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Gul Ahmed Textile Mills Limited: Consolidated Accounts
Gul Ahmed Textile Mills Limited: Consolidated Accounts
Gul Ahmed Textile Mills Limited: Consolidated Accounts
Contents
Company Information Notice of Meeting Directors' Report Six Years at a Glance Compliance with the Code of Corporate Governance Auditors Report Balance Sheet Profit and Loss Account Cash Flow Statement Statement of Changes in Equity Notes to the Accounts Attendance at Board Meetings Pattern of Shareholding CONSOLIDATED ACCOUNTS Auditors' Report Balance Sheet Profit and Loss Account Cash Flow Statement Statement of Changes in Equity Notes to the Accounts 39 4041 42 4344 45 4663 2 34 57 8 910 11 1213 14 1516 17 1834 35 3637
Form of Proxy
Company Information
BOARD OF DIRECTORS BASHIR H. ALIMOHAMMED - Chairman & Chief Executive A. RAZAK HAJI SATTAR YASIN HAJI KASSAM YOUNUS HAJI LATIF ZAIN BASHIR ZIAD BASHIR ABDUL AZIZ YOUSUF MOHAMMED SALIM GHAFFAR A. RAZAK HAJI SATTAR - Chairman YOUNUS HAJI LATIF - Member ZAIN BASHIR - Member ABN AMRO BANK NV ALLIED BANK OF PAKISTAN BANK AL HABIB LIMITED CITIBANK, N.A. DEUTSCHE BANK AG HABIB BANK AG ZURICH HABIB BANK LIMITED MEEZAN BANK LIMITED NATIONAL BANK OF PAKISTAN NIB BANK LIMITED STANDARD CHARTERED BANK THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED UNION BANK LIMITED UNITED BANK LIMITED GARDEZI & CO. Chartered Accountants PLOT NO. 82 MAIN NATIONAL HIGHWAY LANDHI, KARACHI-75120 PLOT NO. HT/3A LANDHI INDUSTRIAL AREA KARACHI-75120 LANDHI INDUSTRIAL AREA KARACHI-75120 finance@gulahmed.com www.gulahmed.com
BANKERS
SHARES DEPARTMENT
Notice Of Meeting
Notice is hereby given that the 54th Annual General Meeting of Gul Ahmed Textile Mills Limited will be held at Avari Towers, 242, Fatima Jinnah Road, Karachi, on Monday, October 30, 2006 at 10:00 a.m. to transact the following business: 1. 2. 3. 4. To receive, consider and adopt the Directors Report and Audited Accounts for the year ended June 30, 2006 and Auditors Report thereon. To appoint Auditors and fix their remuneration. To transact any other ordinary business as may be placed before the meeting with the permission of the Chairman. Special Business To consider and approve increase in Authorized Share Capital of the Company from Rs. 500 million to Rs.750 million and to approve the amendments in the Memorandum and Articles of Association of the Company resulting from this increase.
A statement under section 160(1)(b) of the Companies Ordinance, 1984, pertaining to the Special Business is being sent to the Shareholders with this Notice. By Order of the Board Karachi September 28, 2006 NOTES: 1. 2. Share Transfer Books of the Company will remain closed from October 19, 2006 to October 30, 2006 (both days inclusive) for determining entitlement to the right shares. A member entitled to vote at the meeting may appoint a proxy. Proxies in order to be effective, must be received at the Registered Office of the Company duly stamped and signed not later than 48 hours before the meeting. Shareholders who have deposited their shares into Central Depository Company of Pakistan Limited, must bring their original National Identity Card (NIC) or Original Passport at the time of attending the meeting. If proxies are granted by such shareholders the same must be accompanied with attested copies of the NIC or the Passport of the beneficial owners. Representatives of corporate members should bring the usual documents required for such purpose. A proxy must be a member of the Company. Shareholders are requested to immediately notify the change of address, if any. MOHAMMED SALIM GHAFFAR Company Secretary
3.
4. 5.
STATEMENT OF MATERIAL FACTS UNDER SECTION 160 (1) (b) OF THE COMPANIES ORDINANCE, 1984
It is proposed to increase the Authorized Share Capital from Rs. 500 million to Rs. 750 million to facilitate further issue of capital according to the requirements of the Company. For this purpose it is intended to propose that the following resolution be passed as a Special Resolution. a) Resolved that the Authorized Share Capital of the Company be and is hereby increased from Rs. 500 million to Rs. 750 million by the creation of 25,000,000 ordinary shares of Rs. 10 each. Such new shares shall rank pari passu with the existing shares. Further Resolved that in view of the increase in Authorized Share Capital, Clause 5 of the Memorandum of Association be and is hereby amended to read as under: The capital of the Company is Rs. 750,000,000 (Rupees seven hundred fifty million) divided into 75,000,000 ordinary shares of Rs. 10 (Rupees ten) each with power to increase or reduce the said capital c) Further Resolved that Articles 5 of the Articles of Association be and is hereby amended to read as under: The Share Capital of the Company is Rs. 750,000,000 (Rupees seven hundred fifty million) divided into 75,000,000 ordinary shares of Rs. 10 each The Directors are interested in the above Resolution only to the extent of the shares held by them in the Company.
b)
On an annualized basis sales have grown by 5.24%. However the Companys profit before tax has decreased due to allround cost increase and more particularly the increase in energy cost and finance cost due to higher mark-up rates. Export sales are under the presumptive tax regime hence the tax liability is higher than the profit resulting in after tax loss. RIGHT SHARES Your Directors have decided to issue 20% right shares on the existing paid-up capital of the Company in the ratio of two shares for every ten shares held. The right shares will be issued at an issue price of Rs. 20/= per share including premium of Rs. 10/= per share. The right shares are being issued to improve the liquidity of the Company. FUTURE PROSPECTS The European Commission has finally approved the revised anti-dumping duty. The reduced rate of 5.6% is in place since May 2006. The Government has taken some positive steps in providing relief to the value-added textile sector. This relief comes at a crucial time in global textile trade, and will be well utilized by your Company. The Government has reduced the mark-up rate on export refinance. The State Bank has announced to refinance long-term borrowings under its Long Term Finance Export Oriented Projects (LTF-EOP) Scheme. The Company expects that a part of our Long Term Debt will qualify for this scheme and will generate savings in our finance cost. Lastly the Government has introduced a scheme to reimburse the exporters for Research and Development cost. In the case of your Company the reimbursement rate varies from 3% to 5% of the FOB value of the exports depending on the type of product exported.
PATTERN OF SHAREHOLDING A statement showing the pattern of shareholding in the Company as at June 30, 2006 is included in the annual report. AUDITORS The present auditors Gardezi & Co., Chartered Accountants, retire and offer themselves for reappointment. CONSOLIDATED ACCOUNTS Consolidated accounts for the year ended June 30, 2006 of the Company and its subsidiaries Gul Ahmed International Limited (FZC) and GTM (Europe) Limited are attached. ACKNOWLEDGMENT Your Directors are pleased to record their appreciation for the continued dedication, commitment and loyalty of the employees of the Company. We also appreciate the assistance and continued support of the various Government Departments and Bankers.
2. 3.
4. 5. 6.
7.
8.
17. 18.
19.
20.
Review Report To The Members On Statement Of Compliance With Best Practices Of Code Of Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance for the year ended June 30, 2006 prepared by the Board of Directors of Gul Ahmed Textile Mills Limited to comply with the Listing Regulations of the respective Stock Exchanges, where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls. Based on our review nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance, as applicable to the Company for the year ended June 30, 2006. GARDEZI & CO. Chartered Accountants
10
ii)
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, 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 Companys affairs as at June 30, 2006 and of the profit, its cash flows and changes in equity for the year then ended; and in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance. GARDEZI & CO. Chartered Accountants
(d)
11
Balance Sheet As At
June 30, 2006 SHARE CAPITAL AND RESERVES Authorised capital 50,000,000 ordinary shares of Rs.10 each Issued, subscribed and paid-up capital Reserves Unappropriated profit Proposed bonus shares 4 5 Note 500,000 459,989 1,850,054 752 2,310,795 Rs. 000s 500,000 383,325 1,841,721 5,371 38,332 2,268,749 June 30, 2005
NON-CURRENT LIABILITIES Long term loans Deferred liabilities CURRENT LIABILITIES Short term borrowings Current maturity of long term loans Trade and other payables Provision for taxation 8 9 4,365,701 294,583 774,107 47,000 5,481,391 4,375,827 73,993 937,107 39,000 5,425,927 6 7 2,151,331 74,432 2,036,250 74,367
10 10,017,949 9,805,293
12
10,017,949
9,805,293
13
Note Sales Cost of sales Gross profit Administrative expenses Distribution cost 23 24
14
CASH FLOW FROM OPERATING ACTIVITIES Profit for the year/period before taxation Adjustments for: Depreciation/amortization Gratuity Finance cost Provision for slow moving/obsolete items Provision for doubtful debts Profit on sale of operating assets Interest income/exchange differences Changes in working capital: (Increase)/decrease in current assets Stores,spares and loose tools Stock-in-trade Trade debts Loans and advances Deposits and prepayments Other receivables (Decrease)/increase in current liabilities Trade and other payables Cash generated from operations Receipts from/payments for: Gratuity Finance cost Income tax Long term loans and advances Net cash generated from operating activities CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure Proceeds from sale of operating assets Interest income/exchange differences Long term deposits Net cash used in investing activities
(32,488) (108,637) 85,007) 21,407) 4,964) 13,977) (15,770) (196,623) (212,393) 736,932) (8,228) (553,426) (12,936) (699) 161,643)
16,164) (364,778) 130,427) 67,146) (16,457) (4,951) (172,449) 126,770) (45,679) 610,711) (8,174) (200,128) (34,659) 1,344) 369,094)
15
CASH FLOW FROM FINANCING ACTIVITIES Proceeds from long term loans Repayments of long term loans Right shares subscription Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents - at the beginning of the year/period Cash and cash equivalents - at the end of the year/period
CASH AND CASH EQUIVALENTS Cash and cash equivalents include: Short term investment Cash and bank balances Short term borrowings 426,193) 39,922) (4,365,701) (3,899,586) The annexed notes form an integral part of these accounts. 551,497) 115,546) (4,375,827) (3,708,784)
16
Balance as at September 30, 2004 Bonus shares issue Profit for the period Transferred to general reserve Bonus shares @ 10% Balance as at June 30, 2005 Bonus shares issue Issue of right shares Loss for the year Transfer from general reserve Balance as at June 30, 2006
459,989 1,740,000)
17
3.
Presentation of Financial Statements effective from January 1, 2006 Capital Disclosures Adoption of the above amendments may only impact the extent of disclosures presented in the financial statements. SIGNIFICANT ACCOUNTING POLICIES 3.1 Accounting convention Accounts of the Company have been prepared on historical cost convention except as has been stated below in respective policy notes. 3.2 Foreign currency translation Assets and liabilities in foreign currencies are translated into Pak Rupees at the rates ruling on the balance sheet date or as fixed under contractual agreements. Foreign currency transactions are translated into Pak Rupees at the rates ruling on the transaction date or as fixed under contractual agreements. Exchange differences on loans and deposits created to hedge these loans are capitalized upto the date of commissioning of the assets. Other exchange differences are included in current year's income. 3.3 Borrowing cost Mark-up, interest and other charges on loans are capitalized upto the date of commissioning of the respective qualifying asset, acquired out of the proceeds of such loans. All other mark-up, interest, profit and other charges are charged to income. 3.4 Retirement benefits The Company operates an approved funded contributory provident fund for its eligible employees to which equal monthly contribution is made both by the Company and the employees. The Company also operates an unfunded gratuity scheme for eligible employees who are not part of the provident fund scheme. Gratuity is payable to the employees under the law. Consequent to\ the adoption of IAS 19, the Company now accounts for gratuity provision on the basis of actuarial valuation on projected unit credit method. 3.5 Employee compensated absences The Company provides for compensated absences for all eligible employees in the period in which these are earned in accordance with the rules of the Company.
18
19
3.14
3.15
3.16
3.17 Revenue recognition Sales are recorded on despatch of goods to buyers. Return on investment is recognised on accrual basis. 3.18 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprises cash on hand, with banks on current, savings and deposit accounts, running finance under mark-up arrangements and short-term finance. June 30, 2006 Rs. 000s
213,179) 54,473) 192,337) 459,989) 174,847) 54,473) 154,005) 383,325)
4.
21,317,967 17,484,722 Ordinary shares of Rs.10 each fully paid in cash 5,447,326 5,447,326 Ordinary shares of Rs.10 each fully paid under scheme of arrangement for amalgamation
19,233,656 15,400,411 Ordinary shares of Rs.10 each issued as fully paid bonus shares
5.
RESERVES Revenue reserve General reserve Less/add: Transfer to/from profit and loss account Capital reserve Share premium Add: Premium on right shares issued during the year Less: Reserve for bonus shares Book difference of share capital under scheme of arrangement for amalgamation 1,770,000) (30,000) 1,740,000) 50,162) 38,333) 88,495) 88,495) 21,559) 110,054) 1,850,054) 1,695,000) 75,000) 1,770,000) 88,494) 88,494) (38,332) 50,162) 21,559) 71,721) 1,841,721)
20
Less: Current maturity shown under current liabilities 6.1 6.2 Suppliers Credit 9 was repaid during the year.
Habib Bank Limited Loan 3 is repayable in six half yearly equal installments commencing from September, 2006. Mark-up is payable on six month KIBOR Ask Side plus 60 basis points, immediately preceding the mark-up payment period with no floor and no cap. The loan is secured by equitable mortgage charge over land, building, plant and machinery of the Company. Standard Chartered Bank Loan was repaid during the year. United Bank Limited Loan 1 is repayable in eight half yearly equal installments commencing from September, 2002. Mark-up is payable half yearly @ 2.50% above prevailing SBPs discount rate at the time of due date of the relevant installment or six months T-Bill+1.50%, whichever is higher. This amount is now repayable in six half yearly equal installments commencing from March 2006. Mark-up is payable half yearly at six months T-Bill cut-off yield immediately preceding the markup payment date plus 1%. The loan is secured by way of pari passu charge over the fixed assets of the Company. United Bank Limited Loan 2 is repayable at the time of maturity in September 2008. Mark-up is payable half yearly @ 0.85% above six months T-Bill cut-off yield immediately preceding the markup payment date upto March 27, 2005. Effective from March 28, 2005 mark-up rate has been swapped @8.30% fixed rate plus 0.85%. The loan is secured by way of hypothecation of stock, book debts and receivables. NIB Bank Limited loan is repayable in eight half yearly equal installments commencing from March, 2003. Mark-up is payable half yearly @ 1.50% above SBPs discount rate prevailing before the beginning of each six months payment period. Effective from September, 2003 mark-up rate has been revised at six month T-Bill cut-off yield plus 2% with a minimum rate of 4% per annum. The loan is secured by hypothecation charge over specified machinery. National Bank of Pakistan Loan 1 is repayable in six half yearly equal installment commencing from December, 2007. Mark-up is payable half yearly on average six months KIBOR Ask Rate+1.25% prevailing on the disbursement date and then on the immediately preceding day before the start of each semi-annual period. The loan is secured by first pari passu charge over moveable fixed assets of the Company. National Bank of Pakistan Loan 2 is repayable in six half yearly equal installment commencing from September, 2008. Mark-up is payable half yearly on average six months KIBOR Ask Rate+1.50% prevailing on the disbursement date and then on the immediately preceding day before the start of each semi-annual period. The loan is secured by first pari passu charge over present and future fixed assets of the Company, and equitable mortgage over land. Supplier Credit is payable in December 2007 and does not carry any interest or mark-up. The Supplier Credit is secured against letter of credit.
6.3 6.4
6.5
6.6
6.7
6.8
6.9
21
Rs. 000s
This represents the net deferred tax liability arising mainly due to temporary differences in respect of accelerated tax depreciation allowance and deductible temporary differences in respect of provision against gratuity, doubtful debts and slow moving items. 7.2 Gratuity Opening balance as at July 1 Provision during the year/period Paid during the year/period Transferred to current liabilities Closing balance as at June 30 6,094) 8,293) 14,387) (8,228) 6,159) 6,159) 49,440) 21,380) 70,820) (8,174) 62,646) (56,552) 6,094)
Approved funded contributory provident fund scheme was introduced with effect from July 1, 2005 and gratuity entitlement of employees eligible to the provident fund scheme was reclassified from deferred liabilities to current liabilities. The remaining balance under this head represents gratuity entitlement of those employees who are not eligible to the provident fund scheme. 8. SHORT TERM BORROWINGS - SECURED Short term bank borrowings Short term running finance Murabaha 4,257,065) 108,636) 4,365,701) 3,623,556) 552,271) 200,000) 4,375,827)
Short term borrowing includes Rs. 3,474 million (2005: Rs. 3,364 million) which is secured by pari passu hypothecation charge over stores and spares, stock-in-trade, trade debts and other receivables and Rs. 500 million (2005: Rs. 500 million) which is secured against charge over the fixed assets. Unavailed facility at the year/period end was Rs. 2,448 million (2005: Rs. 2,561 million). The balance amount of short term borrowing Rs. 392 million (2005: Rs. 512 million) is secured against US Dollar bonds, referred to in note 21. Unavailed facility at the year/period end was Rs.Nil (2005: Rs. Nil). Mark-up rates range from 3.58% to 10.88% (2005: 2.40% to 9.86%) per annum.
22
Rs. 000s
567,332 3,666 204,520 7,680 30,610 55,734 56,552 387 10,626 937,107
Rs. 000s
23
Leasehold land Buildings on leasehold land Plant and machinery Office equipment Furniture and fixtures Transport equipment June 30, 2006 June 30, 2005
100) 83,170)
233,755 802,884
51,841) 278,236) 22,498) (6,720) 3,730) (840) 23,028) (9,241) 379,332) (16,801) 269,742) (12,362)
336,318
233,755 466,566
10 10
348,535) 5,096,043 14,612) (7,776) 1,693) (1,293) 14,350) (13,394) 207,701 51,829 198,430
11.1.1 Depreciation charge for the year/period has been allocated as follows: For year ended June 30, 2006 For nine month ended June 30, 2005 231,461 38,281 269,742
24
248
51
55
770
158
162
1,748
133
137
566 196
205
257 99
142
779
217
312
355
99
142
525
146
210
805
280
437
471
54
295
25
719
160
288
365
127
183
809
282
625
1,050
366
455
590
257
350
454
158
182
610
136
130
745
208
390
775
216
525
Written down value below Rs. 50,000 each For the year ended June, 2006 For nine month ended June, 2005
26
58,450)
58,450)
8,310) 7,020) 15,330) (6,872) 8,458) (2,448) 6,010) 3,604) (1,894) 1,710) 7,720)
5,028) 6,160) 11,188) (2,878) 8,310) (3,790) 4,520) 12,256) (9,755) 2,501) 7,021)
14.1 Loans and advances have been given for the purchase of cars, scooters and household equipment and housing assistance in accordance with the terms of employment and are repayable in monthly installments. These loans are secured against retirement benefits and other dues of the employees. 15. STORES, SPARES AND LOOSE TOOLS Stores including in transit Rs. 1 million (2005: Rs. 7 million) Spares including in transit Rs. 6 million (2005: Rs. 8 million) Loose tools Less: Provision for slow moving/obsolete items 187,448 204,061 2,882 394,391 24,509 369,882 185,400) 174,994) 1,509) 361,903) 23,528) 338,375)
27
Rs. 000s
Includes Rs. 314 million (2005: Rs.148 million) due from subsidiaries. The maximum aggregate month end balance due from subsidiaries during the year/period is Rs. 398 million (2005: Rs. 148 million).
18. LOANS AND ADVANCES Considered good Current portion of loans and advance to employees (note 14) Suppliers Advance income tax Letter of credit 19. DEPOSITS AND PREPAYMENTS Prepayments 20. OTHER RECEIVABLES Accrued interest Sales tax refundable Duty drawback receivable Income tax refundable Others 21. SHORT TERM INVESTMENT - AVAILABLE FOR SALE US Dollar bonds (USD 7.086 million (2005: USD 9.241 million)) 426,193 551,497 18,961 58,218 39,346 55,582 172,107 16,077 61,646 72,068 16,640 33,409 199,840 13,971 18,935 4,342 43,321 70,756 171 118,590 13,545 55,594 80,180 102 149,421
These are under lien for borrowings referred to in note 8. These bonds carry mark-up between 2% to 4% (2005: 2% to 4%) above six months USD LIBOR. 22. CASH AND BANK BALANCES In hand With banks in - current accounts - short term deposits 1,461 4,961 33,500 39,922 1,648 3,278 110,620 115,546
28
Rs. 000s 1,741,865) 3,433,480) 717,822) 4,151,302) 5,893,167) 16,906) 102,644) 5,773,617)
23.1 Sales are exclusive of sales tax amounting Rs. 3.778 million (2005: Rs. 328.893 million). 24. COST OF SALES Opening stock of finished goods Add: Cost of goods manufactured (note 24.1) Purchases and processing charges Less: Closing stock of finished goods 24.1 Cost of goods manufactured Raw materials consumed (note 24.2) Stores consumed Salaries, wages and benefits Fuel, power and water Insurance Repairs and maintenance Depreciation Other expenses Cost of samples shown under distribution cost Work-in-process Opening Closing 3,149,545) 830,862) 824,603) 749,471) 36,762) 164,488) 331,374) 26,520) (33,549) 6,080,076) 54,296) (80,616) (26,320) 6,053,756) 1,993,242) 779,035) 632,821) 455,435) 25,653) 124,672) 231,461) 21,848) (29,773) 4,234,394) 68,026) (54,296) 13,730) 4,248,124) 1,547,675 6,053,756 979,929 8,581,360 1,644,340 6,937,020 1,335,470 4,248,124 876,969 6,460,563 1,547,675 4,912,888
Salaries, wages and benefits include Rs. 15 million (2005: Rs. 13 million) and Rs. 15 million (2005: Rs. 12 million) in respect of retirement benefits and staff compensated absences respectively. 24.2 Raw materials consumed Opening stock Purchases during the year/period Closing stock 751,546) 3,190,328) (792,329) 3,149,545) 578,954) 2,165,834) (751,546) 1,993,242)
29
Salaries and benefits include Rs. 10 million (2005: Rs. 3 million) and Rs. 4 million (2005: Rs. 3 million) in respect of retirement benefit and staff compensated absences respectively. 25.1 Auditors' remuneration Audit fee Half yearly review Audit of workers' profit participation fund and other services Out of pocket expenses 125 30 2 35 192 125 30 2 33 190
25.2 None of the Directors or their spouses have any interest in the donees. 26. DISTRIBUTION COST Shipment expenses Advertisement and publicity Cost of samples transferred from cost of goods manufactured Other expenses 27. OTHER OPERATING INCOME Profit on sale of operating assets Scrap sales Others 66,569 37,201 33,549 20,739 158,058 2,194 4,702 607 7,503 41,331 59,216 29,773 20,471 150,791 3,006 3,648 65 6,719
30
29.1 Reconciliation between accounting profit and tax expense Net profit for the year/period before taxation Tax at the applicable tax rate of 35% Effect of income assessed under presumptive tax regime Effect of expenses deductible for tax purposes less inadmissible expenses 12,381) 4,333) 55,065) (12,398) 47,000) 30. EARNINGS PER SHARE (Loss)/profit for the year/period Number of shares (Loss)/earnings per share (Rs.) (34,619) 45,124,637) (0.77) 75,908) 44,500,129) 1.71) 121,908) 42,668) 22,873) (19,541) 46,000)
31
Rs. 000s
40,355 46,055 16,142 18,422 4,036 4,606 7,819 8,318 68,352 77,401 56 60
Number of persons
31.1 The Chief Executive, Directors and certain Executives are provided with free use of Company cars and are covered under Company's Health Insurance Plan alongwith their dependents. 31.2 The Chief Executive and some Directors are also provided with free residential telephones. 31.3 Aggregate amount charged in the accounts for the year for meeting fee to three Directors was Rs. 3 (000) (2005: three Directors Rs. 4 (000)) 32. TRANSACTIONS WITH RELATED PARTIES The related parties comprise subsidiaries, associated companies, companies where directors also hold directorship, directors of the company and key management personnel. The Company in the normal course of business carried out transactions with various related parties. June 30, June 30, Nature of Transactions Relationship with 2005 2006 Rs. 000s the Company 1,629 Subsidiaries Purchase of goods 849,972 279,298 Sale of goods 12,425 11,283 Associated Companies Purchase of goods 1,027 and other related parties Sale of goods 513 Rent paid 1,500 Fees paid 1,695 1,316 Deposit with bank 71,133 Bills discounted 817 Mark-up paid There are no transactions with directors of the Company and key management personnel other than under the terms of employment. The related parties status of outstanding receivable and payable as at June 30, 2006 are included in respective notes to the financial statements. 33. CAPACITY AND PRODUCTION Cloth Yarn Capacity Unit Sq. metres 79,238 (50 Picks converted) June 30, 2006 Production 70,278 (000s) Working 3 shifts June 30, 2005 Capacity Production 83,561 53,109
36,455 33,551 3 shifts 36,035 24,773 Kgs. (20 Counts converted) Production is lower due to variation in production mix and various technical factors. Moreover capacity shown above is for the full year whereas machinery added during the year were put into commercial operation gradually.
32
Non Interest/mark-up bearing Maturity Maturity Sub upto one after one Total year year
Financial liabilities
Long term loans Short term borrowings Trade and other payables 294,583 4,365,701 1,578 4,661,862 2,151,331 2,151,331 2,445,914 4,365,701 1,578 6,813,193 755,323 755,323 755,323 755,323 2,445,914 2,110,243 4,365,701 4,375,827 756,901 861,309 7,568,516 7,347,379
4,661,862
2,151,331 6,813,193
The effective interest/mark-up rates for the monetary financial assets/liabilities are mentioned in the respective notes to the financial statements. 34.1 Concentration of credit risk Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. The Company believes that it is not exposed to major concentration of credit risk. 34.2 Foreign exchange risk management Foreign currency risk arises when receivables and payables exist due to transactions with foreign undertakings. Payables exposed to foreign currency risk are covered partially through forward foreign exchange contracts and partially through hedging by purchase of US Dollar bonds. 34.3 Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company usually borrows funds at fixed and market based rates and as such the risk is minimized. 34.4 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. Company treasury aims at maintaining flexibility in funding by keeping committed credit lines available. 34.5 Fair value of financial assets and liabilities The carrying amounts of the financial assets and liabilities approximate their fair values.
33
37. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statement in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the Companys accounting policies. Estimates and judgements are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Companys financial statements or where judgement was exercised in application of accounting policies are as follows: 1) Provision for slow moving/obsolete items (note 15) 2) Provision for doubtful trade debts (note 17) 3) Provision for taxation (note 29) 38. GENERAL Figures have been rounded off to the nearest thousand rupees.
34
Bashir H. Ali Mohammed A. Razak Haji Sattar Yasin Haji Kassam Younus Haji Latif Zain Bashir Ziad Bashir Abdul Aziz Yousuf
35
Pattern Of Shareholding
As At June 30, 2006
No. of Shareholders
798 773 153 120 18 6 5 4 2 2 1 1 3 2 1 1 2 1 1 2 2 1 1 2 1 2 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1,939 From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From From
Shareholding
1 101 501 1,001 5,001 10,001 15,001 20,001 30,001 35,001 40,001 45,001 50,001 55,001 60,001 65,001 105,001 115,001 135,001 160,001 165,001 175,001 180,001 185,001 205,001 215,001 220,001 230,001 235,001 240,001 260,001 270,001 310,001 320,001 345,001 375,001 395,001 425,001 460,001 465,001 485,001 490,001 505,001 610,001 650,001 765,001 1,005,001 1,395,001 1,555,001 2,150,001 2,760,001 4,010,001 4,485,001 4,495,001 5,020,001 5,165,001 to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to to 100 500 1,000 5,000 10,000 15,000 20,000 25,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 110,000 120,000 140,000 165,000 170,000 180,000 185,000 190,000 210,000 220,000 225,000 235,000 240,000 245,000 265,000 275,000 315,000 325,000 350,000 380,000 400,000 430,000 465,000 470,000 490,000 495,000 510,000 615,000 655,000 770,000 1,010,000 1,400,000 1,560,000 2,155,000 2,765,000 4,015,000 4,490,000 4,500,000 5,025,000 5,170,000
Shares held
27,827 166,572 104,933 259,760 136,663 73,906 86,106 87,667 62,565 72,298 41,020 48,800 157,857 117,366 63,875 65,880 212,192 117,012 135,620 326,190 339,224 178,800 182,966 373,493 207,424 431,514 220,705 466,519 237,124 241,744 261,777 274,196 312,222 323,257 346,843 379,745 397,939 427,122 463,359 469,240 487,225 493,748 2,026,724 611,024 653,967 766,604 1,009,573 1,397,439 1,556,049 2,152,052 2,762,482 4,011,884 4,485,372 4,495,447 5,021,457 5,168,580 45,998,949
Categories of Shareholders Individuals Investment Companies Insurance Companies Joint Stock Companies Modaraba Companies Financial Institutions Foreign Investors Charitable Institutions Government Departments
Shares held 33,316,612 1,445,540 2,054,342 19,762 142,662 10,624 8,980,819 23,093 5,495 45,998,949
Percentage 72.43 3.14 4.47 0.04 0.31 0.02 19.53 0.05 0.01 100.00
36
Number
Shares held
Detail of trading in the shares by: Directors, CEO, CFO, Company Secretary, their spouses and minor childern
No trading was carried out by Directors, CEO, CFO, Company Secretary, their Spouses and minor children during the year under review.
37
38
39
NON-CURRENT LIABILITIES Long term loans Deferred liabilities 6 7 2,151,331) 74,550) 2,036,250 74,471
CURRENT LIABILITIES Short term borrowings Current maturity of long term loans Trade and other payables Provision for taxation 8 9 4,367,070) 294,583) 847,978) 47,425) 5,557,056) CONTINGENT LIABILITIES AND COMMITMENTS 10 10,113,394) 9,838,517 4,376,787 73,993 960,395 39,000 5,450,175
40
CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debts Loans and advances Deposits and prepayments Other receivables Short term investment Cash and bank balances 14 15 16 17 18 19 20 21 369,882 2,646,472 1,854,542 118,590 16,315 151,028 426,193 65,976 5,648,998 338,375 2,477,804 1,917,578 149,421 24,447 200,201 566,659 123,686 5,798,171
10,113,394
9,838,517
41
Sales Cost of sales Gross profit Administrative expenses Distribution cost Operating profit Other operating income
22 23
5,827,516) 4,934,163) 893,353) 357,329) 165,452) 522,781) 370,572) 6,719) 377,291) 243,647) 6,448) 600) 250,695) 126,596) 46,000) 80,596) 1.81)
24 25
485,385) 192,147) 677,532) 555,943) 7,557) 563,500) 540,010) 664) 235) 540,909) 22,591) 47,425) (24,834)
26
Finance cost Workers profit participation fund Workers welfare fund Profit for the year/period before taxation Provision for taxation (Loss)/profit after taxation (Loss)/earnings per share (Rs.)
27
28
29
(0.55)
42
(32,488) (168,668) 62,097) 21,407) 8,132) 35,057) (74,463) (146,040) (220,503) 743,547) (8,228) (558,544) (12,936) (699) 163,140)
16,164) (390,988) 103,529) 67,146) (21,577) (4,951) (230,677) 138,172) (92,505) 575,702) (8,174) (201,155) (34,783) 1,344) 332,934)
43
CASH AND CASH EQUIVALENTS Cash and cash equivalents include: Short term investment Cash and bank balances Short term running finance 426,193) 65,976) (4,367,070) (3,874,901) 566,659) 123,686) (4,376,787) (3,686,442)
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Balance as at September 30, 2004 Bonus shares issued Profit for the period Transferred to general reserve Bonus shares @ 10% Exchange adjustments Balance as at June 30, 2005 Bonus issue Issue of right shares Transferred from/to general reserve Loss for the year Exchange adjustments Balance as at June 30, 2006
459,989 1,740,000
45
SIGNIFICANT ACCOUNTING POLICIES 3.1 Accounting convention Accounts of the Group have been prepared on historical cost convention except as has been stated below in respective policy notes. 3.2 Foreign currency translation Assets and liabilities in foreign currencies are translated in Pak Rupees at the rates ruling on the balance sheet date or as fixed under contractual agreements.
46
3.4
3.6
3.7
3.8
47
3.12
3.13
3.14
3.15
3.16
3.17
3.18
48
Rs. 000s
21,317,967 17,484,722 Ordinary shares of Rs.10 each fully paid in cash 5,447,326 5,447,326 Ordinary shares of Rs.10 each fully paid under scheme of arrangement for amalgamation
19,233,656 15,400,411 Ordinary shares of Rs.10 each issued as fully paid bonus shares
5.
RESERVES Revenue reserve General reserve Less/add: Transfer to/from profit and loss account Exchange difference on translation of foreign subsidiaries Capital reserve Share premium Add: Premium on right shares issued during the year Less: Reserve for bonus shares Book difference of share capital under scheme of arrangement for amalgamation Statutory reserve 1,770,000) (30,000) 1,740,000) (2,917) 50,162) 38,333) 88,495) 88,495) 21,559) 110,054) 2,977) 1,850,114) 1,695,000) 75,000) 1,770,000) (3,922) 88,494) 88,494) (38,332) 50,162) 21,559) 71,721) 2,223) 1,840,022)
6.
LONG TERM LOANS - SECURED 6.1 Suppliers Credit 9 6.2 Habib Bank Limited Loan 3 6.3 Standard Chartered Bank 6.4 United Bank Limited Loan 1 6.5 United Bank Limited Loan 2 6.6 NIB Bank Limited 6.7 National Bank of Pakistan Loan 1 6.8 National Bank of Pakistan Loan 2 6.9 Suppliers Credit Less: Current maturity shown under current liabilities
700,000 125,000 500,000 11,250 700,000 180,000 229,664 2,445,914 294,583 2,151,331
13,993 700,000 12,500 150,000 500,000 33,750 700,000 2,110,243 73,993 2,036,250
49
6.3 6.4
6.5
6.6
6.7
6.8
6.9
50
Rs. 000s
This represents the net deferred tax liability arising mainly due to temporary differences in respect of accelerated tax depreciation allowance and deductible temporary differences in respect of provision against gratuity, doubtful debts and slow moving items. 7.2 Gratuity Opening balance as at July 1 Provision during the year/period Paid during the year/period Transferred to current liabilities Closing balance as at June 30 6,198) 8,307) 14,505) (8,228) 6,277) ) 6,277) 49,440) 21,484) 70,924) (8,174) 62,750) (56,552) 6,198)
Approved funded contributory provident fund scheme was introduced with effect from July 1, 2005 and gratuity entitlement of employees eligible to the provident fund scheme was reclassified from deferred liabilities to current liabilities. The remaining balance under this head represents gratuity entitlement of those employees who are not eligible to the provident fund scheme. Subsidiary companies have only six employees therefore gratuity provision is calculated on the basis of actual amount payable to the employees. 8. SHORT TERM BORROWINGS Short term bank borrowings Short term running finance Murabaha 4,258,434) 108,636) ) 4,367,070) 3,624,516) 552,271) 200,000) 4,376,787)
Short term borrowing includes Rs. 3,475 million (2005: Rs. 3,364 million) which is secured by pari passu hypothecation charge over stores and spares, stock-in-trade, trade debts and other receivables and Rs. 500 million (2005: Rs. 500 million) which is secured against charge over the fixed assets. Unavailed facility at the year/period end was Rs. 2,448 million (2005: Rs. 2,561 million). The balance amount of short term borrowing Rs. 392 million (2005: Rs. 512 million) is secured against US Dollar bonds, referred to in note 20. Unavailed facility at the year/period end was Rs. Nil (2005: Rs. Nil). Mark-up rates range from 3.58% to 10.88% (2005: 2.40 % to 9.86%) per annum.
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Rs. 000s
582,949 3,666 212,191 7,680 30,610 55,734 56,552 387 10,626 960,395
(b) (c)
10.2 The Group has field a suit for recovery of Rs.33.409 million (2005: Rs.33.409 million) included in other receivable. Groups management and its legal counsel are of the opinion that the case will be decided in the Groups favour and as such no provision has been made there against. 10.3 The Group is committed for capital expenditure as at June 30, 2006 of Rs. 169 million (2005: Rs.282 million). 10.4 The Group is committed for non capital expenditure items under letters of credits as at June 30, 2006 of Rs. 23 million (2005: Rs. 149 million). 11. PROPERTY, PLANT AND EQUIPMENT June 30, 2006 3,550,203 862,419 4,412,622 June 30, 2005 3,471,601 542,129 4,013,730
Rs. 000s
52
Leasehold land Buildings on leasehold land Plant and machinery Office equipment Furniture and fixtures Transport equipment June 30, 2006 June 30, 2005
100) 83,170)
233,755 802,884
51,841) 278,236) 23,291) (6,720) 3,730) (840) 23,028) (9,241) 380,126) (16,801) 270,032) (12,362)
336,318
233,755 466,566
10 10
348,533) 5,096,041 16,548) (7,776) 1,693) (1,293) 14,350) (13,394) 211,250 51,829 198,430
11.1.1 Depreciation charge for the year/period has been allocated as follows: For year ended June 30, 2006 For nine month ended June 30, 2005 231,461 38,571 270,032
53
248
51
55
770
158
162
1,748
133
137
566 196
205
257 99
142
779
217
312
355
99
142
525
146
210
805
280
437
471
54
295
54
719
160
288
365
127
183
809
282
625
1,050
366
455
590
257
350
454
158
182
610
136
130
745
208
390
775
216
525
Written down value below Rs. 50,000 each For the year ended June, 2006 For nine month ended June, 2005
55
Rs. 000s
8,310) 7,020) 15,330) (6,872) 8,458) (2,448) 6,010) 3,604) (1,894) 1,710) 7,720)
5,028) 6,160) 11,188) (2,878) 8,310) (3,790) 4,520) 12,256) (9,755) 2,501) 7,021)
13.1 Loans and advances have been given for the purchase of cars, scooters and household equipment and housing assistance in accordance with the terms of employment and are repayable in monthly installments. These loans are secured against retirement benefits and other dues of the employees. 14. STORES, SPARES AND LOOSE TOOLS Stores including in transit Rs. 1 million (2005: Rs. 7 million) Spares including in transit Rs. 6 million (2005: Rs. 8 million) Loose tools Less: Provision for slow moving/obsolete items
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16. TRADE DEBTS - UNSECURED Considered good Considered doubtful Less: Provision for doubtful trade debts 17. LOANS AND ADVANCES Considered good Current portion of loans and advance to employees (note 13) Suppliers Advance income tax Letter of credit 18. DEPOSITS AND PREPAYMENTS Prepayments 19. OTHER RECEIVABLES Accrued interest Sales tax refundable Duty drawback receivable Income tax refundable Others 20. SHORT TERM INVESTMENT US Dollar bonds - Available for sale (note 20.1) (USD 7.086 million (2005: USD 9.241 million)) Euro bonds - Held for trading (USD NIL (2005: USD 0.25 million)) 426,193 426,193 551,497 15,162 566,659 18,961 58,218 39,346 34,503 151,028 16,438 61,646 72,068 16,640 33,409 200,201 16,315 24,447 4,342 43,321 70,756 171 118,590 13,545 55,594 80,180 102 149,421 1,854,542 22,481 1,877,023 22,481 1,854,542 1,917,578 21,542 1,939,120 21,542 1,917,578
20.1 These are under lien for borrowings referred to in note 8. These bonds carry mark-up between 2% to 4% (2005: 2% to 4%) above six months USD LIBOR. 21. CASH AND BANK BALANCES Cash in hand In hand With banks in - current accounts - short term deposits 1,666 14,473 49,837 65,976 1,867 5,011 116,808 123,686
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22.1 Sales are exclusive of sales tax amounting Rs. 3.778 million (2005: Rs. 328.893 million). 23. COST OF SALES Opening stock of finished goods Add: Cost of goods manufactured (note 23.1) Purchases and processing charges Less: Closing stock of finished goods 23.1 Cost of goods manufactured Raw materials consumed (note 23.2) Stores consumed Salaries, wages and benefits Fuel, power and water Insurance Repairs and maintenance Depreciation Other expenses Cost of samples shown under distribution cost Work-in-process Opening Closing 3,149,545) 830,862) 824,603) 749,471) 36,762) 164,488) 331,374) 26,520) (33,549) 6,080,076) 54,296) (80,616) (26,320) 6,053,756) 1,993,242) 779,035) 632,821) 455,435) 25,653) 124,672) 231,461) 21,848) (29,773) 4,234,394) 68,026) (54,296) 13,730) 1,616,831) 6,053,756) 1,162,268) 8,832,855) 1,726,900) 7,105,955) 1,378,416) 4,248,124) 924,454) 6,550,994) 1,616,831) 4,934,163)
4,248,124 ) Salaries, wages and benefits include Rs. 15 million (2005: Rs. 13 million) and Rs. 15 million (2005: Rs.12 million) in respect of retirement benefit and staff compensated absences respectively. 23.2 Raw materials consumed Opening stock Purchases during the year/period Closing stock 751,546) 3,190,328) (792,329) 3,149,545) 578,954) 2,165,834) (751,546) 1,993,242)
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24. ADMINISTRATIVE EXPENSES Salaries and benefits Rent, rates and taxes Repairs and maintenance Vehicle up keep Conveyance and traveling Printing and stationery Postage and telecommunication Legal and consultancy fees Depreciation / amortization Auditors' remuneration (note 24.1) Donations (note 24.2) Insurance Bad / doubtful debts Provision for slow moving / obsolete items Other expenses
Salaries and benefits include Rs. 10 million (2005: Rs. 3 million) and Rs. 4 million (2005: Rs. 3 million) in respect of retirement benefit and staff compensated absences respectively. 24.1 Auditors' remuneration Audit fee Half yearly review Audit of workers' profit participation fund and other services Out of pocket expenses 476 30 2 35 543 333 30 2 33 398
24.2 None of the Directors or their spouses have any interest in the donees. 25. DISTRIBUTION COST Shipment expenses Advertisement and publicity Cost of samples transferred from cost of goods manufactured Other expenses 26. OTHER OPERATING INCOME Profit on sale of operating assets Scrap sales Others 2,194 4,702 661 7,557 3,006 3,648 65 6,719 95,959 39,940 33,549 22,699 192,147 52,164 59,216 29,773 24,299 165,452
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27. FINANCE COST Interest / mark-up on long term loans Mark-up on short term borrowings Interest on workers' profit participation fund Bank charges Interest income / exchange differences 28. PROVISION FOR TAXATION Current Deferred
47,425) 47,425)
28.1 Reconciliation between accounting profit and tax expense Net profit for the year/period before taxation Tax at the applicable tax rate of 35% Income not chargeable to tax Effect of income assessed under presumptive tax regime Effect of expenses deductible for tax purposes less inadmissible expenses 22,591) 7,907) (3,149) 55,065) (12,398) 47,425) 29. EARNINGS PER SHARE (Loss)/profit for the year/period Number of shares (Loss)/earnings per share (Rs.) (24,834) 45,124,637) (0.55) 80,596) 44,500,129) 1.81) 126,596) 44,309) (1,641) 22,873) (19,541) 46,000)
60
Rs. 000s
Total
June-2005
40,355 46,055 16,142 18,422 4,036 4,606 7,819 8,318 68,352 77,401 56 60
Number of persons
30.1 The Chief Executive, Directors and certain Executives are provided with free use of Group cars and are covered under Group's Health Insurance Plan alongwith their dependents. 30.2 The Chief Executive and some Directors are also provided with free residential telephones. 30.3 Aggregate amount charged in the accounts for the year/period for meeting fee to three Directors was Rs. 3 (000) (2005: three Directors Rs. 4 (000)). 31. TRANSACTIONS WITH RELATED PARTIES The related parties comprise subsidiaries associated companies, companies where directors also hold directorship, directors of the Group and key management personnel. The Group in the normal course of business carried out transactions with various related parties. June 30, June 30, Nature of Transactions Relationship with 2005 2006 Rs. 000s the Group Associated Companies Purchase of goods and other related parties Sale of goods Rent paid Fees paid Deposit with bank Bills discounted Mark-up paid 12,425 1,027 1,500 1,695 71,133 817 11,283 513 1,316
There are no transactions with directors of the Group and key management personnel other than under the terms of employment. The related parties status of outstanding receivables and payable as at June 30, 2006 are included in respective notes to the financial statements. 32. CAPACITY AND PRODUCTION Capacity Unit Sq. metres 79,238 (50 Picks converted) Kgs. 36,455 (20 Counts converted) June 30, 2006 Production 70,278 33,551 (000s) Working 3 shifts 3 shifts June 30, 2005 Capacity Production 83,561 36,035 53,109 24,773
Cloth Yarn
Production is lower due to variation in production mix and various technical factors. Moreover capacity shown above is for the full year whereas machinery were put into commercial operation gradually.
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Non Interest/mark-up bearing Maturity Maturity Sub upto one after one Total year year
Financial liabilities
Long term loans Short term borrowings Trade and other payables 294,583 4,367,070 1,578 4,663,231 2,151,331 2,445,914 4,367,070 1,578 2,151,331 6,814,562 825,186 825,186 825,186 825,186 2,445,914 2,110,243 4,367,070 4,376,787 826,764 884,597 7,639,748 7,371,627
4,663,231
2,151,331 6,814,562
The effective interest/mark-up rates for the monetary financial assets/liabilities are mentioned in the respective notes to the financial statements. 33.1 Concentration of credit risk Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. The Group believes that it is not exposed to major concentration of credit risk. 33.2 Foreign exchange risk management Foreign currency risk arises when receivables and payables exist due to transactions with foreign undertakings. Receivables and payables exposed to foreign currency risk are covered partially through forward foreign exchange contracts and partially through hedging by purchase of US Dollar bonds. 33.3 Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group usually borrows funds at fixed and market based rates and as such the risk is minimized. 33.4 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. Group treasury aims at maintaining flexibility in funding by keeping committed credit lines available. 33.5 Fair value of financial assets and liabilities The carrying amounts of the financial assets and liabilities approximate their fair values.
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35. DATE OF AUTHORIZATION These financial statements were authorized for issue on September 28, 2006 by the Board of Directors of the Group. 36. CORRESPONDING FIGURES As per SRO 684(1) 2004 dated August 10, 2004 issued by Central Board of Revenue the Groups accounting year is required to end on June 30, instead of September 30. In order to make the Groups accounting period consistent with aforementioned requirement the Group prepared its financial statement covering period of nine months ended on June 30, 2005. Since the audited comparative figures are available for nine months ended June 30, 2005, same has been disclosed as comparative figures of profit and loss account, statement of changes in equity, cash flow statement and related notes and are therefore not entirely comparable. Previous years figures have been reclassified wherever necessary for the purpose of more appropriate presentation. The reclassification include the following significant changes. Reclassification from component Distribution cost Freight Insurance and bank charges Trade and other payables Gratuity payable Loan and advances Income tax refundable Reclassification to component Sales Export sales Export sales Deferred liabilities Gratuity Other receivables Income tax refundable Amount 101,331 1,313 6,094 16,640
37. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statement in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the Groups accounting policies. Estimates and judgements are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Groups financial statements or where judgement was exercised in application of accounting policies are as follows: 1) Provision for slow moving/obsolete items (note 14) 2) Provision for doubtful trade debts (note 16) 3) Provision for taxation (note 28) 38. GENERAL Figures have been rounded off to the nearest thousand rupees.
63