Zahur Cotton Mills Ltd - 2001

===================================================================================
BALANCE SHEET AS AT SEPTEMBER 30, 2001
-----------------------------------------------------------------------------------
Note 2001 2000
Rupees Rupees
===================================================================================
SHARE CAPITAL & RESERVES
Authorised Capital
20,000,000 (2000: 20,000,000)
ordinary shares of Rs 10 each 200,000,000 200,000,000
Issued, subscribed and paid up
9,860,000 (2000: 9,860,000) ordinary shares
of Rs.10/- each fully paid in cash 98,600,000 98,600,000
Share Deposit money 20,066,240 20,066,240
Unappropriated loss (126,053,902) (103,291,790)
(7,387,662) 15,374,450
LONG TERM LOANS 3 <#3> 233,069,070
241,926,334
DEFERRED LIABILITIES
staff gratuity 798,421 621,792
CURRENT LIABILITIES
Current portion of long term liabilities 3 <#3> 16,566,882
9,373,935
Creditors, accrued and other liabilities 4 <#4> 59,114,915
55,586,087
Provision for taxation 5,451,182 5,338,834
81,132,979 70,298,856
CONTINGENCIES AND COMMITMENTS 5 <#5>
307,612,808 328,221,432
-----------------------------------------------------------------------------------
TANGIBLE FIXED ASSETS
Operating fixed assets 6 <#6> 200,162,011
213,033,825
Stores held for capital expenditure 72,930,618 72,930,618
273,092,629 285,964,443
LONG TERM DEPOSITS 235,390 235,390
CURRENT ASSETS
Stores and spares 7 <#7> 1,231,292
1,782,543
Stock in trade 8 <#8> 2,327,032
4,529,246
Trade debtors 9 <#9> 7,664,977
9,675,700
Advances, deposit, prepayments
and other receivables 10 <#10> 22,631,941
25,537,839
Cash and bank balances 11 <#11> 429,547
496,271
34,284,789 42,021,599
307,612,808 328,221,432
===================================================================================

===================================================================================
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER 30, 2001
-----------------------------------------------------------------------------------
Note 2001 2000
Rupees Rupees
===================================================================================
Sales 12 <#12> 22,456,724
165,505,952
Cost of sales 13 <#13> 39,976,057
168,810,194
Gross loss (17,519,333) (3,304,242)
Administrative and general expenses 14 <#14> 3,231,466
5,769,456
Selling and distribution expenses 15 <#15> 272,807
897,899
3,504,273 6,667,355
Operating loss (21,023,606) (9,971,597)
Other income 16 <#16> 13,613
740,912
(21,009,993) (9,230,685)
Financial charges 17 <#17> 1,639,771
2,352,122
(22,649,764) (11,582,807)
Extra Ordinary Items - 213,034,654
(Loss) / profit before taxation (22,649,764) 201,451,847
Provision for taxation 18 <#18> 112,348
829,467
(Loss) / profit after taxation (22,762,112) 200,622,380
Gain on discontinuance of spinning unit - 102,781,610
Tax on gain - 1,400,000
- 101,381,610
(22,762,l12) 302,003,990
Unappropriated loss brought forward (103,291,790) (405,295,780)
Unappropriated loss carried forward (l26,053,902) (103,291,790)
(Loss)/ earning per share 23 <#23> (2.31)
30.63
===================================================================================

===================================================================================
CASH FLOW STATEMENT FOR THE YEAR ENDED SEPTEMBER 30, 2001
-----------------------------------------------------------------------------------
Note 2001 2000
Rupees Rupees
===================================================================================
Cash Flows from operating activities
Cash Flows from operations 20 <#20> 1,953,662
20,631,519
Financial charges paid (239,771) (647,838)
Taxes paid (323,769) (730,404)
Net cash flows from operating activities 1,629,893 19,901,115
Cash flows from investing activities
Fixed capital expenditure (32,300) (1,429,805)
Proceeds from disposal of fixed assets - 190,000
Net cash flows from investing activities (32,300) (1,239,805)
Cash flows from financing activities
Long term loans - secured (1,664,317) (15,268,581)
Deferred liabilities - (645,870)
Liabilities against assets subject to finance lease - (2,571,883)
Short term running finances - secured - 24,000
Net cash flows from financing activities (1,664,317) (18,510,334)
Net Increase in cash and cash equivalents (66,724) 150,976
Cash and cash equivalents at the beginning of the year 496,271 345,295
Cash and cash equivalents at the end of the year 429,547 496,271
===================================================================================

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, 2001
3. LONG TERM LOANS

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
Secured
Allied Bank of Pakistan Limited
Demand Finance 3.1 <#3.1> 80,000,000
80,000,000
Demand Finance 3.2 <#3.2> 78,920,000
78,920,000
158,920,000 158,920,000
Doha Bank Limited
Running Finance 3.3 <#3.3> 15,714,750
16,762,400
Deferred Mark Up 3.4 <#3.4> 7,500,000
7,500,000
23,214,750 24,262,400
A1-Towfeeq Investment Bank
Morabaha Finance 3.5 <#3.5> 9,233,332
9,849,999
Un secured
Chief Executive 3.6 <#3.6> 30,467,870
30,467,870
Others 3.6 <#3.6> 127,800,000
27,800,000
58,267,870 58,267,870
249,635,952 251,300,269
Less: Current portion 8,857,264 9,373,935
Overdue instalments 7,709,618 -
16,566,882 9,373,935
233,069,070 241,926,334
===================================================================================

3.1. Demand finance is payable in 10 equal half yearly instalments

commencing from September, 2003.

This finance carries mark up at the rate of 2 percent per annum during
the grace period and payable half yearly, after the grace period it will
carry mark-up at the rate of 12 percent per annum which is to be
capitalised till the payment of last instalment of principal amount.

Then it will be paid in 6 equal half yearly instalments commencing from

September, 2008. It is secured against promissory notes, mortgage on
land, building, machinery, fittings, fixtures, equipments and personal
guarantee of directors.
3.2. Mark up capitalised in previous years, now treated as demand
finance, payable in 8 half-yearly instalments commencing from 2011. It
is mark up free.

It is secured against promissory notes, mortgage on land, building,

machinery, fittings, fixtures, equipments and personal guarantee of
directors.
3.3. Running finance payable in 24 equal quarterly instalments as per
compromised agreement dated August 31, 1998 commenced from August 1999.

It is mark up free. However, in case of default in payment of any four

consecutive instalments, the entire outstanding balance as on date of
default, would become payable with mark up, to be charged @ 15% per
annum. The loan is secured against charge on assets.
3.4. This represents over due mark-up on short term running finance
deferred by Doha Bank Limited as a result of compromise agreement dated
August 21, 1998. Mark-up payable in 10 equal quarterly instalments
commencing after repayment of principal. It is mark up free.
3.5. Morabaha finance payable in twelve equal quarterly instalments
commenced from March 1999. It is mark up free. It is secured against
shares of the directors.
3.6. Loan received from Chief Executive and relatives / associates of
the directors. Loans are interest free and unsecured. Repayment schedule
has not been finalised.
4. CREDITORS, ACCRUED AND OTHER LIABILITIES

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Creditors 14,187,572 16,016,637
Advances from customers 29,362,840 25,870,187
Accrued liabilities 4,420,087 3,545,986
Interest accrued on long term loans 1,474,521 74,521
Mark up accrued on short term running finance 67,357 67,357
Income tax 7,448,065 7,466,158
Sales tax 32,020 32,020
Others 2,122,453 2,513,221
59,114,915 55,586,087
===================================================================================

5. CONTINGENCIES AND COMMITMENTS

CONTINGENCIES
5.1. There is a contingent liability of Rs. 11,089,523 (2000: Rs.
11,089,523) in respect of excise duty on bank advances for which the
company has obtained stay order from Lahore High Court. Excise duty
already deducted by the banks amounting Rs. 11,089,523 (2000: Rs.
11,089,523) has been treated as receivable.
5.2. The Company has filed an appeal before Collector of Sales Tax
(Appeals) against the order passed by Deputy Collector Sales tax
(Refund) whereby refund claimed by the Company aggregating Rs. 3,601,593
(2000: Rs.3,601,593) was rejected.

The case has been remanded by the Collector of Sales Tax (Appeals) to
Deputy Collector, Sales Tax (Refund) which is pending for adjudication.
5.3. COMMITMENTS

Nil (2000:- Nil)

===================================================================================
=========================================================================
6. OPERATING FIXED ASSETS
-----------------------------------------------------------------------------------
-------------------------------------------------------------------------
Particulars Cost
Depreciation Book Value
As at As at
As at As at As at
September Additions (Deletions) September Rate
September Charge for Adjustments September September
30, 2000 30, 2001 %
30, 2000 the year 30, 2001 30, 2001
===================================================================================
=========================================================================
Land freehold 2,120,007 - - 2,120,007 -
- - - - 2,120,007
Building 38,879,895 - - 38,879,895 3
5,209,506 1,108,118 - 6,317,624 32,562,271
Plant & machinery 239,981,936 - - 239,981,936 5
66,447,431 10,867,573 - 77,315,004 162,666,932
Tools and equipment 118,108 - - 118,108 10
50,767 10,690 - 61,457 56,651
Furniture and fixtures 1,839,461 - - 1,839,461 10
943,371 143,512 - 1,086,883 752,578
Office equipment 1,023,118 32,300 - 1,055,418 10
419,701 91,577 - 511,278 544,140
Electric installations 2,294,667 - - 2,294,667 5
830,749 103,260 - 934,009 1,360,658
Vehicles 3,626,774 - - 3,626,774 20
2,986,577 574,961 - 3,561,538 65,236
Fire fighting equipment 38,566 - - 38,566 10
17,741 3,471 - 21,212 17,354
Arms and ammunition 19,040 - - 19,040 5
1,904 952 - 2,856 16,184
Rupees 289,941,572 32,300 - 289,973,872 -
76,907,747 12,904,114 - 89,811,861 200,162,011
2000 Rupees 580,897,955 1,429,805 (292,386,188) 580,897,955
175,284,167 22,096,392 (120,472,812) 76,907,747 213,033,825
===================================================================================
=========================================================================

6.1. DEPRECIATION FOR THE YEAR HAS BEEN ALLOCATED AS FOLLOWS:

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
Cost of sales 13 <#13> 12,094,064
20,712,918
Administrative and general expenses 14 <#14> 810,050
1,383,474
12,904,114 22,096,392
===================================================================================

7. STORE AND SPARES

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Store 382,107 554,448
Spares 849,185 1,228,095
1,231,292 1,782,543
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8. STOCK-IN-TRADE

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Finished goods - 2,440,200
Work done on third parties materials;
Work in process 996,668 763,766
Finished goods 1,330,364 1,325,280
2,327,032 2,089,046
2,327,032 4,529,246
===================================================================================

9. TRADE DEBTORS - UNSECURED CONSIDERED GOOD

10. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Advances - Considered good
Employees 318,979 197,670
Supplies / others 5,926,023 7,728,064
6,245,002 7,925,734
Prepayments - 17,324
Central Excise duties on loans 11,089,523 11,089,523
Advance income tax 4,264,480 4,198,575
Export rebate 75,909 75,909
Sale tax 217,383 1,516,130
Others 739,644 714,644
22,631,941 25,537,839
===================================================================================

10.1. Maximum aggregate balance due from both directors and executives
of the company at the end of month during the year was Rs. Nil (2000:
Rs. Nil)
11. CASH AND BANK BALANCES

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
These were held as under:
At banks
Deposit accounts 60,750 60,750
Current accounts 11.1 <#11.1> 254,200
425,851
314,950 486,601
Cash in hand 114,597 9,670
429,547 496,271
===================================================================================

11.1. Cash at banks on current accounts include foreign currency balance

of U.S.$53.87 (2000:U.S.$53.87) converted into Pak Rupees at the year
end exchange rate.
12. SALES
===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Export - 2,996,376
Local 2,653,118 184,651,135
Waste - 591,358
2,653,118 188,238,869
Conversion receipts 23,187,037 1,757,813
25,840,155 189,996,682
Less: Sale Tax 3,370,456 24,391,346
Commission to selling agents 12,975 99,384
3,383,431 24,490,730
22,456,724 165,505,952
===================================================================================

13. COST OF SALES

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
Raw materials consumed 13.1 <#13.1>
99,213,554
Salaries, wages and other benefits 7,818,991 11,405,504
Fuel and power 7,797,925 17,079,121
Stores and chemicals 8,852,776 13,671,242
Insurance 177,416 44,532
Repairs and maintenance 253,078 709,509
Depreciation 6.1 <#6.1> 12,094,064
20,712,918
Others 779,593 2,664,996
37,773,843 165,501,376
Work-in-Process:
Opening stock 763,766 1,980,384
Closing stock (996,668) (763,766)
(232,902) 1,126,618
Cost of goods manufactured 37,540,941 166,627,994
Finished goods:
Opening stock 3,765,480 6,315,204
Closing stock (1,330,364) (4,133,004)
2,435,116 2,182,200
39,976,057 168,810,194
===================================================================================

13.1. RAW MATERIAL CONSUMED

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Opening balance - 4,472,878
Add: purchases - 94,740,676
- 99,213,554
Less: closing stock - -
- 99,213,554
===================================================================================

14. ADMINISTRATIVE AND GENERAL EXPENSES

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
Salaries, wages and other benefits 799,114 1,614,302
Printing and stationery 64,429 124,434
Communication 321,619 580,404
Travelling and conveyance 502,730 428,148
Legal and professional 105,800 382,820
Auditors remuneration 75,000 75,000
Repair and maintenance 23,294 90,265
Fee and subscription 33,629 345,930
Vehicle running and maintenance 99,243 152,551
Depreciation 6.1 <#6.1> 810,050
1,383,474
Electricity 209,290 265,939
Others 187,268 326,189
3,231,466 5,769,456
===================================================================================

15. SELLING AND DISTRIBUTION EXPENSES

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Salaries and other benefits 212,400 212,400
Domestic and ocean freight 16,050 115,627
Bad debts written off - 176,407
Other expenses 44,357 393,465
272,807 897,899
===================================================================================

16. OTHER INCOME

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Profit on sales of fixed assets - 78,800
Profit on bank deposits - 98,112
Miscellaneous 13,613 -
Custom duty rebate - 564,000
13,613 740,912
===================================================================================

17. FINANCIAL CHARGES

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Interest on long term loans 1,600,000 2,089,521
Bank charges and commission 39,771 262,601
1,639,771 2,352,122
===================================================================================

18. TAXATION
The provision for current taxation has been made under section 80(D) of
Income Tax Ordinance 1979 in view of the brought forward losses.

Income tax assessments of the company are completed up to financial year

1995-96 (assessment year 1996-97). Subsequently all assessments were
reopened by the Inspecting Additional Commissioner of Income Tax under
section 66(A) of the Income Tax Ordinance 1979.

The Company has filed an appeal against the said order. The company has
a good case. Accordingly, no additional provision has been made in these
accounts under this head.
19. PROFORMA STATEMENT OR ACCUMULATED LOSS UNDER THE ALLOWED ALTERNATIVE
TREATMENT

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
Opening unappropriated loss as previously reported - (405,295,780)
Correction of fundamental error - (15,194,130)
Opening unappropriated loss as restated - (420,489,910)
Profit / (loss) for the year - 317,198,120
unappropriated loss at the balance sheet date - (103,291,790)
===================================================================================

Cost of goods sold for the year 2000 included Rs.5,998,621 for certain
products and raw materials that had been sold and consumed in previous
years but were incorrectly included in inventory as at 30 September 1999.

Cost of goods sold and Administration and general expenses for the year
2000 also correctly included Rs.8,618,854 and Rs.576,655 respectively on
account of depreciation which was not charged in previous year. Restated
proforma information for the year 2000 and 1999 is presented as if the
error had been corrected in the year 1999.
20. CASH FLOWS FROM OPERATING ACTIVITIES

===================================================================================
Note 2001 2000
Rupees Rupees
===================================================================================
(Loss)/Profit before taxation and
extraordinary items 23.1 <#23.1> (22,649,764)
91,198,803
Add/( Less) adjustments for non-cash and other charges
Depreciation 12,904,114 22,096,392
Excise duty waived off - (564,000)
Profit on disposal of fixed assets - (102,860,410)
Provision for gratuity 176,629 156,345
Bad debts written off - 176,407
Financial charges 1,639,771 2,352,122
14,720,514 (78,643,144)
Operating profit before working capital changes (7,929,250) 12,555,659
Changes in working capital
(Increase)/decrease in current assets
Stores, spares and loose tools 551,251 952,347
Stock in trade 2,202,214 7,781,696
Trade debts 2,010,723 1,574,828
Advances, deposits, prepayments and other receivables 2,971,803 3,452,872
7,735,991 6,855,999
 (Decrease)/increase in current liabilities
Creditors, accrued and other liabilities 2,146,921 1,219,861
Cash flows from operations 1,953,662 20,631,519
===================================================================================

20.1. PROFIT /(LOSS) BEFORE TAXATION AND EXTRAORDINARY ITEMS

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
(Loss)/profit after taxation and extraordinary items (22,762,112) 302,003,990
Add: Provision for taxation on:
Ordinary activities 112,348 829,467
Gain on disposal - 1,400,000
Less: Extraordinary items - 213,034,654
(Loss)/ profit before taxation and extraordinary
items (22,649,764) 91,198,803
===================================================================================

21. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

INTEREST MARK-UP

Interest/Mark-up rate risk and sensitivities of the company?s financial

assets and financial liabilities as at September 30, 2001 can be
calculated from the following:

===================================================================================
=====================================================================
Interest Interest bearing
Non interest bearing Total
rate range Maturity with in Maturity after
Sub total Maturity with in Maturity after Sub total
One year one year
one year one year Rupees
===================================================================================
=====================================================================
Financial Assets
Long term deposits - - -
- - 235,390 235,390 235,390
Trade debts - - -
- 7.664,977 - 7,664,977 7,664,977
Advances, deposits and
other receivables - - -
- 318,978 - 318,978 318.978
Cash and bank - - -
- 429,574 - 429,574 429,574
2001: - -
- 8,413,529 235,390 8,648,919 8,648,919
2000:
Financial Liabilities - -
- 19,062,587 235,390 19,297,977 19,297,977
Long term liabilities 2 to 12% - 80,000,000
80,000,000 16,566,882 153,069,070 169,635,952 249,635,952
Deferred Liabilities - - -
- - 798,421 798,421 798,421
Creditors, accrued and other
liabilities - - -
- 2,271.990 - 2,271,990 2,271,990
2001: - 80,000,000
80,000,000 18,838,872 153,867,491 172,706,363 252,706,363
2000: - 80,000,000
80,000,000 58,644,145 161,381,459 220,025,604 300,025,604
===================================================================================
=====================================================================

21.1. INTEREST RATE RISK

Since the company borrows funds usually at fixed interest rates,
therefore the risk occurrence is minimal.
21.2. FOREIGN EXCHANGE RISK MANAGEMENT
Foreign exchange risk on financial instruments, receivable or payable in
foreign currency is also not material.
21.3. CREDIT RISK
Financial assets of the company amounting Rs.8.6 million are subject to
credit risk.
21.4. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The carrying value of all financial assets and liabilities reflected in
the financial statements approximate their fair values.
22. REMUNERATION OF CHIEF EXECUTIVE AND EXECUTIVES

=============================================================================
Chief Executive Executives
2001 2000 2001 2000
=============================================================================
Managerial remuneration 165,000 165,000 222,605 412,686
House rent allowance 135,000 135,000 95,395 190,981
300,000 300,000 318,000 603,667
Number of persons 1 1 2 3
=============================================================================

In addition to the above, the chief executive is provided with the

maintenance of car and residential telephone and executives are provided
with free use of company maintained vehicle.
23. BASIC AND DILUTED EARNING PER SHARE

There is no dilutive effect on the basic earning per share which is

based on:

===================================================================================
2001 2000
Rupees Rupees
===================================================================================
(Loss) /profit attributable to ordinary shareholders (22,762,112) 302,003,990
Weighted Average Number of Ordinary Shares 9,860,000 9,860,000
(Loss) /earning per share (2.31) 30.63
===================================================================================

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