic and diluted 36 (0.39) (17.65)


4,281,832,449(4,277,593,476)

30th, June2013PKR

30th, June2012PKR

Karachi:Dated: November 08 2013

Chief Executive Director

17

SHADMAN COTTON MILLS LIMITEDSTATEMENT OF COMPREHENSIVE INCOME


(Loss) after taxation (6,841,769)

Other comprehensive income / (loss) - -

Total comprehensive (loss) for the year (6,841,769) (311,287,553)


(311,287,553)

.... ....

30th, June2013PKR

30th, June2012PKR



18

Balance as at July 01, 2011 176,367,190

Comprehensive (loss) for the

year - 2012 - - (311,287,553) (311,287,553) (311,287,553)

Transfer from surplus on

revaluation of property, plant and

equipment - Disposed off - - 515,892 515,892 515,892

Transfer from surplus on revaluation

of property, plant and equipment -

Incremental depreciation - - 26,976,649 26,976,649 26,976,649

Balance as at June 30, 2012 176,367,190 53,218,752 (364,421,443) (311,202,691) (134,835,501)

Comprehensive (loss) for the

year - 2013 - - (6,841,769) (6,841,769) (6,841,769)



equipment - Disposed off - - 109,584,642 109,584,642 109,584,642



equipment - Incremental depreciation - - 23,670,721 23,670,721 23,670,721

Balance as at June 30, 2013 176,367,190 53,218,752 (238,007,847) (184,789,095) (8,421,905)


53,218,752 (80,626,431) (27,407,679) 148,959,511

.... ....

.... ....

.... ....

.... ....

.... ....

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SHADMAN COTTON MILLS LIMITEDSTATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2013

RESERVES



SHARECAPITAL

UNAPPROPRIATEDPROFIT/(LOSS)

CAPITALRESERVE

PKR PKR PKR PKR

TOTAL EQUITY

SUB TOTAL

PKR

19

SHADMAN COTTON MILLS LIMITEDSTATEMENT OF CASH FLOW FOR THE YEAR ENDED JUNE 30, 2013

2013 2012Note PKR PKR

CASH FLOW FROM OPERATING ACTIVITIESProfit/(Loss) before taxation 35,410,080 (269,152,707)Adjustments for: Depreciation of property, plant and equipment 72,741,627 79,219,865 Amortisation of deferred income 2,844,661 780,653 Provision for bad debts - (1,627,268) Provision for gratuity 22,888,010 20,083,774 ETO Charges provision - (2,500,000) Investment at fair value through profit and loss (142,000) (188,250) Payables written off 1,266,091 - Bad debts write off 354,064 - Worker's profit participation fund 1,899,682 - Worker's welfare fund 683,886 - Gain on disposal of property, plant and equipment (33,559,212) (151,454) Finance cost 125,751,380 181,112,606

Cash flow before working capital changes 230,138,269 7,577,219 (Increase)/Decrease in current assets Stores, spares and loose tools 16,541,894 7,764,552 Stock in trade 242,012,680 172,198,737 Trade debts 30,387,194 223,948,381 Loans and advances 37,491,642 (25,631,476) Trade deposits and short term prepayments 899,053 - Sale tax refundable 36,594,852 (20,916,072) Other receivables (104,152,789) (4,946,813)

259,774,526 352,417,309 Increase/(decrease) in current liabilities Trade and other payables (21,401,022) (93,660,759)

Cash generated from operations 468,511,773 266,333,769

Finance cost paid (58,472,736) (77,657,872) Gratuity paid (12,903,181) (12,547,019) Worker's profit participation fund paid (5,373,269) - Taxes paid (25,426,321) (37,115,523) Dividend paid - (293,748)

(102,175,507) (127,614,162)

Net cash generated from operating activities 366,336,266 138,719,607 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 373,974,185 850,700 Capital expenditure (89,173,798) (23,775,286) Long term deposit (1,434,400) (8,217,141)

Net cash generated/ (used in) investing activities 283,365,987 (31,141,727)CASH FLOW FROM FINANCING ACTIVITIES Proceeds of long term financing (215,293,710) 74,365,695 Short term borrowings (415,083,442) (177,732,180) (Repayment) of liabilities against assets subject to finance lease 1,274,981 (7,479,878)

Net cash (used) in financing activities (629,102,171) (110,846,363)

Net increase (decrease) in cash and cash equivalents 20,600,082 (3,268,483)Cash and cash equivalents at beginning of the year 8,252,292 11,520,775

Cash and cash equivalents at the end of year 27 28,852,373 8,252,292


30th, June 30th, June

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....

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....

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20

1.The Company was incorporated in Pakistan as a public limited company on November 24, 1979 under the Companies Act, 1913 (Now Companies Ordinance, 1984) and is quoted on Karachi and Lahore Stock Exchanges. The main business of company is manufacturing and sale of yarn. The registered office of the company is located at 201-202, 2nd Floor Commerce Centre, Hasrat Mohani Road, Karachi.

1.1 During the year ended June 30, 2013 the company has incurred a net loss after tax of Rs. 6,841,769 and as on the said date its current liabilities exceed its current assets by Rs. 582,040,998 and its accumulated loss compute to Rs. 238,007,847 . These conditions along with adverse key financial ratios, pending litigations with the banking companies and as disclosed in note 1.2 disposal of entire Sindh segment (sizeable part of the business) of the company indicate the existence of material uncertainty which may cast significant doubt about the company's ability to continue as a going concern and therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business. These financial statements, however, have been prepared under the going concern assumptions based on the following mitigating factors:

THE COMPANY AND ITS OPERATION

a) The management has considered all available information and based on the current market trends, results obtained in the subsequent months and other information has prepared a future projections for five years. The said projections entails that the company will be able to generate positive cash flows from its operations and negates any doubts over the going concern assumption of the entity.

b) Directors have made commitment to inject a minimum of Rs. 30 Million next year into the Company to further imporve the Company’s liquidity and profitability.

c) The management has also undertaken adequate steps towards the reduction of fixed cost and expenses which are at various stages of implementation. Such steps include, but not limited to, rightsizing of the man power, resource conservation, close monitoring of other fixed cost etc. The management is certain to generate sufficient savings as consequences of adapting all such measures.

The management anticipates that above steps will not only bring the Company out of the existing financial crisis but also contribute significantly towards the improvement of the Company Financial Position in the foreseeable future.

1.2 As on June 30, 2013 the Company sold Sindh segment of Shadman Cotton Mills Limited with the approval of Board of Directors and Share Holders. Section 196 (3) complied and SRO No. 1227/2005 dated 5th December 2005 clause (i) complied with Section 160(i) (b). In order to dispose off assets at market rate, valuation of assets at market value was determined by Independent valuer. The assets and liabilities of Sindh segment were disposed in these financial statements at their respective fair value on June 30, 2013. The sale consideration amounted to Rs. 100 million equal to fair values of net assets of the Sindh segment of Shadman Cotton Mills Limited located at Kotri. Detail of which is as follows:

Particulars Fair Value at June 30, 2013

Assets:Property, plant and equipment 334,389,834 Long term deposits 18. 949,600 Stores, spares and loose tools 19. 15,248,287 Stock in trade 20. 36,769,262 Trade debts 21. 73,073,386 Loans and advances 22. 6,008,273 Trade deposits, prepayments and other receivables 23. 2,068,632 Tax refund due from Government 25. 58,899,553 Cash and bank balances 27. 2,332,343

529,739,170 Liabilities:Long term finance 9. 125,513,014 Deferred liabilities 11. 22,511,268 Trade and other payables 12. 104,747,501 Mark-up accrued on financing 13. 3,631,106 Short term borrowings 14. 141,547,128 Current portion of Long Term loan 9. 19,925,445 Provision for Taxation 11,863,708

429,739,170 Net Assets 100,000,000

SHADMAN COTTON MILLS LIMITEDNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2013

21

2. BASIS OF PREPARATION

2.1. Statement of compliance

Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provision of and directives issued under the Companies Ordinance, 1984, In case requirement differ the provision or directives of the Companies Ordinance, 1984 shall prevail.

These financial statements have been prepared in accordance with approved accounting standards as applicable in

2.2 Accounting ConventionThese financial statements have been prepared on historical cost convention except for certain financial instruments at fair value and employees retirement benefits at present value. In these financial statements, except for cash flow statements, all transactions have been accounted for on accrual basis.

2.3 Functional and presentation currencyThese financial statements are presented in Pakistan Rupees which is the company's functional and presentation currency. All financial information in Pakistan Rupees has been rounded to the nearest Rupee.

2.4 Use of estimates and judgmentsThe preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumption are based on historical experiences and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting are recognized the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by the management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note to these financial statements.

3 Standards, interpretations and amendments to published approved accounting standards3.1 Amendments to published standards that are effective in current financial year and are relevant to the Company

Following are the amendments that are applicable for accounting periods beginning on or after January 1, 2012:Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), (effective for annual periods beginning on or after 1 July 2012). The amendments require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendments do not address which items are presented in other comprehensive income or which items need to be reclassified. The requirements of other IFRSs continue to apply in this regard.

IAS 12, ‘Income Taxes’ (Amendments), These are applicable on accounting periods beginning on or after January 01, 2012. IAS 12, ‘Income taxes’, currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, ‘Investment Property’. This amendment therefore introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, ‘Income taxes - recovery of revalued non-depreciable assets’, will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn.

3.2 New accounting standards, amendments to existing approved accounting standards and interpretations that are issued but not yet effective and have not been early adopted by the Company:

IFRS 7 (Amendments), ‘Financial Instruments: Disclosures’ (effective for periods beginning on or after January 1, 2013). This amendment is on offsetting financial assets and financial liabilities. This include new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP.

IAS 27 Separate Financial Statements (2011) (effective for annual periods beginning on or after 1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). Three new standards IFRS 10 - Consolidated Financial Statements, IFRS 11- Joint Arrangements and IFRS 12- Disclosure of Interest in Other Entities dealing with IAS 27 would be applicable effective 1 January 2013. IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. The amendments have no major impact on financial statements of the Company.

22

IAS 28 Investments in Associates and Joint Ventures (2011) (effective for annual periods beginning on or after 1 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the amendments to apply IFRS 5 to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale; and on cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture.

IAS 39 Financial Instruments' Recognition and Measurement- Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective for annual periods beginning on or after 1 January 2014). The narrow-scope amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract agree to replace their original counterparty with a new one).

IAS 19 (Revised), ‘Employee benefits’ (effective for the periods beginning on or after 01 January, 2013). The amendments will make significant changes to the recognition and measurement of defined benefit plan expense. The amendments requires actuarial gains and losses to be recognized immediately in other comprehensive income. This change will remove the corridor method and eliminate the ability for entities to recognize all changes in defined benefit obligation and in plan assets in profit or loss, which currently is allowed under IAS 19, and that the expected return on plan assets recognized in profit or loss is calculated based on the rate used to discount the defined benefit obligation. The Company is in process of reviewing the implications of the revised standard on its financial statements.

IAS 1 Presentation of Financial Statements is amended to clarify that only one comparative period – which is the preceding period – is required for a complete set of financial statements. If an entity presents additional comparative information, then that additional information need not be in the form of a complete set of financial statements. However, such information should be accompanied by related notes and should be in accordance with IFRS. Furthermore, it clarifies that the ‘third statement of financial position’, when required, is only required if the effect of restatement is material to statement of financial position.

IAS 32 Financial Instruments: Presentation’ (effective for the periods beginning on or after 01 January, 2014). This amendment clarifies some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The management of the Company is in the process of assessing the impact of this amendment on the Company's financial statements.

3.3 Standards, interpretations issued by the IASB that are applicable to the company but are not yet notified by the SECPThese financial statements are presented in Pakistan Rupees which is the company's functional and presentation currency. All financial information in Pakistan Rupees has been rounded to the nearest Rupee.

IFRS 9 Financial Instruments’ (effective for periods beginning on or after January 1, 2013). This is the first part of a new standard on classification and measurement of financial assets that will replace IAS 39. IFRS 9 has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.

IFRS 10 Consolidated Financial Statements', applicable from January 01, 2013, build on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.

IFRS 11 Joint Arrangements', applicable from January 01, 2013, is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement; joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence entity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

IFRS 12 Disclosure of interests in other entities’ (effective for the periods beginning on or after 01 January, 2013). This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

IFRS 13 Fair value measurement', this standard provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The standard is not applicable until April 01, 2013 but is available for early adoption.

There are a number of other minor amendments and interpretations to other approved accounting standards that are not yet effective and are also not relevant to the Company and therefore have not been presented here.

23

4. THE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are set-out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

4.1 Property, plant and equipmentOwned assetsProperty, plant and equipment are stated at cost less accumulated depreciation except freehold land and leasehold land, which are stated at cost less impairment losses, if any. Cost comprises acquisition and other directly attributable costs.Depreciation is provided on a reducing balance method and charged to profit and loss account to write off the depreciable amount of each asset over its estimated useful life at the rates specified in note 16. Depreciation on addition in property, plant and equipment is charged from the month of addition while no depreciation is charged in the month of disposal.The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized, if any. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit and loss as incurred.Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized in the profit and loss account.The Company reviews the useful life and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding effect on depreciation charge.

4.2 Leased assetsLeases in terms of which the Company assumes substantially all the risks and rewards of ownership, are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Outstanding obligations under the lease less finance cost allocated to future periods are shown as a liability.

Finance cost under lease agreements are allocated to the periods during the lease term so as to produce a constant periodic rate of finance cost on the remaining balance of principal liability for each period.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

4.3 De-recognitionAn item of property, plant and equipment is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset is included in the profit and loss account in the year the asset is de-recognized.

4.4 Capital work-in-progressCapital work-in-progress is stated at cost accumulated up to the balance sheet date less accumulated impairment losses, if any. Capital work-in-progress is recognized as an operating fixed asset when it is made available for intended use.

A provision is recognized in the balance sheet when the Company has a legal or constructive obligation as a result of past event, and it is probable that an outflow of resource embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.

Investments are initially measured at fair value plus transaction costs directly attributable to acquisition, except for “Investment at fair value through profit or loss” which is initially measured at fair value.

The Company assesses at the end of each reporting period whether there is any objective evidence that investments are impaired. If any such evidence exists, the Company applies the provisions of IAS 39 ‘Financial Instruments: Recognition and Measurement’ to all investments, except investments in subsidiaries and equity method accounted for associates, which are tested for impairment in accordance with the provisions of IAS 36 ‘Impairment of Assets’.

4.6 Investment at fair value through profit or lossLiabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.

4.7 Held-to-maturityInvestments 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. Investments intended 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 amortized cost. This cost is computed as the amount initially recognized minus principal repayments, plus or minus the cumulative amortization, using the effective interest method, of any difference between the initially recognized amount and the maturity amount. For investments carried at amortized cost, gains and losses are recognized in profit and loss account when the investments are de-recognized or impaired, as well as through the amortization process.

4.5 Investments

24

4.8 Available-for-saleInvestments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity, or changes to interest rates or equity prices are classified as available-for-sale. After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized directly in statement of other comprehensive income until the investment is sold, de-recognized or is determined to be impaired, at which time the cumulative gain or loss previously reported in statement of other comprehensive income is included in profit and loss account. These are sub-categorized as under:

a) QuotedFor investments that are actively traded in organized capital markets, fair value is determined by reference to stock exchange quoted market bids at the close of business on the balance sheet date.

b) UnquotedFair value of unquoted investments is determined on the basis of appropriate valuation techniques as allowed by IAS 39 ‘Financial Instruments: Recognition and Measurement’.

4.9 InventoriesTrade debts are initially recognized at fair value and subsequently measured at cost less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the trade debts. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy of financial reorganization, and default or delinquency in making payments are considered indicators that the trade debt is doubtful and the provision is recognized in the profit and loss account. When a trade debt in uncollectible, it is written off against the provision.

a) Stores, spares and loose toolsUseable stores, spare parts and loose tools are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

b) Stock in trade"Cost of raw material, work-in-process and finished goods is determined as follows:(i) For raw materials: Annual average basis(ii) For work-in-process and finished goods: Average manufacturing cost including a portion

of production overheads."

Materials in transit are valued at cost comprising invoice value plus other charges paid thereon. Waste stock / rags are valued at net realizable value.

Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make a sale.

Trade debts are initially recognized at fair value and subsequently measured at cost less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the trade debts. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy of financial reorganization, and default or delinquency in making payments are considered indicators that the trade debt is doubtful and the provision is recognized in the profit and loss account. When a trade debt in uncollectible, it is written off against the provision.

Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortized cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in current liabilities to the extent of the amount remaining unpaid.

4.13 Staff Retirement BenefitDefined benefits plansThe Company operates unfunded gratuity scheme for all its eligible employees. The Company accounts for gratuity provision on the basis of actuarial valuation using the projected unit credit method.

Actuarial gains and losses arising at each valuation date are recognised immediately in the profit and loss account. However, the amendment in IAS-19 Employee benefit, (effective from the accounting period beginning on July 2013), requires to recognize the actuarial gain or loss in Other Comprehensive Income instead of Profit and Loss Account, whose impact is not significant.

Benefits under the scheme are payable to employees on completion of the prescribed qualifying period.4.14 Trade and other payables

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

4.10 Trade debts and other receivables

4.11 Cash and cash equivalents

4.12 BorrowingsBorrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortized cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in current liabilities to the extent of the amount remaining unpaid.

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4.15 TaxationCurrent yearProvision for current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.

4.16 Deferred taxDeferred tax is accounted for using the balance sheet liability method in respect of all taxable temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case the tax is also recognized in other comprehensive income or directly in equity, respectively.

4.17 Dividend and appropriation to reservesDividend and appropriation to reserves are recognized in the financial statements in the period in which they are approved by the shareholders and therefore, they are accounted for as non-adjusting post balance sheet event.

4.18 ProvisionsProvisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

4.19 Revenue recognitionRevenue from sale of goods is recognized when goods are dispatched to customers and invoices raised.Operating lease rentals are recorded in profit and loss account on a time proportion basis over the term of the lease arrangements.Dividend income and entitlement of bonus shares are recognized when right to receive such dividend and bonus shares is established.

4.20 Financial InstrumentsFinancial instruments carried on the balance sheet include investments, deposits, trade debts, loans and advances, other receivables, cash and bank balances, long-term financing, liabilities against assets subject to finance lease, short-term borrowings, accrued mark-up and trade and other payables etc. Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of instrument. Initial recognition is made at fair value plus transaction costs directly attributable to acquisition, except for “financial instruments at fair value through profit or loss” which are initially measured at fair value.Financial assets are de-recognized when the Company loses control of the contractual rights that comprise the financial asset. The Company loses such control if it realizes the rights to benefits specified in contract, the rights expire or the Company surrenders those rights. Financial liabilities are de-recognized when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on subsequent measurement (except available for sale investments) and de-recognition is charged to the profit or loss currently. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item.

4.21 Borrowing costInterest, mark-up and other charges on long-term finances are capitalized up to the date of commissioning of respective qualifying assets acquired out of the proceeds of such long-term finances. All other interest, mark-up and other charges are recognized in profit and loss account.

4.22 Foreign currency transactions and translationThese financial statements are presented in Pak Rupees, which is the Company’s functional currency. All monetary assets and liabilities denominated in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date, while the transactions in foreign currencies during the year are initially recorded in functional currency at the rates of exchange prevailing at the transaction date. All non-monetary items are translated into Pak Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange gains and losses are recorded in the profit and loss account.

4.23 Impairmenta) Financial AssetsA financial asset is considered to be impaired if objective evidence indicate that one or more events had a negative effect on the estimated future cash flows of that asset.

26

An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference between its carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of available for sale financial asset is calculated with reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics

b) Non Financial AssetsThe carrying amounts of the Company’s non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account.

4.24 Off-setting of financial assets and liabilitiesFinancial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legal enforceable right to set off and the Company intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously.

4.25 Derivative financial instrumentsDerivative that do not qualify for hedge accounting are recognized in the balance sheet at estimated fair value with corresponding effect to profit and loss account. Derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative.

4.26 Earnings per share - basic and dilutedThe Company presents basic and diluted earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

4.27 Dividend and other appropriationsDividend distribution to the Company’s shareholders is recognized as a liability in the Company’s financial statements in the period in which the dividends are declared and other appropriations are recognized in the period in which these are approved by the Board of Directors.

4.28 Related party transactionsTransactions with related parties are priced at comparable uncontrolled market price. All transactions involving related parties arising in the normal course business are conducted at arm’s length using valuation modes, as admissible. Parties are said to be related when they meet the definition as provided in the Companies Ordinance 1984.

Ordinary shares of Rs. 10 each

116,273,440 116,273,440 6,009,375 6,009,375 Ordinary shares of Rs. 10 each

17,636,719 17,636,719 176,367,190 176,367,190

5.1 There was no movement during the reporting year.

5.2 The shareholders' are entitled to receive all distributions to them in the form of bonus and right shares as and when declared by the Company. All shares carry "one vote" per share without restriction.

53,218,752 53,218,752

53,218,752 53,218,752

The company had issued 3,527,344 ordinary shares at a premium of Rs. 8 per share in the year 2002 and 2,500,000 ordinary shares at premium of Rs.10 per share in the year 1992.

5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL

2013 2012No. of shares No. of shares11,627,344 11,627,344

allotted for consideration paid in cash

allotted as bonus shares 60,093,750 60,093,750

6. CAPITAL RESERVEShare premium

30th, June2013PKR

30th, June2012PKR

7. SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENTThe land, building and plant & machinery of the company was revalued by M/s Sadruddin & Associates, Karachi, an approved valuer on March 01, 2009 on the basis of depreciated replacement value. The resulting revaluation surplus of Rs.707,335,349 has been credited to surplus on revaluation account. The land, building and Plant & machinery of Sindh Segment of the company were revalued by M/s Sadruddin & Associates, Karachi, an approved valuer on the basis of prices quoted in active market for identical assets (Level-1 as described in Note 40.3.6). This resulted in a revaluation decrease of Rs.46.4 million and has been debited to surplus on revaluation account as on 30.06.2013.The Revaluation of Land, Building and Plant & Machinery of Punjab Segment was carried by M/s K.G. Traders (Pvt.) Limited, an approved valuer on the basis of market value (Level-1 as described in note 40.3.6) which resulted a revaluation surplus of Rs. 334.65 million, which has been credited to surplus on revaluation account on 30.06.2013.

Opening balance 161,373,116 449,116,409 610,489,525 637,982,066Less: Revaluation increase/ (decrease) (46,405,751) 334,648,091 288,242,340 (515,892)

114,967,365 783,764,500 898,731,865 637,466,174Less: Incremental depreciation for the year (5,382,723) (18,287,998) (23,670,721) (26,976,649)

109,584,642 765,476,502 875,061,144 610,489,525

Less: Related deferred tax liability - (130,378,587) (130,378,587) (132,382,714)Transferred to reserves for disposal of assets (109,584,642) - (109,584,642) -

- 635,097,915 635,097,915 478,106,811

8. DEFERRED INCOMEDeferred gain on sale & lease back - 1,496,254 1,496,254 2,276,908Add: Deferred gain arise on sale & lease back during the year - 8,090,436 8,090,436 -Less: Amortized during the year (Note 32) - (2,844,661) (2,844,661) (780,653)

- 6,742,029 6,742,029 1,496,255

8.1 This represents excess of sale proceeds over carrying amount in sale and lease back of asset. This amount is being amortized over the lease term in equal proportion. This amount is amortized over 3 years.

9. LONG TERM FINANCINGS

- - - 34,869,530

-

-

-

-

1 - 122,813,014 108,189,180-

- -

- 122,284,822 122,284,822 337,578,532

- 19,925,445 -Total Current Maturity - -

- (102,284,822) (102,284,822) (115,879,002)

- - -

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From Banks - Secured9.1 Askari Commercial Bank Limited

- Term Finance 9.2 Allied Bank Limited -

Demand Finance 16,315,958 16,315,958 54,375,9589.3 The Bank of Punjab -

Demand finance-1-LTF 17,863,256 17,863,256 17,863,2569.4 The Bank of Punjab - Demand finance

Demand finance - 2 80,000,000 80,000,000 80,000,0009.5 Habib Bank Limited -

Term finance (Note 9.8) 8,105,608 8,105,608 8,105,608 From related party-Unsecured

9.6 Associated company 22,813,014 9.7 Directors 2,700,000 2,700,000 34,175,000

Less : Transferred to Nadeem Textile Mills Limited (Note 1.2) (125,513,014) (125,513,014)

Less: Current maturity shown under current liabilities (19,925,445) (20,000,000) (39,925,445) (44,391,140)Transferred to Nadeem Textile Mills Ltd. (Note 1.2) 19,925,445

(20,000,000) (20,000,000)Less: Overdue installments

177,308,390

27

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

28

9.1 Askari Bank Limited - Term FinanceThe running finance of Rs. 40Million was converted to term finance loan and secured by way of first pari passu charge over the fixed assets. The loan is payable in two years in 08 quarterly installments commencing from June 2012. It carries mark-up rate at 3Months KIBOR plus 2% P.A payable quarterly. The outstanding liability of this loan is transferred to Nadeem Textile Mills Limited as on June 30, 2013 and the related charge is vacated afterwards.

9.2 Allied Bank Limited - Demand FinanceThe demand finance of Rs. 200 million was obtained and was secured by way of pari passu charge over the fixed assets of the company to the extent of Rs. 296 million. The loan was obtained for five years and payable in 10 half yearly installments commencing from June 2006. It carries mark-up 6Months KIBOR plus 1.5% P.A. payable quarterly.

This demand finance facility is Rs. 45 Million and is secured against first Pari Passu charge of Rs. 70 Million over the fixed assets of the company. The loan was obtained for five years repayable in half yearly installments, and the same was swapped under the LTF scheme launched by the SBP and carries mark-up 7% P.A. payable quarterly.

9.4 The Bank of Punjab - Demand Finance - 2This demand finance facility of Rs. 100 Million was obtained and is secured against first Pari Passu charge over the fixed assets of the company. The loan was obtained for five years repayable in 10 half yearly installments with no grace period, it carries mark-up 3 Months KIBOR plus 2% payable quarterly.

9.5 Habib Bank Limited Term FinanceTerm loan has been obtained for Rs. 20.84 Million at first equitable and hypothecation charge over all the fixed assets i.e. plant, machinery, equipment of what so ever nature ranking pari passu with the charge of ABL and BOP.

9.7 Loan from directors is interest free and unsecured . Period of payment is beyond one year. The outstanding liability of this loan is transferred to Nadeem Textile Mills Limited as on June 30, 2013.

9.8 The balances remain unconfirmed . Confirmation was sent.

10. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE Future minimum lease payments under finance lease together with the present value of the net minimum lease payments are as follows.

This represents finances obtained under the sale and lease back arrangement for plant and machinery the total minimum lease payment are repayable in (20) twenty equal quarterly installments with one year grace period . This is secured by charge on leased assets. The internal rate of return is 6 month KIBOR + 1.75% (June 30, 2012: 6 months KIBOR+ 1.75% )p.a. is used as discounting factor. Taxes , repairs and insurance cost are to be borne by lessee. The lessee can exercise purchase option at the end of the lease term by adjusting the deposit amount. Current portion includes over due installments of Rs. Nil (June 30, 2012: 26,302,581).

9.3 The Bank of Punjab - Demand Finance - 1 - LTF

9.6 Payable to associated undertaking M/s. Nadeem Power Generation (Pvt.) Ltd. This is unsecured & interest free and payment period is beyond one year. The outstanding liability of this loan is transferred to Nadeem Textile Mills Limited as on June 30, 2013.

Gross minimum lease payments

Not later than one year 25,514,981 42,439,009Later than one year but not later than five years 39,697,825 30,769,061

65,212,806 73,208,070

Finance charges allocated to future periodNot later than one year 6,208,076 16,136,428Later than one year but not later than five years 3,388,793 2,730,686

9,596,869 18,867,114Present value of minimum lease paymentsNot later than one year 19,306,905 26,302,581Later than one year but not later than five years 36,309,032 28,038,375

55,615,937 54,340,956Current portion (19,306,905) (26,302,581)

36,309,032 28,038,375

10.1

10.2 The company has restructured the existing lease facility by an Ijarah finance obtained under the sale and lease back arrangement for plant & machinery the total minimum lease payment are payable in (8) eight equal quarterly installments with one year grace period. its installment will start from 30th November 2013. This is secured by charge on leased assets. The internal rate of return is 3 month kibor +1.75% (June 2012: 6 months kibor+1.75%) p.a and used for discounting factor. Taxes, repair & Insurance cost are to be borne by lessee.

30th, June2013PKR

30th, June2012PKR

29

Deferred tax (Note 11.1) 2,387,808 127,437,372 129,825,180 131,829,290ETO charges payable (Note 11.2) 1,450,078 18,316,926 19,767,004 22,228,370

Gratuity (Note 11.3 to 11.4) 18,673,382 26,094,115 44,767,497 34,782,668Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (22,511,268)

11.1 DEFERRED TAXThe liability for deferred taxation comprises of temporary differences relating to:

Accelerated tax depreciation allowance 67,840,884 67,840,884 105,343,038 Related deferred tax

liability on revaluation 130,378,587 130,378,587 132,382,714

Deductible temporary differences:Tax losses (58,520,750) (58,520,750) (87,504,412) Provision for bad debts (2,180,729) (2,180,729) (3,271,094)Lease rentals (6,996,926) (6,996,926) (10,495,389)Deferred debit arising in respect of provision for gratuity (3,083,694) (3,083,694) (4,625,567)

11. DEFERRED LIABILITIES

- (22,511,268) -

- 171,848,413 171,848,413 188,840,328

-

-

--

-

-

- (70,782,099) (70,782,099) (105,896,462)

- 127,437,372 127,437,372 131,829,290

11.1.1 Deferred tax asset amounting to Rs. 79.432 million has not been recognized as it is not probable that in future taxable profit will be available against which unused tax losses and unused tax credits can be utilized.

11.2 This represents amount payable to Excise and Taxation Department, Government of Sindh in respect of infrastructure fee levied through fifth version of law (i-e Sindh Finance (Amendment) Ordinance 2006). The Supreme Court in his judgment dated 17th May 2011 has decided the fifth version of law (i-e Sindh Finance (Amendment) Ordinance 2006) is valid and hence the levy imposed and collected from the effective date of the fifth version i-e 28th December 2006 is valid and all imposition and collection before 28th December 2006 are declared to be invalid. The company has now filed petition in Sindh High Court, challenging fifth version of law (i-e Sindh Finance (Amendment) Ordinance 2006 regarding levy of infrastructure fee from the 28th December 2006. During the pendency of decision on fifth version of law, Sindh High Court has directed on 31st May 2011 to pay 50% of liability to Excise and Taxation Department, Government of Sindh, and provide bank guarantee of the remaining amount as calculated in accordance with the decision of Supreme Court of Pakistan. Subsequent imports of the company be released against 50% payment infrastructure fee to Excise and Taxation Department, Government of Sindh and furnishing bank guarantee of balance 50% amount. The company has provided bank guarantee amounting to PKR: 30.500 million (June 30, 2012: PKR: 34.411million) in respect of infrastructure fee. The company has accrued unpaid infrastructure fee.

11.3 Movement in the net liability recognized in the balance sheet

Opening liability 14,308,949 20,473,719 34,782,668 27,245,913Expense for the year (Note: 11.4) 8,544,614 14,343,396 22,888,010 120,083,774

22,853,563 34,817,115 57,670,678 47,329,687Contribution paid (4,180,181) (8,723,000) (12,903,181) (12,547,019)Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (18,673,382) - (18,673,382) -

- 26,094,115 26,094,115 34,782,668

11.4 Expense recognized in the profit and loss accountCurrent service cost 2,509,153 8,634,032 11,143,185 9,387,406Interest cost 1,859,602 1,659,103 3,518,705 2,921,579Net actuarial loss recognized in the year 4,175,859 4,050,261 8,226,120 7,774,789

8,544,614 14,343,396 22,888,010 20,083,774

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30th, June2013 PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

11.5 General descriptionThe scheme provides for terminal benefits for all of its permanent employees who attain the minimum qualifying period. Annual charge is made using the actuarial technique of Projected Unit Credit Method.

11.6 Principle actuarial assumptionFollowing are a few important actuarial assumptions used in the valuation.

% %

Discount rate 10.5 13Expected rate of increase in salary 10 10

11.7 Expected gratuity expense for the year ended June 30, 2014 works out to be Rs. 15,777,735.

12. TRADE AND OTHER PAYABLESCreditors 38,896,162 122,298,695 161,194,857 172,987,771Accrued expenses ( Note: 12.1) 38,892,885 91,413,778 130,306,663 105,263,567 Advance from customers 1,909,331 25,068,690 26,978,021 36,091,513Other liabilities 8,776,857 79,111,670 87,888,527 26,161,991Sales tax 15,114,251 - 15,114,251 31,055Worker's welfare fund payable - 683,886 683,886 - Worker's profit participation fund payable (Note: 12.2) - 1,899,682 1,899,682 4,131,225Unclaimed dividend 1,158,015 - 1,158,015 1,481,635Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (104,747,501) - (104,747,501) -

- 320,476,401 320,476,401 346,148,757

12.1

- 8,019,702- 1,899,682 1,899,682 -

- 1,242,044 1,012,016

5,373,269

Paid during the year (5,373,269) - (4,900,493)

Balance at the end of the year - 1,899,682 1,899,682 4,131,225

13. INTEREST / MARKUP ON LOANSBanking companies Long term finance 1,568,317 Non banking companies Finance lease -

- -

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This includes Rs. Nil (2012: 17,254,136) Due to Associated Undertaking Nadeem Power Generation (Pvt) Limited against electric bill and is unsecured.

12.2 Worker's profit participation fundBalance at the beginning of the year 4,131,225 4,131,225Allocation / expenses for the year Interest on fund utilized in the company's business 1,242,044

1,899,682 7,272,951 9,031,718

(5,373,269)

54,715,086 56,283,403 38,369,187

Short term borrowings 2,062,789 213,051,595 215,114,384 161,521,054

24,447,263 24,447,263 25,045,059Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (3,631,106) (3,631,106)

292,213,944 292,213,944 224,935,300

30

30th, June2013 PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

31

14. SHORT TERM BORROWINGSFrom banking companies-Secured (Note 14.1 & 14.1.2) 140,049,966 474,159,905 614,209,871 888,716,822Book overdraft (Note 14.2) 1,497,162 - 1,497,162 526,525Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (141,547,128) - (141,547,128) -

- 474,159,905 474,159,905 889,243,347

14.1 he finance facilities are available from various banks amounting to Rs. 474.2 million (2012 Rs. 900 million). These carry mark up at the rate ranging from one month Kibor to six months average Kibor plus 0.5 percent to 2 percent per annum. (2012: mark up at the rate ranging from one month Kibor to six months average Kibor plus 0.5 percent to 2 percent per annum). These are secured by way of pledge of cotton, yarn, polyester and pari passu charge over stocks & book debts. The bank balance includes overdue balance (PAD) of Rs. 89.855 Million (2012: 89.855 Million).

15. CONTINGENCIES AND COMMITMENTSContingencies

15.1 Bank of Punjaba) Suit filed by the Company against The Bank of Punjab, before the Lahore High Court vide COS No. 26/2012,

wherein along other prayers recovery of Rs. 744.348 Million has also been claimed on account of acts and omission committed by the Bank against the company. There is no scope of any loss to the company in the instant matter as per legal opinion.

b) Suit filed by the Bank of Punjab, against the Company and others before Lahore High Court vide COS No. 23/2012 for the recovery of Rs. 577.391 Million. This case is vigorously and diligently is being contested by the company.

15.2 Habib Bank LimitedSuit filed by the Habib Bank Limited, against the company before the Banking Courts Lahore vide Suit No. 496/2012 for recovery of Rs. 8.996 Million. This case is presently pending adjudication before the Banking Court No. II Lahore. This case is being vigorously and diligently contested by the company.

15.3 The company has filed C.P. No. 2052/2013 in the Sindh High Court Karachi against Computer Risk Based Evaluation of Sales Tax (CREST) for Rs. 45,020,706 (Sindh Rs. 20,160,436 and Punjab Rs. 24,860,270).

15.4 FBR vide their Letter # DCIR-04/ARB/Zone II/LTU/2010-11/8318 Dated 22.05.2013 has raised their Sales Tax demand in the matter of Sales Tax Audit 2010-11 under section 72B read with section 25(1) of Sales Tax Act 1990 for the sum of Rs. 43,402,853 (Sindh Rs. 16,910,088 and Punjab Rs. 26,492,765). The case has not yet been finalized.

15.5

ETO Guarantees issued to custom department - 30,500,000 30,500,000 34,411,444Bank guarantee issued to Sui Gas Department - 27,767,900 27,767,900 27,767,900Post dated cheques - 475,158 475,158 -

Commitments

Letter of credit - For raw material -

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11,077,456 11,077,456 154,662,812

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

32

16. PROPERTY, PLANT AND EQUIPMENT - Sindh and Punjab Segment consolidated

OwnedLand (freehold) 113,404,839 - - - - - - - - - 133,904,839Land (leasehold) 29,595,161 - - (30,250,000) - 9,595,161 - - - - - 9,595,161Factory building 339,776,138 313,000 - (114,143,357) - 251,721,567 477,667,348 5 127,572,836 - (34,894,504) 10,614,016 103,292,348 374,375,000Non-factory building 138,826,621 725,000 (16,057,845) (40,013,777) (130,039) 14,072,794 97,422,754 5 48,169,808 (5,478,694) (14,747,151) 4,278,791 32,222,754 65,200,000

Office equipment 9,204,315 2,261,902 (57,200) (3,630,536) (2,060,001) - 5,718,480 10 4,608,805 (29,685) (2,010,425) 548,758 3,117,453 2,601,027Furniture and fixture 5,529,718 29,200 - (1,546,845) (368,337) - 3,643,736 10 3,492,959 - (1,264,604) 205,301 2,433,656 1,210,080Vehicle 49,760,910 5,062,640 (1,612,500) (16,836,419) - 3,491,237 39,865,868 20 28,901,192 (1,477,953) (8,587,634) 4,094,534 22,930,139 16,935,729

2,590,995,087 37,737,383 (17,727,545) (560,865,481) (93,780,563) 382,022,903 2,338,381,784 1,191,427,495 48,933,694 (323,691,721) 67,890,479 984,559,947 1,353,821,837

LeasedPlant and machinery 148,576,747 55,615,937 (56,076,747) (92,500,000) - - 55,615,937 10 61,014,327 (64,471,269) -

2013 - PKR 2,739,571,834 93,353,320 (73,804,292) (653,365,481) (93,780,563) 382,022,903 2,393,997,721 1,252,441,822 (15,537,575) (323,691,721) 72,741,627 985,954,153 1,408,043,568

Note

Cost of sales 29.1 66,011,018 69,283,920

Administrative expenses 31 6,730,608 9,935,946

72,741,627 79,219,866

16.2 Had there been no revaluation the related figures of land, building and plant and machinery at June 30, 2013 would have been as follows:

Land Leasehold - - - 1,932,252 -Free hold land 26,828,329 - 26,828,329 26,828,329 -Factory building 110,523,931 73,620,326 36,903,605 145,642,513 97,582,182 48,060,331

\OwnedLand (freehold) 113,404,839 - - - - - - - - - - 113,404,839Land (leasehold) 29,595,161 - - - - - 29,595,161 - - - - -Factory building 339,776,138 - - - - - 339,776,138 5 116,404,241 - - 11,168,595 127,572,836 212,203,302Non-factory building 138,826,621 - - - - - 138,826,621 5 43,398,397 - - 4,771,411 48,169,808 90,656,813

- - - -Office equipment 7,658,787 1,593,428 (47,900) - - - 9,204,315 10 4,238,938 (18,248) - 388,115 4,608,805 4,595,510Furniture and fixture 5,331,633 198,085 - - - - 5,529,718 10 3,273,958 - - 219,001 3,492,959 2,036,759Vehicle 49,125,140 2,496,626 (1,860,856) - - - 49,760,910 20 25,423,116 (1,440,199) - 4,918,275 28,901,192 20,859,714

2,569,757,315 23,806,528 (2,568,756) - - - 2,590,995,087 1,123,806,298 (1,869,510) - 69,490,707 1,191,427,495 1,399,567,588

LeasedPlant and machinery 148,576,747 - - - - - 148,576,747 10 51,285,169 - -

2012 - PKR 2,718,334,062 23,806,528 (2,568,756) - - - 2,739,571,834 1,175,091,467 (1,869,510) - 79,219,865 1,252,441,822 1,487,130,008

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20,500,000 133,904,83910,250,000

Plant and machinery 1,904,897,385 29,345,641 - (354,444,547) (91,222,186) 81,987,305 1,570,563,598 5 978,681,895 55,920,026 (262,187,403) 48,149,079 820,563,597 750,000,001

4,851,148 1,394,206 54,221,731

16.1 Depreciation for the year has been allocated as follows:

1,932,25226,828,329

Non-factory building 64,902,215 28,550,383 36,351,832 112,992,154 44,127,771 68,864,383Plant and machinery 1,298,138,891 772,985,413 525,153,478 1,692,153,560 984,367,829 707,785,731Vehicle 30,916,147 17,397,733 13,518,414 40,475,457 23,958,636 16,516,821

1,531,309,513 892,553,855 638,755,658 2,020,024,265 1,150,036,418 869,987,847

113,404,83929,595,161

Plant and machinery 1,886,038,996 19,518,389 (660,000) 1,904,897,385 5 931,067,648 (411,063) 48,025,310 978,681,895 926,215,490

9,729,158 61,014,327 87,562,420

30th, June 2012PKR

30th, June 2013PKR

PARTICULARS AS AT JULY 01,

2012

ADDITIONS (DISPOSALTO

ASSOCIATES)

COST/REVALUATION ACCUMULATED DEPRECIATION

AS AT JULY 01,

2012

(DISPOSAL)/

ADJUSTMENT

DISPOSALTO

ASSOCIATES

FOR THEYEAR(DISPOSAL)

DOWN VALUEAS AT2013

WRITTEN

PKR PKR

June 30, 2013

REVALUATION(DECREASE)

REVALUATIONINCREASE

AS AT JUNE 30,

2013

RATE%

AS AT JUNE 30,

2013

DESCRIPTION Cost Accumulated

Depreciation

Book

Value

JUNE 30, 2013

Cost Accumulated

Depreciation

Book

Value

JUNE 30, 2012


2011

ADDITIONS TRANSFERIN/(OUT)

COST/REVALUATION ACCUMULATED DEPRECIATION

AS AT JULY 01,

2011

(DISPOSAL)/

TRANSFER

(ADJUSTMENT) FOR THEYEAR(DISPOSAL)

DOWN VALUEAS AT2012

WRITTEN

PKR PKR

June 30, 2012

REVALUATION/

(IMPAIRMENT)

TRANSFERIN

OUT

AS AT JUNE 30,

2012

RATE%

AS AT JUNE 30,

2012

33

16.1.1 PROPERTY, PLANT AND EQUIPMENT - Sindh Segment

OwnedLand (freehold) - - - - - - - - - - - - -Land (leasehold) 20,000,000 - - (30,250,000) 10,250,000 - - - - - - - -Factory building 80,439,782 70,000 - (114,143,357) 33,633,575 - - 5 32,495,608 - (34,894,504) 2,398,896 - -

- - - - - -- - - - - -

Office equipment 4,313,744 1,433,993 (57,200) (3,630,536) - (2,060,001) - 10 1,720,142 (29,685) (2,010,425) 319,968 - -Furniture and fixture 1,892,982 22,200 - (1,546,845) - (368,337) - 10 1,193,568 - (1,264,604) 71,036 - -Vehicle 14,645,182 - (1,300,000) (16,836,419) 3,491,237 - - 20 9,151,831 (1,169,056) (8,587,634) 604,859 - -

687,008,104 14,120,328 (1,357,200) (653,365,481) 47,374,812 (93,780,563) - 306,026,163 (1,198,741) (323,691,721) 18,864,299 - -

LeasedPlant and machinery - - - - - - - 10 - - - - - -

2013 - PKR 687,008,104 14,120,328 (1,357,200) (653,365,481) 47,374,812 (93,780,563) - 306,026,163 (1,198,741) (323,691,721) 18,864,299 - -

16.1.3 PROPERTY, PLANT AND EQUIPMENT - Punjab Segment

OwnedLand (freehold) 123,000,000 - - - 20,500,000 - - - - 143,500,000Land (leasehold) - - - - - - - - - -Factory building 259,336,356 243,000 - - 218,087,992 477,667,348 5 95,077,228 - 8,215,120 103,292,348 374,375,000

- (16,057,845) - 14,072,794 (5,478,694) 65,200,000- 81,987,305 55,920,026

Office equipment 4,890,571 827,909 - - - 5,718,480 10 2,888,663 - 228,790 3,117,453 2,601,027Furniture and fixture 3,636,736 7,000 - - - 3,643,736 10 2,299,391 - 134,265 2,433,656 1,210,077Vehicle 35,115,728 5,062,640 (312,500) - - 39,865,868 20 19,749,361 (308,897) 3,489,675 22,930,139 16,935,729

1,903,986,983 23,617,055 (16,370,345) 92,500,000 334,648,091 2,338,381,784 885,401,332 50,132,435 49,026,180 984,559,947 1,353,821,833

LeasedPlant and machinery 148,576,747 55,615,937 (56,076,747) (92,500,000) - 55,615,937 10 61,014,327 (64,471,269) 4,851,148 1,394,206 54,221,731

2013 - PKR 2,052,563,730 79,232,992 (72,447,092) - 334,648,091 2,393,997,721 946,415,659 (14,338,834) 53,877,328 985,954,153 1,408,043,568

.... .... .... .... ........ .... ..... ..... ..... ..... ..... ..... ..... .....

.... ..... ..... ..... ..... .....

.... .... ..... ..... ..... .....

.... .... ..... ..... ..... ......... ..... ..... .....

.... .... ..... .... ..... ......... ..... ..... ..... .....

..... ..... .....

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.... .... ....

.... .... .... ..... ..... ..... ......... .... .... .... .... ..... ... . .... .... ....

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.. .

....

Non-factory building 39,418,816 725,000 (40,013,777) (130,039) 5 13,420,626 (14,747,151) 1,326,525Plant and machinery 526,297,598 11,869,135 (446,944,547) (91,222,186) 5 248,044,388 (262,187,403) 14,143,015

16.1.2 ALLOCATION OF DEPRECIATION

MANUFACTURING 15,986,420 16,545,566

ADMINISTRATIVE 2,877,879 2,978,537

18,864,299 19,524,103

143,500,000

Non-factory building 99,407,805 97,422,754 5 34,749,182 2,952,266 32,222,754Plant and machinery 1,378,599,787 17,476,506 92,500,000 1,570,563,598 5 730,637,507 34,006,064 820,563,597 750,000,000

16.1.4 ALLOCATION OF DEPRECIATION

MANUFACTURING 50,024,598 52,738,354

ADMINISTRATIVE 3,852,729 6,957,409

53,877,327 59,695,763

30th, June 2012PKR

30th, June 2013PKR


2012

ADDITIONS (DISPOSAL)TO

ASSOCIATES

COST DEPRECIATION

AS AT JULY 01,

2012

DISPOSAL(DISPOSAL)

TOASSOCIATES


DOWN VALUEAS AT2013

WRITTEN

PKR PKR

June 30, 2013

REVALUATIONINCREASE

REVALUATION(DECREASE)

AS AT JUNE 30,

2013

RATE%

AS AT JUNE 30,

2013

30th, June 2012PKR

30th, June 2013PKR


2012

ADDITIONS TRANSFERIN / (OUT)

COST DEPRECIATION

AS AT JULY 01,

2012

(DISPOSAL) /ADJUSTMENT


DOWN VALUEAS AT2013

WRITTEN

PKR PKR

June 30, 2013

REVALUATIONINCREASE

AS AT JUNE 30,

2013

RATE%

AS AT JUNE 30,

2013

34

16.3 DISPOSAL OF FIXED ASSETS

1 Non-Factory Building 16,057,845 5,478,694 10,579,151 39,200,000 28,620,849 Negotiation

2 Vehicle LOP-8311 312,500 308,897 3,603 75,000 71,397 Negotiation Mr. Muhammad Imtiaz S/O Shah Muhammad

3 Vehicle CN-2500 1,300,000 1,169,056 130,944 300,000 169,056 Negotiation Mr. Abdul Mannan S/O Shamsul Haque

4 Computer Equipment 57,200 29,685 27,515 9,350 (18,165) Negotiation Al-Qaim Corporation

5 Property, plant & equipment 653,365,481 323,691,721 329,673,760 334,389,835 4,716,075 Agreement Nadeem Textile Mills Ltd.

June 30, 2013 671,093,026 330,678,053 340,414,973 373,974,185 33,559,212

June 30, 2012 2,568,756 1,869,510 699,246 850,700 151,454

17. CAPITAL WORK IN PROGRESSBuilding, other civil works and plant and machinery Opening balance 4,179,522 - 4,179,522 4,144,797 Add: Additions during the year - - - 34,725

4,179,522 - 4,179,522 4,179,522Less: written off (Note 29.1.5) (4,179,522) - (4,179,522) -

- - - 4,179,522

18. LONG TERM DEPOSITS

Security deposits 949,600 15,572,915 16,522,515 14,138,515

Less: Transferred to Nadeem Textile Mills Limited (Note 1.2) (949,600) - (949,600) -

- 15,572,915 15,572,915 14,138,515

19. STORES, SPARES AND LOOSE TOOLSStores 6,727,886 49,769,900 56,497,786 55,525,680Spares 8,455,554 24,489,952 32,945,506 35,316,666Loose tools 64,847 4,739,990 4,804,837 4,699,390

Less: Transferred to Nadeem Textile Mills Limited (Note 1.2) (15,248,287) - (15,248,287) -

- 78,999,842 78,999,842 95,541,736

20. STOCK IN TRADERaw material 861,314 65,162,959 66,024,273 192,989,073Work in process 13,966,949 27,697,998 41,664,947 50,392,835Finished goods (Note 20.1) 20,699,386 118,999,459 139,698,845 207,098,139Waste 1,241,613 4,487,567 5,729,180 7,880,616Less: Transferred to Nadeem Textile Mills Limited (Note 1.2) (36,769,262) - (36,769,262) -

- 216,347,983 216,347,983 458,360,663

20.1 The finished goods amounting to Rs. 17,786,602 (June 30, 2012: 72,890,927) stated at their net realizable value aggregating to Rs. 14,223,476 (June 30, 2012: Rs. 68,311,933). The amount charged to profit and loss in respect of stocks written down to their net realizable value is Rs. 3,563,127 (June 30, 2012: Rs. 4,578,994).

20.2 The carrying value of stock pledged is Rs. 171.613 million (2012: Rs. 408 million).

Allied Bank Limited

........ .... ....

....

.... ....

..... .... ... .

.... ....

....

.... ....

....

.... ....

....

S.No.

Buyer NameParticulars CostAccumulatedDepreciation

BookValue

SalesProceeds

Gain/(Loss)

PKR

Mode ofDisposal

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

21. TRADE DEBTSSecured - 86,332,134 86,332,134 52,487,637Unsecured 77,155,113 73,288,125 150,443,238 145,739,606Provision for doubtful debts (Note 21.1) (4,081,727) (9,420,617) (13,502,344) (17,640,407)Less: Transferred to Nadeem Textile Mills Limited (Note 1.2) (73,073,386) - (73,073,386) -

- 150,199,642 150,199,642 180,586,836

21.1 Particulars of Provision for doubtful receivablesProvision for bad debts at the beginning of year 8,219,790 9,420,617 17,640,407 19,267,675Bad debts provision provided during the year - - - -Bad debts provision written off (1,488,063) - (1,488,063) (158,068)Bad debts recovered during the year (2,650,000) - (2,650,000) (1,469,200)Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (4,081,727) - (4,081,727) -Provision for bad debts at the end of year - 9,420,617 9,420,617 17,640,407

22. LOAN AND ADVANCES Due from employees - Considered good 843,209 925,556 1,768,765 2,018,390 Advance to suppliers 3,655,648 9,021,057 12,676,705 16,076,781 Letters of credit margin 1,509,416 353,158 1,862,574 29,696,242 Bank guarantee margin - 4,485,400 4,485,400 4,485,400 Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (6,008,273) - (6,008,273) -

- 14,785,171 14,785,171 52,276,813

23. TRADE DEPOSITS AND SHORT TERM PREPAYMENTS Deposits 2,068,632 - 2,068,632 899,053Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (2,068,632) - (2,068,632) -

- - - 899,053

24. OTHER RECEIVABLES Unsecured-considered goodSpecial excise duty - - - 950,380Insurance claim receivables - 14,907,028 14,907,028 8,122,112Others (Note 24.1) 100,000,000 1,722,066 101,722,066 3,403,813

100,000,000 16,629,094 116,629,094 12,476,305

24.1 Others includes Rs. 100 million receivable from Nadeem Textile Mills Limited.

25. TAX REFUND DUE FROM GOVERNMENTSales Tax 39,597,225 37,368,359 76,965,584 73,963,211Advance income tax 19,302,328 34,330,207 53,632,535 40,186,722Less : Transferred to Nadeem Textile Mills Limited (Note 1.2) (58,899,553) - (58,899,553) -

- 71,698,566 71,698,566 114,149,933

26. OTHER FINANCIAL ASSETS-Punjab SegmentInvestment at fair value through profit and loss

.....

..... ..........

..... ..... ..... ...............

..... ..........

.....

..... ..........

....

.... ....

.... .... ....

.... .... ....

....

.... ....

Fair Value

AdjustmentName of Securities No. of Shares Cost Fair Value

Pakistan Reinsurance Limited NIB Bank Limited

25,000

50,000

50,000

JS Bank Limited

2012 - PKR 125,000

2013 - PKR 125,000

163,000

16,500

(37,500)

188,250

142,000

590,750

116,000

217,500

782,250

924,250

427,750

255,000

99,500

594,000

782,250

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

35

36

27. CASH AND BANK BALANCES

Cash at bank in current account 1,664,869 28,170,825 29,835,694 3,250,664 in saving account (Note 27.1) 531,902 103,605 635,507 4,647,873

2,196,771 28,274,430 30,471,201 7,898,537Cash in hand 135,572 577,943 713,515 353,755Transferred to Nadeem Textile Mills Ltd. (Note 1.2) (2,332,343) - (2,332,343) -

- 28,852,373 28,852,373 8,252,292

27.1 It carries mark up at the rate of 5.50 to 7.30 (June 30, 2012: 5.50 to 9.00) percent per annum.

28. SALES - NETLocal (Note 28.1) 1,539,495,106 1,166,052,540 2,705,547,646 2,503,727,089Export - Direct 387,975,117 2,592,192,489 2,980,167,606 1,679,717,952Waste (Note 28.1) 12,939,411 48,443,883 61,383,294 62,462,154Processing 318,855 - 318,855 5,436,850Raw material (Note 28.1) 7,094,580 50,689,501 57,784,081 93,057,640

1,947,823,069 3,857,378,413 5,805,201,482 4,344,401,685

Less: Ocean freight (3,395,605) (24,211,006) (27,606,611) (15,195,965) Commission on export (3,738,328) (41,347,470) (45,085,798) (24,658,309) Export development surcharge (987,611) (6,227,918) (7,215,529) (4,094,683) Export trailer charges (1,741,390) (24,236,188) (25,977,578) (15,174,613) Miscellaneous export expenses (2,185,432) (7,238,208) (9,423,640) (3,445,666)

(12,048,366) (103,260,790 (115,309,156) (62,569,236)

1,935,774,703 3,754,117,623 5,689,892,326 4,281,832,449

28.1 Sales tax on local sales and indirect sales is Rs. 20,782,865 (2012: Rs. Nil)28.2 These Financial Statements does not include disclosure relating to IFRS 8 "Operating Segments" as the

company is considered to be a single operating segment.

29. COST OF SALESCost of goods manufactured (Note: 29.1) 1,831,221,512 3,468,689,422 5,299,910,934 3,987,970,251Cost of raw material sold 5,943,049 47,265,255 53,208,304 85,652,603Finished goodsOpening 55,994,014 182,252,188 238,246,202 346,826,942Yarn purchased - 30,971,350 30,971,350 72,122,435Closing (45,208,447) (123,487,026) (168,695,473) (214,978,755)

10,785,567 89,736,512 100,522,079 203,970,622

1,847,950,128 3,605,691,189 5,453,641,317 4,277,593,476

29.1 COST OF GOODS MANUFACTUREDRaw material consumed (Note 29.1.1) 1,420,624,013 2,600,557,921 4,021,181,934 3,065,416,994Stores consumed (Note 29.1.2) 29,614,621 65,074,391 94,689,012 63,652,956Packing material consumed (Note 29.1.3) 36,234,171 55,433,739 91,667,910 67,925,488Salaries, wages and other benefits (Note 29.1.4) 120,753,906 253,706,997 374,460,903 283,805,987Repair and maintenance (Note 29.1.5) 7,900,795 4,587,121 12,487,916 7,620,422Insurance 2,763,881 2,721,035 5,484,916 6,488,299Fuel and power 197,733,377 402,871,101 600,604,478 427,691,479Depreciation (Note 16.1) 15,986,420 50,024,598 66,011,018 69,283,920Others 2,728,348 21,866,611 24,594,959 8,057,772

1,834,339,532 3,456,843,514 5,291,183,046 3,999,943,317

.... ....

....

....

....

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

Work in process Opening 20,304,346 39,543,906 59,848,252 38,419,769 Closing (23,422,366) (27,697,998) (51,120,364) (50,392,835)

(3,118,020) 11,845,908 8,727,888 (11,973,066)

Cost of goods manufactured 1,831,221,512 3,468,689,422 5,299,910,934 3,987,970,251

29.1.1 RAW MATERIAL CONSUMEDOpening stock 194,266,707 129,662,121 323,928,828 245,312,689Purchases 1,364,101,423 2,583,324,014 3,947,425,437 3,098,745,981

1,558,368,130 2,712,986,135 4,271,354,265 3,344,058,670Raw material sold (5,943,049) (47,265,255) (53,208,304) (85,652,603)Less: Closing stock (131,801,068) (65,162,959) (196,964,027) (192,989,073)

1,420,624,013 2,600,557,921 4,021,181,934 3,065,416,994

29.1.2 STORES CONSUMEDOpening stock 31,962,923 41,940,582 73,903,505 57,768,295 Purchases 26,754,358 65,793,724 92,548,082 62,089,540

58,717,281 107,734,306 166,451,587 119,857,835 Less: Closing stock (29,102,660) (42,659,915) (71,762,575) (56,204,879)

29,614,621 65,074,391 94,689,012 63,652,956

29.1.3 PACKING MATERIAL CONSUMEDOpening stock 7,158,316 35,727,161 42,885,477 45,502,592 Purchases 36,468,728 56,046,505 92,515,233 61,759,751

43,627,044 91,773,666 135,400,710 107,262,343 Less: Closing stock (7,392,873) (36,339,927) (43,732,800) (39,336,855)

36,234,171 55,433,739 91,667,910 67,925,488

29.1.4 This includes Rs. 18,679,019 (2012: Rs. 19,736,618) in respect of staff retirement benefits.29.1.5 This includes Rs. 4,179,522 (2012: Nil) in respect of Capital work in Progress

30. DISTRIBUTION COSTLocal freight and handling 2,600,426 3,601,712 6,202,138 9,496,575 Commission-local 2,447,630 10,489,840 12,937,470 15,173,625 Export bank charges 136,203 4,140,573 4,276,776 2,582,666 Stamp Duty 510,480 - 510,480 462,998 Forwarding charges 51,000 6,669,460 6,720,460 3,581,673 Others 1,156,661 - 1,156,661 2,313,272

6,902,400 24,901,585 31,803,985 33,610,809 31. ADMINISTRATIVE EXPENSES

Directors' remuneration 600,000 1,288,000 1,888,000 1,896,000 Staff salaries and other benefits (Note 31.1) 10,511,472 17,985,118 28,496,590 24,222,226 Travelling and conveyance 1,158,314 3,670,325 4,828,639 5,185,278 Legal and professional 3,217,567 5,311,512 8,529,079 7,746,775 Fees & subscription 722,652 961,938 1,684,590 872,005 Rent rates and taxes 460,542 24,855 485,397 474,481 Electricity, gas and water 1,040,520 1,781,616 2,822,136 3,068,191 Repair and maintenance 1,495,826 7,840,103 9,335,929 2,040,357 Postage, telephone telegraph and facsimile 1,324,442 1,919,847 3,244,289 3,013,495 Printing and stationery 1,413,316 367,920 1,781,236 1,431,609 Motor vehicle expenses 1,393,736 - 1,393,736 2,106,543 Advertisement expenses 270,482 201,255 471,737 200,260 Entertainment expenses 824,027 534,034 1,358,061 1,469,333 Charity and donation (Note 31.2) 21,000 - 21,000 233,000 Auditors Remuneration (Note 31.3) 341,927 683,853 1,025,780 921,800 Bad debts written off - - - 45,000 Miscellaneous expenses 582,534 5,028,009 5,610,543 2,768,654 Watch and ward 6,700 - 6,700 57,000 Newspaper and periodicals 23,618 4,931 28,549 34,323 Depreciation (Note:16.1) 2,877,879 3,852,729 6,730,608 9,935,946

28,286,554 51,456,045 79,742,599 67,722,276

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....

....

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....

30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

37

38

31.1 This includes Rs. 4,208,990 ( 2012 : Rs.347,156) in respect of staff retirement benefits.31.2 No directors or their spouse has any interest in the donees' fund.

31.3 AUDITORS REMUNERATIONAudit fee 275,000 550,000 825,000 750,000Half yearly review 41,727 83,453 125,180 113,800Review of Code of Corporate Governance 12,000 24,000 36,000 36,000Out of Pocket 13,200 26,400 39,600 22,000

341,927 683,853 1,025,780 921,800

32. OTHER INCOMEGain on sale of property, plant and equipment 4,885,130 28,692,246 33,577,376 335,676Exchange gain 674,869 447,552 1,122,421 2,932,526Dividend Income - 62,500 62,500 75,000Gain on forward booking - - - 1,197,000Payables written off - 1,266,091 1,266,091 1,202,497Rental Income - 3,400,000 3,400,000 -Bad debts recovered 2,650,000 - 2,650,000 1,469,200Gain on sale & lease back - 2,844,661 2,844,661 780,653Profit on PLS Account 77,548 - 77,548 - Mark-up received on PLS account 218,138 282,608 500,746 1,057,431Gain on measurement of investment at fair value - 142,000 142,000 188,250

8,505,685 37,137,658 45,643,343 9,238,233

33. FINANCE COST Banking companies Long term finance 2,924,963 5,393,262 8,318,225 21,721,754 Short term finance 21,471,328 80,280,958 101,752,286 139,060,901Finance lease obligation - 5,330,787 5,330,787 8,738,202L/C discount charges 645,650 5,489,975 6,135,625 7,455,288Interest on WPPF 1,242,044 - 1,242,044 1,012,016Bank charges and commission 603,365 2,369,048 2,972,413 3,124,445

26,887,350 98,864,030 125,751,380 181,112,606

34. OTHER OPERATING EXPENSESLoss on sale of property, plant and equipment 18,165 405,266 423,431 184,222Bad debts write off 354,064 - 354,064 -

Foreign exchange loss 5,672,229 153,016 5,825,245 -Worker's profit participation fund - 1,899,682 1,899,682 -Worker's welfare fund - 683,886 683,886 -

6,044,458 3,141,850 9,186,308 184,222

35. TAXATIONCurrent (11,863,708) (32,035,942) (43,899,650) (42,919,141)Prior 1,647,802 - 1,647,802 784,295Deferred (Note No. 35.1) - - - -

(10,215,906) (32,035,942) (42,251,848) (42,134,846)

35.1 Deferred tax asset amounting to Rs. 79.629 million has not been recognized during the year 2013 as it is not probable that in future taxable profit will be available against which unused tax losses and unused tax credits can be utilized.

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30th, June2013PKR

30th, June2012PKR

PunjabJune-2013

PKR

SindhJune-2013

PKR

39

36. (Loss) per shares - Basic and diluted

36.1 Basic Loss Per Share(Loss) after taxation (6,841,769) (311,287,553)Weighted average number of ordinary shares 17,636,719 17,636,719 (Loss) per share (0.39) (17.65)

36.2 There is no diluted effect on loss per share.

37. RELATED PARTY TRANSACTIONS The related parties comprise of associated companies, directors and key management personnel. The company in the normal course of business carries out sale and purchase of goods and services transactions with related parties at arm's length price. Nature and description of related party transactions along with monetary value are as follows:-

Nadeem Textile Mills Limited Associate

Purchase of yarn - 13,190,350Reprocessing income 318,600 5,436,850Sale of yarn 199,129,000 4,309,500Purchase of raw material 604,169,126 477,628,629Sale of Sindh segment & related facilities 100,000,000 -

Nadeem Power Generation (Pvt) Limited Associate

Electricity purchase 223,537,768 167,533,155

38. PLANT CAPACITY AND ACTUAL PRODUCTIONTotal number of spindle installed 79,656 79,656Spindles under re-erection/major overhauling - 1,368Average numbers of spindle worked 71,918 71,918Number of shifts worked per day 3 3Installed capacity of conversion into 20/1 count (kg) 26,220,255 27,091,193Actual production after conversion into 20/1 count (kg) 19,850,285 18,687,453

The Company has sold spindles of Sindh Segment to Nadeem Textile Mills Limited as at June 30, 2013 (Note 1.2).

39. CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVE REMUNERATION

40. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURE

The company has exposure to the following risks from its use of financial instruments.(i) Credit risk

(ii) Liquidity risk

(iii) Market risk

The board of directors has overall responsibility for the establishment and oversight of company's risk management framework. The board is also responsible for developing and monitoring the company's risk management policies.

.....

....

....

Managerial remuneration 400,000 400,000 864,000 864,000 8,332,831 6,183,442 9,596,831 7,447,442

Remuneration allowances 200,000 200,000 424,000 432,000 3,865,836 2,792,558 4,489,836 3,424,558

Retirement benefits - - - - 644,403 465,287 - 465,287

600,000 600,000 1,288,000 1,296,000 12,843,070 9,441,287 14,086,667 11,337,287

Number of persons 1 1 3 3 14 12 18 16

The chief executive and two directors are provided with cars maintained by the company and telephone at their residence. The directors have waived their meeting fees.

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CHIEF EXECUTIVE DIRECTORS EXECUTIVE

June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012

TOTAL

June 30, 2013 June 30, 2012

40

40.1 Credit riskCredit risk represents the accounting loss that would be recognized at the reporting date if counter-parties failed completely to perform as contracted. The Company does not have significant exposure to any individual counter-party. To reduce exposure to credit risk the Company has developed a formal approval process whereby credit limits are applied to its customers. The management also continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery. To mitigate the risk, the Company has a system of assigning credit limits to its customers based on an extensive evaluation based on customer profile and payment history. Outstanding customer receivables are regularly monitored. Some customers are also secured, where possible, by way of inland letters of credit, cash security deposit, bank guarantees and insurance guarantees.

40.1.1 Exposure to credit riskThe maximum exposure to credit risk at the reporting date was as follows:

Long term loans and advancesLong term deposits 15,572,915 14,138,515 Trade debts 150,199,642 180,586,836 Loans and advances 1,768,765 2,018,390 Other financial assets 924,250 782,250 Trade deposits and short term prepayments 2,068,632 899,053 Other receivables (Note: 40.1.1.1) 116,629,094 12,476,305 Cash and bank balances 28,852,373 8,252,292

316,015,671 219,153,641

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit rating (if available) or to historical information about counterparty default rate.

Due to Company's long standing business relationship with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counter parties on their obligations to the Company. Accordingly the credit risk is minimal.

40.1.1.1 Other receivables includes Rs. 100 million receivables from Associate.

40.1.2 The maximum exposure to credit risk for trade debts at the balance sheet date by geographical region is as follows:-

Domestic 136,940,894 128,099,199 Export 86,332,134 52,487,637

223,273,028 180,586,836

The majority of export debtors of the company are situated in Asia.

40.1.3 The maximum exposure to credit risk for trade debts at the balance sheet date by type of the customers is as follows:

Yarn 142,117,811 173,562,365 Waste 8,081,831 6,628,148 Others - 396,323

150,199,642 180,586,836

Not past due 64,047,771 109,094,859 0 - 30 days past due 38,578,509 17,860,114 31 - 90 days past due 29,325,570 10,353,157 90 - 1 year past due 18,247,792 5,665,231 Over one year 9,420,617 55,253,882

159,620,259 198,227,243 Impairment 9,420,617 17,640,407

150,199,642 180,586,836

40.1.5 Based on the past experience, sales volume, consideration of financial position, past track records and recoveries, economic conditions of particularly the textile sectors and generally the industry, the company believes that it is prudent to provide trade.

....

40.1.4 The aging of trade debtors at the close of the balance sheet date is as follows:-

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40.1.6 Liquidity riskLiquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities.

The Company manages liquidity risk by maintaining sufficient cash and availability of funding through an adequate amount of committed credit facilities. Management believes the liquidity risk to be low.

Following are the contractual maturities of financial liabilities, including interest payments. The amounts disclosed in the table are undiscounted cash flows.

Contractual maturities of financial liabilities as at June 30, 2013:

Non - derivativeFinancial liabilities:Long term financing 122,284,822 277,268,994 61,258,367 16,867,227 199,143,400 -

Long term loans fromdirectors (125,513,014) (125,513,014) - - (125,513,014) - Finance lease 55,615,937 65,212,806 9,635,851 15,879,130 39,697,825 -

Trade and other payables 320,476,401 320,476,401 320,476,401 - - - Accrued mark up and interest 292,213,944 292,153,041 292,153,041 - - -

Short term borrowings 474,159,905 545,283,891 237,079,953 237,079,953 - -

1,139,237,995 1,374,882,119 920,603,613 269,826,310 113,328,211 -

Contractual maturities of financial liabilities as at June 30, 2012:

Non - derivativeFinancial liabilities:

Long term financing 221,699,530 376,683,702 61,258,367 16,867,227 298,558,108 -

Long term loans fromdirectors - - - - - -

Finance lease 54,340,956 73,208,070 23,643,846 2,658,735 46,905,489 - Trade and other payables 340,504,842 340,504,842 340,504,842 - - - Accrued mark up & interest 224,935,300 224,935,300 224,935,300 - - -

Short term borrowings 889,243,347 1,024,129,849 512,064,925 512,064,925 - -

1,730,723,975 2,039,461,763 1,162,407,280 531,590,887 345,463,597 -

40.2.1 The contractual cash flows relating to the above financial liabilities have been determined on the basis of mark up rates effective as at June 30. The rates of mark up have been disclosed in relevant notes to these financial statements.

40.2 Market Risk

40.2.2 Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to a change in credit rating of the issuer or the instruments, changes in market sentiments, speculative.

40.3.1 Currency risk

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

The Company is exposed to currency risk arising from various currency exposures, primarily with the respect to United states Dollar(USD). Currently, The company's foreign exchange risk exposure is restricted to bank balances, The account receivables/payables from/to the foreign entities. The company's exposure to currency risk was as follows:

US Dollar Euro Others PKR

Trade debts 2013 869,845 - - 86,332,134

Trade debts 2012 583,520 - - 52,487,637

The following significant exchange rates applied during the year.

June 30, 2013

CarryingAmount

ContractualCash flows

Six monthsor less

Six to twelvemonths

Two to fiveyears

More thanfive years

PKR

June 30, 2012

CarryingAmount

ContractualCash flows

Six monthsor less

Six to twelvemonths

Two to fiveyears

More thanfive years

PKR

42

Average Rates Reporting date Rates

2013 2012 2013 2012

US Dollar 99.25 89.95 98.6 94.2

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and liabilities of the company.

40.3.2 Other Price RiskOther price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate of changes in market price (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to commodity price.

40.3.3 Interest Rate RiskThis represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate risk is the risk that the fair value or future cash flows of a financial instruments will fluctuate because of changes in market interest rates. Majority of the interest rate arises from short and long term borrowings from bank.

Fixed rate instruments

Financial assets - -

Financial liabilities 177,900,759 391,919,488

Variable rate instruments

Financial assets 635,507 4,647,873

Financial liabilities 474,159,905 889,243,347

Fair value sensitivity analysis for fixed rate instruments The company does not account for any fixed rate financial assets and liabilities at fair value through profit and

loss. Therefore, a change in interest rates at the reporting date would not affect profit and loss account.

Cash flow sensitivity analysis for variable rate instrumentsA change of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Profit and loss Equity

100 bp 100 bp 100 bp 100 bpincrease decrease increase decrease

Cash sensitivity analysis

variable rate instruments 2013 4,741,599 (4,741,599) - -

Cash sensitivity analysis

variable rate instruments 2012 8,892,433 (8,892,433) - -

40.3.4 Fair value of financial assets and liabilities

The carrying value of all financial instruments reflected in the financial statements approximate to their fair values. Fair value is determined on the basis of objective evidence at each reporting date.

PKR

43

40.3.5 Fair value of financial assets and liabilities

The carrying value of all financial instruments reflected in the financial statements approximate to their fair values. Fair value is determined on the basis of objective evidence at each reporting date.

40.3.6 Fair Value Hierarchy

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into level 1 to 3 based on the degree to which the fair value is observed.

Level 1 fair value measurement are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurement are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurement are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at June 30, 2013 other financial assets was categorized in level 1.

There were no transfers between Level 1 and 2 in the year.

40.3.7 Capital risk management

The company's prime object when managing capital is to safeguard its ability to continue as a going concern in order to provide adequate returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the company monitors capital on the basis of the gearing ratio. The ratio is calculated as total borrowings divided by total capital employed. Borrowings represent long term financing, long term financing from directors and others and short term borrowings. Total capital employed includes total equity as shown in the balance sheet plus borrowings.

40.3.8 Off balance sheet itemsBank guarantee issued for SNGP 27,767,900 27,767,900 Bank guarantees issued in ordinary course of business 30,500,000 34,411,444 Post dated Cheques 475,158 -Letters of credit for raw material 11,077,456 154,662,812

....

The effective rate of interest / mark up for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.

41. NUMBER OF EMPLOYEESTotal number of employees as at 2227 2288Average number of employees during the year 2214 2275

42. RECLASSIFICATIONCorresponding figures have been rearranged and reclassified to reflect more appropriate presentation of events and transactions of the purposes of comparison. Significant reclassification made is as follow:FROM TO NATURE AMOUNTAdministrative Expenses Other Expenses Proper Classification Rs. 354,064

43. GENERALThese financial statements were authorized for issue on November 08, 2013 by the Board of Directors of the Company.



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