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AMIN SPINNING MILLS LIMITED.

Annual Reports 2003

CONTENTS
Company Profile
Vision & Mission Statement
Statement of Ethics And Business Practices
Notice of Annual General Meeting
Directors' Report
Six Years Operating and Financial Data
Pattern of Share Holding
Statement of Compliance With Best Practices of
Corporate Governance
Review report to the members on statement of compliance
with best practices of code of corporate governance
Auditors' Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts

COMPANY PROFILE
Board of Directors
Chaudhury Muham (Chief Executive)
Chaudhury Muhammad Euseff
Chaudhury Muhammad Yaqoob
Chaudhury Muhammad Naeem
Chaudhury Muhammad Sadiq
Chaudhury Khuda Dad

AUDIT COMMITTEE
Chaudhury Moham(Chairman)
Chaudhury Moham(Member)
Chaudhury Moham(Member)

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CORPORATE SECRETARY
CHIEF FINANCIAL OFFICER ( CFO)
Rao Anees - Ur -Rehman

MANAGER INTERNAL AUDIT

Syed Shafqat Altaf

BANKERS
Habib Bank Limited
National Bank of Pakistan
Faysal Bank Limited

AUDITORS
M. Hussain Chaudhury & Co.
Chartered Accountants
CORPORATE & SHARES DEPARTMENT
24 / D-l Industrial Estate Mirpur (A.K)
Tel : (058610) 44308 - 43921 Fax 43921
REGISTERED OFFICE
24 /D-l Industrial Estate Mirpur (A.K)
Tel : (058610) 44308- 43921 Fax 43921

MILLS
24 /D-l Industrial Estate Mirpur (A.K)
Tel : (058610) 44308 - 43921 Fax 43921
Website : www.asmazad.com
E-mail : [email protected]

Vision Statement

To attain a leadership position in the textile sector in Pakistan through commitment, Integrity,
honesty and team work.

Mission Statement

The company will conduct its operations prudently assuring customer's satisfaction and to
provide profits as well as growth to its shareholders through.

• Acquiring sophisticated technology by continuously balancing, modernization and

replacement (BMR) of plant and machinery.

• Manufacturing of cotton and blended yarn in accordance with the customer's requirement
and market demand.

• Providing quality products to our customers mainly engaged in the manufacturing of

textile products.

• Striving hard to develop new markets for the sale of our products.

• Enhancing the profitability of the mill by improved efficiency and cost controls ensuring a
fair return to the investors, shareholders and employees of the company.

• Making comprehensive arrangement for the training of our workers as well as technician
and providing them good working conditions.

• Protecting the environment and contributing towards the economic growth of the country
as a good corporate citizen.

STATEMENT OF ETHICS AND BUSINESS PRACTICES

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Amin Spinning Mills Ltd has laid the following business ethics and principles, the observance of
which is compulsory for all the directors and staff member of the company in the conduct of
company's business in order to protect and safeguard the reputation and integrity of the
company at all levels of its operations. Any contravention of these ethics is regarded as
misconduct. The company will ensure that all the executives and subordinate staff are fully aware
of these standards and principles.

1. Conflict of Interest

All staff members are expected not to engage in any activity which can cause conflict
between their personal interest and company's interest, such as:

a. In effecting the purchases for the company and selling its products the directors
and the staff members are forbidden from holding any personal interest in any
organization supplying goods or services to the company or buying its products.

b. The staff members should not engage in any outside business while serving the
company.

c. Staff members are not permitted to conduct personal business in company's

premises or use the company's facilities for the same.

d. If a staff member has a direct or indirect relationship with an outside

organization dealing with the company he must disclose the same to the
management.

2. Confidentiality

All members are required not to divulge any secrets / information's of the company to
any outsider even after leaving the service of the company unless it is so required by
court of law. During the course of service in the company not disseminate any
information relating to the company without the consent of the management.

3. Kickbacks

All members are strictly forbidden not to accept any favor, gifts or kickbacks from any
organization dealing with the company. In case if such a favor is considered, in the
interest of the company, the same should be disclosed clearly to the management.

4. Proper accounts keeping

All fund's receipts and disbursements should be properly recorded in the account books
of the company. No false or fictitious entries should be made or misleading statement
pertaining to the company or its operation should be issued. All arrangement s with
agents, dealers and consultants should be made in writing supported with the required
evidence.

5. Relationship with government officials suppliers, agents etc

The dealings of the company with the government officials, suppliers, buyers, agents,
and consultants of the company should always be such that the integrity of the company
and reputation is not damaged. Members having queries in connection with how to deal
with their requirements should consult the management.

6. Health and safety

Every staff member is required to take care of his health and safety and of those working
with him. Company management is responsible for medical treatment of its staff

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members as per government and regulations.

7. Environment

To preserve and protect the environment all staff members are required to operate the
company's facilities and processes so as to ensure maximum safety of the adjoining
communities, and strive continuously to improve environmental awareness and
protections.

8. Alcohol, drugs

All types of gambling and betting at company's working places are strictly forbidden, also
taking of any alcohol or drugs inside the work places is not allowed and any member of
the staff, not abiding by the prohibitions will attract disciplinary and penal action under
the law.

9. Coordinating among the staff members to maintain discipline

All staff members will work in close co-ordination with their co-workers, superiors and
colleagues, every member will co-operate with other members so that the company's
work is carried out effectively and efficiently. All cases of non co-operation among staff
members should be reported to the management for necessary and suitable action. Strict
disciplinary action will be taken against those staff members who violate the rules and
regulations of the company.

10.10.Workplace harassment

All members of the staff will provide an environment that is free from harassment and in
which all employees are equally respected. Work place harassment means any action
that creates an intimidating, hostile or offensive environment which may include sexual
harassment, disparaging remarks based on gender, religious, race or ethnicity.

NOTICE OF ANNUAL GENERAL MEETING

Notice is herby given that the 20th Annual General Meeting of Amin Spinning Mills Limited Mirpur
(A.K) Will be held on Saturday January 31st 2004 at 11.30 A.M. at Registered Office 24/D-l
industrial Area Mirpur (A.K) to transact the following business:-

1. To confirm the minutes of the last Annual general Meeting held on March 31, 2003.

2. To receive and adopt the audited accounts of the Company for the year ended
September 30, 2003 together with the reports of directors and auditors thereon.

3. To appoint auditors of the company for the year ending September 30, 2004 and to fix
their remuneration.

4. To transact any other business which may be brought forward with the permission of the
Chair.

Notes :

The share transfer books of the company are closed since take over by the present
management and will remain closed till availability of records / statutory books at
registered office of the company from previous management.

A member entitled to attend and vote at the Annual General Meeting may appoint
another member as his/her proxy to attend and vote on his/her behalf, Proxies to
be effective must be received by the company not less than 48 hours before the
meeting.

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Members are requested to notify immediately changes in their address, if any.

Directors' Report

The Directors present before you the annual report along with the audited financial statements for the year
ended September 30, 2003.

Presently, management is striving hard on one side for economic and profitable operation and on other side
doing its best effort in settling and defending the cases with the Income Tax / Sales Tax and other legal
cases along with loan settlement with our banker (NBP) under SBP circular No.29 of 2002.

Financial Results

The company suffered heavy losses of Rs. 33.766 millions as compared to loss of Rs. 51.414 million in the
previous year. The loss is mainly attributable to increase in prices of raw cotton and staple fiber and
decrease selling prices of yarn. The prices of blended yarn generally remained depressed during the year.
The market of yarn is also under pressure because of recession in global market of yarn. These factors
along with the uncertain economic and political conditions and the global events (Iraq War) added to the
economic difficulties of the country.

Dividend

The company could not declare any dividend due to loss during the year and accumulated losses brought
forward.

Accounting Policies

Appropriate accounting policies has been consistently applied in the preparation of financial statements and
accounting estimates are based on reasonable and prudent judgement except for change in accounting
policy regarding deferred taxation. It was changed due to the application of IAS—12. The impact of change
in policy is disclosed in note No. 2.6 and 28.2 to the financial statements as per alternative treatment.

Compliance with International Accounting Standards

International Accounting standard, made applicable by the SECP from time to time has been followed in the
preparation of financial statement and there has been no departure from them, except the applicability of
IAS -19, having no material impact on account of its minor amount involved.

Going Concern

Doubt upon the ability of the company to continue as going concern has ostracized, as the company has
made down payment to bank for settling the NBP loans under SBP circular No. 29 and hopefully the
company will succeed in settling the NBP loans as requested by the company management to pay the
liabilities determined with in period of five years instead of three years. Further the financial assistant from
present directors as well as from other financial institution for BMR and expansion of unit may strengthen
the financial position of company.

Corporate and Financial Reporting Framework

a. The financial statements prepared by the management of the company, present fairly its state of
affairs the results of its operations, cash flow and changes in equity.

b. Proper books of accounts of the company have been maintained.

c. Appropriate accounting policies have been consistently applied on preparation of financial

statement.

d. International Accounting standards, as applicable in Pakistan have been followed in preparation of

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financial statements and any departure there from has been adequately disclosed.

e. The system of internal control is sound in design and has been effectively implemented and
monitored. The process of review will continue and any weakness in controls will be removed.

f. There has been no material departure from the best practices of corporate governance as detailed
in listing regulation except the availability of statutory record.

g. Key operating and financial data for the last six years in summarized form is annexed.

h. We have filed application to company Registrar Muzzaffar Abad under section 263 of Companies
Ordinance 1984 for investigation of accounts as the present management do not agree with the
existing balances of Borrowing from directors, due to associated Companies and Creditors prior to
19-04-2002. Past management has illegally shifted all statutory and accounts record to their group
office in Lahore. We have filed FIR against the past management for return of all record of period
prior to 19-04-2002.

In regards the Auditors observation the company has no other option as the present management does not
have the company accounts and statutory records for the period 01-10-2001 to 18-04-2002 and has also
applied for investigation of accounts of prior period i.e. before 19-04-2002. In this context, it is not possible
for present management to send balance confirmation letter to parties and further believe / confirm to any
confirmation sent by the parties.

Board of Directors Meeting

During the period 01-10-2002 to 30-09-2003 five meetings of board of directors were held. Attendance of
each Director is as follows:-

Name of Directors No of meetings Attended

Ch. Mohammad Saeed 5
Ch. Mohammad Euseff 4
Ch. Mohammad Yaqoob 5
Ch. Mohammad Naeem 5
Ch. Mohammad Sadiq 4
Ch. Mohammad Khuda Dad 4
Kh. Mohammad Jahangir NIL
Kh. Mohammad Jawed NIL
Kh. Mohammad Kaleem NIL
Kh. Mohammad Tanveer NIL

Directors, who have not attended the board meetings and not intimated to company and hence were not
granted leave of absence in accordance with the law, are removed from BOD with effect from August 20,
2003 under clause (b) of sub section 1 of section 188 of Companies Ordinance 1984, after serving them
notices on dated 16-08-2003. Names of removed directors are here under:

Kh. Mohammad Jahangir

Kh. Mohammad Jawed
Kh. Mohammad Kaleem
Kh. Mohammad Tanveei

Pattern of Share holding

Pattern of shareholding is annexed to the directors report.

Trade in shares

Present directors and their spouses have not involved in trade of company shares during the year.

Gratuity Fund

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Company operates un-funded gratuity account towords the retirement benefits of its permanent employees.

Statutory Payments

Company is making its all statutory payments regularly and has filed appeals before the appellate authorities
against all income/sale tax assessments/demands.

Auditors

M/s M. Hussain Chaudhury & Company, Chartered Accountants, the present auditors retired.
Earning / (Loss) per share

Earning /(loss) per share (Rs. 6.52) 2003 (Rs. 9.94) 2002. It is decreased due to the impact of deferred tax
assets incorporated in accounts under IAS-12.

Future Prospects

The management has indulged NBP under SBP circular No. 29 regarding re-structuring / waiver of non-
performing loans by making 10% down payment to bank of forced sale value of unit determined by an
independent evaluator appointed by the bank management. Further company management has requested
to bank management to enhance the re-payment to five years, instead of three years, in pretext of
exhaustive analysis conducted by our professionals and Spinning experts about machinery condition, unit
capacity and huge preferential liabilities. Upon the finalization of loan settlement agreement with NBP to
make payment in five years, present management is of the view to do BMR and expansion of unit with the
financial assistance of present directors and other financial institutions. The BMR / expansion plan will
substantially raise the quality, production as well as selling price of yarn and resulting in profitable
operations.

Acknowledgement

The Directors of your company take pleasure in recording their appreciation for the contribution made by
the management, staff and workers during the last year.

SIX YEARS OPERATING AND FINANCIAL DATA

2003 2002 2001 2000 1999

RUPEES

Sales 197 194 199 194 130

Gross prof it/ (Loss) -22 -6 -22 -
Profit / (loss) before Tax -61 -50 -73 -45
Tax 27 1 1 1
Profit /(loss) after tax -34 -51 -74 -46
Total Assets 164 162 176 185 244
Current Liabilities 547 478 410 333 291
-383 -316 -234 -148
Presented by:
Share Capital 60 60 60 60
Accumulated loss -581 -588 -536 -462 -414
Equity -521 -528 -476 -402 -354
Surplus on revaluation of
fixed assets 31 90 90 90
Long term loan & leases 107 122 152 164 217
-383 -316 -234 -148

FORM - 34

THE COMPANIES ORDINANCE, 1984

PETTERN OF SHARE HOLDING AS AT SEPTEMBER 30,2003

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NUMBER OF SHARE HOLDINGS Total

SHAREHOLDERS Shares Held
FROM TO
413 1 100 629143
186 101 500 39194
163 105 1000 108726
90 1001 5000 257467
80 5001 10000 462909
6 10001 15000 75035
60 15001 20000 1084126
1 20001 25000 24581
33 25001 30000 856700
1 30001 35000 34000
1 40001 45000 41500
1 50001 55000 50500
2 65001 70000 133196
2 180001 185000 364504
1 220001 225000 223512
1 235001 240000 238167
1 255001 260000 256740
1 290001 295000 295000
1043 TOTAL 5175000

Categories of Number of Shares Held Percentage

Shareholders Shareholders
Individuals 1028 5013805 96.89
Investment 1 29000 0.56
Companies
Insurance companies 2 39750 0.77
Joint Stock 5 10785 0.2
Companies
Financial Institutions 4 71110 1.38
Modaraba Companies 2 4950 0.09
Charitable Truest 1 5600 0.11
Total 1043 5175000 100

NOTE:- The Shares holding pattern as on September 30, 2003 is prepared from information
provided by previous management up to 31-12-2002. In absence of complete record, company is
unable to incorporate the sale / purchase entries against the request received by the present
management.

PETTERN OF SHARE HOLDING AS AT SEPTEMBER 30,2003

Additional Information

Share holders category No. of shares held

Directors, CEO, their Spouse and minor children
Chaudhury Mohammad Naeem 295,000
Chaudhury Mohammad Yaqoob 238,167
Chaudhury Mohammad Saeed 256,740
Chaudhury Mohammad Euseff 24,581
Chaudhury Mohammad Sadiq 10,350
Chaudhury Mohammad Khuda Dad 25,875
Mst. Sadaf Saeed 50,500
Mrs. Shagufta Saeed 68,796
Individuals 4,042,661
ICP 29,000
Banks / Non banking Financial Institutions 77,260
Joint Stock Companies 4,510

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Insurance Companies 39,750

Modarabas 4,400
Others 7,410
Total 5,175,000

STATEMENT OF COMPLIANCE WITH BEST PRACTICES

OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in
Regulation No. 37 of listing regulations of Karachi Stock Exchange 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. Present management is in the phase of implementing the
code of corporate governance.

The company has applied the principles contained in the Code in the following manner:

1. The directors have confirmed that none of them is serving as a director of more than ten
listed companies, including this Company.

2. All the resident directors of the Company are registered as taxpayers and non of them has
defaulted in payment of any loan to a banking company, a DPI or an NBFI or, being a
member of a stock exchange, has been declared as a defaulter by that stock exchange.

3. Four casual vacancies occurring in the Board on August 20, 2003 will be filled up by the
directors at their earliest.

4. The Company has prepared a Statement of Ethics and Business Practices; which has been
signed by all the directors and employees of the Company.

5. The Board has developed a vision/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.

6. All the power 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 Chief Executive Officer and other executive directors, have been taken by
the Board.

7. The meetings of the Board were presided over by the Chairman and 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.

8. The Board arranged no orientation courses for its directors during the year to apprise them
of their duties and responsibilities, due to their non-availability at a time. Board willing to
arrange the few courses by the end of next accounting year.

9. Chief Financial Officer and Company Secretary were appointed prior to implementation of
code of corporate governance. However their appointment is duly approved from board and
conforms to the requirements of code of corporate governance. Head of internal audit

appointed subsequently and his appointment is approved from board of directors and
conforms to the code of corporate governance.

10. The directors' report for this year has been prepared in compliance with the requirements of
the Code and fully describes the salient matters required to be disclosed.

11. The financial statements of the company were duly endorsed by Chief Executive Officer and
Chief Financial Officer before approval of the Board.

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12. The company has complied with all the corporate and financial reporting requirements of the
Code.

13. The Board has formed an audit committee. It comprises three members, of whom two are
non-executive directors. Meetings of audit committee could not be conducted during the
year. Board will ensure its compliance by the end of next financial year.

14. The board has set-up an effective internal audit function with the policies and procedures of
the company and they (or their representatives) are involved in the internal audit function on
a full time basis.

15. The statutory auditors of the Company have confirmed that they have been given a
satisfactory rating under the quality control review program 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) guidance on code of ethics
as adopted by Institute of Chartered Accountants of Pakistan.

16. 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.

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 prepared by the Board of Directors of AMIN SPINNING MILLS
LIMITED, to comply with the Listing Regulation No.37 (Chapter XI) and No.40 (Chapter XIII) of
the Karachi Stock Exchange and Lahore Stock Exchange respectively, 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 controls 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.

We have observed that the following mandatory clauses of Code of Corporate Governance are
not being complied with:

1. Orientation courses for directors of the Company as required under clause (xiv) have not
been arranged ;

2. Audit Committee has been established by the Board of Directors but the requirements
relevant to the frequency of meetings, attendance at meetings and reporting procedures
of Code of Corporate Governance under clauses (xxxi, xxxii, xxiv) were not complied
with;

3. No internal audit report was provided for the review of external auditors as required
under clause (xxxvi).

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Based on our review, except for the matters noted in previous paragraphs (from 1 to 3), 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
September 30, 2003.

Lahore (M. HUSSAIN CHAUDHURY & CO.)

Dated: 09-01-2004 Chartered Accountants

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of AMIN SPINNING MILLS LIMITED as at

September 30, 2003 and the related profit and loss account, cash flow statement and statement
of changes in equity together with the notes forming part thereof, for the year then ended and
we state that we have obtained all the information and explanations which, to the best of our
knowledge and belief, were necessary for the purposes 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.

Except as discussed in the following paragraph, 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 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 verification, we report that:

a) As discussed in Note 1.1 to the financial statements, change in management took place on
April 19, 2002 as a result of induction of new directors in the Annual General Meeting held
on March 29, 2002. The present management was unable to provide books of accounts
and records sufficient to evaluate the true and fair view of the transactions relating to the
period from October 1, 2001 to April 18, 2002 owing to the reasons disclosed in the said
Note to the financial statements. Resultantly, net adjustment of Rs.14, 499,416 was made
in the account of borrowings from previous management as explained in Note 10.2 to
incorporate the effect of operational transactions determined on the basis of incomplete
records relating to the period from October 1, 2001 to April 18, 2002. We were, thus,
unable to obtain sufficient appropriate audit evidence relating to the results of operations
and unconfirmed balances appearing in various heads of accounts in the financial
statements for the year ended September 30, 2002, which caused us to disclaim our
opinion on the financial statements relating to that year. Due to the continued non
availability of the related records of the corresponding period and scope limitation on
circulation of direct confirmation from third parties, we could not verify the following
balances as on September 30, 2003:

Notes to the Amount

Accounts (Rupees)
(i) Share deposit money 4 4,500,000
(ii) Gratuity 7 1,189,773
(iii) Creditors and other payables 11 98,076,989
(iv) Fixed assets 14 27,323,203
(v) Trade debts 18.2 1,663,137
(vi) Advances, deposits and other receivables 19 3,376,303

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b) in our opinion, proper books of accounts have been kept by the Company as required by
the Companies Ordinance, 1984;

c) 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 account and are further in accordance with accounting
policies consistently applied except for change in accounting policy as referred in Note
2.6 to which we concur;

(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;

d) in our opinion and to the best of our information and according to the explanations given
to us, except for the effects of such adjustments, if any, as might have been determined
to be necessary had we been able to satisfy ourselves as to the balances referred in
paragraph 'a' above, the balance sheet, profit and loss account, cash flow statement and
statement of changes in equity together with the notes forming part thereof conform
with approved accounting standards as applicable in Pakistan, and, give the information
required by the Companies Ordinance, 1984, in the manner so required and respectively
give a true and fair view of the state of the Company's affairs as at September 30, 2003
and of the loss, its cash flows and changes in equity for the year then ended; and

e) 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 1.2 to the accounts. The Company has
incurred a net loss of Rs. 33.766 million during the year and has accumulated loss of Rs. 581.073
million as at September 30, 2003 and as of that date the Company's current liabilities exceed its
total assets by Rs. 383.763 million. These conditions along with other matters as set forth in Note
13 to the accounts indicate the existence of a material uncertainty which may cast significant
doubt about the Company's ability to continue as a going concern.

LAHORE (M. HUSSAIN CHAUDHURY & CO.)

Dated : 09-01-2004 Chartered Accountants

BALANCE SHEET

2003 2002
CAPITAL AND LIABILITIES Note Rupees Rupees
SHARE CAPITAL AND RESERVES
Authorized:
10,000,000 (2002: 10,000,000) ordinary shares
of Rs.10 each 100,000,000 100,000,000
Issued, subscribed and paid up share capital 3 51,750,000 51,750,000
Accumulated loss -581,073,373 -587,906,704
(529,323,373 -536,156,704
SHARE Deposit Money 4 4,500,000 4,500,000
Surplus on Revaluation of Fixed Assets 5 31,312,262 90,645,457
Long Term Loans 6 106,721,731 122,386,539
Deferred Liability 7 3,026,212 3,128,287
Current Liabilities
Current and over due portion of long term loan 8 68,211,669 69,146,861
Due to associated undertakings 9 21,821,562 18,271,360

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Borrowing from directors 10 27,146,480 180,589,134

Creditors, accrued and other liabilities 11 426,000,928 206,945,648
Provision for taxation 12 4,300,137 3,313,876
547,480,776 478,266,879
Contingencies and Commitments 13 -
163,717,608 162,770,458

The annexed notes from 1 - 36 form an integral part of these accounts.

2003 2002
PROPERTY AND ASSETS Rupees Rupees
Operating Fixed Assets 14 130,932,224 144,848,848
Deferred Tax Assets — Net 15 9,455,742
Current Assets
Stores and spares 16 3,167,896 2,043,781
Stock in trade 17 7,384,445 6,812,887
Trade debtors 18 4,025,464 2,348,596
Advances, deposits, prepayments
and other receivables 19 8,649,458 6,704,644
Cash and bank balances 20 102,379 11,702
23,329,642 17,921,610
163,717,608 162,770,458

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED SEPTEMBER 30, 2003

2003 2002
Note Rupees Rupees
Sales - Net 21 197,252,126 194,156,822
Cost of sales 22 -219,117,207 -200,409,145
Gross Loss -21,865,081 -6,252,323
Operating expenses:
- Administrative and general 23 -9,997,633 -4,366,654
- Selling 24 -193,998 -23,511
-10,191,631 -4,390,165
Operating Loss -32,056,712 -10,642,488
Other income 25 386,126 312,363
Financial charges 26 -29,053,759 -39,657,499
Other charges 27 -245,000 -456,000
Loss before Taxation -60,969,345 -50,443,624
Taxation 28 27,203,314 -970,784
Loss after Taxation -33,766,031 -51,414,408
Accumulated Loss Brought Forward -587,906,704 -536,492,296
Accumulated Loss -621,672,735 -587,906,704
Transfer from surplus on revaluation of fixed assets
- Prior years 37,120,221
- Current year - Net of deferred tax 3,479,141
40,599,362
Accumulated Loss Transferred to Balance Sheet -581,073,373 -587,906,704
Earnings per share - Basic 29 -6.52 -9.94

The annexed notes from 1-36 form an integral part of these accounts.

CASH FLOW STATEMENT

FOR THE YEAR ENDED SEPTEMBER 30, 2003

2003 2002
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES

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Loss before taxation -60,969,345 -50,443,624

Adjustment for:
- Depreciation 14,557,384 16,106,016
- Provision for gratuity 1,022,525 854,127
- Financial charges 29,053,759 39,657,499
44,633,668 56,617,642
Operating profit / (loss) before working capital changes -16,335,677 6,174,018
(Increase) / decrease in current assets:
- Stores and spares -1,124,115 -602,552
- Stock in trade -571,558 -2,357,540
- Trade debtors -1,676,868 -685,459
- Advances, deposits, prepayments and other receivables -201,964 1,823,048
Increase / (decrease) in current liabilities:
- Creditors, accrued and other liabilities -1,731,940 5,846,352
- Due to associated undertakings 14,775,286 7,046,276
9,468,841 11,070,125
Cash Generated from operations -6,866,836 17,244,143
Gratuity paid -1,124,600 -694,450
Income tax paid -1,742,850 -1,126,705
Financial charges paid -80,757 -31,860
Net cash from operating activities -9,815,043 15,391,128
CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditures -640,760 -1,054,107
Net cash used in investing activities -640,760 -1,054,107
CASH FLOW FROM FINANCING ACTIVITIES
Finances from National Bank of Pakistan -16,600,000
Borrowing from directors-unsecured 27,146,480 -14,499,416
Net cash (used in) / financing activities 10,546,480 -14,499,416
Net (decrease)/ increase in cash and cash equivalents 90,677 -162,395
Cash and cash equivalents at the beginning of year 11,702 174,097
Cash and cash equivalents at the end of year 102,379 11,702

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED SEPTEMBER 30, 2003

Share Accumulated Total

Capital Loss
Rupees Rupees Rupees

Balance as at September 30, 2001 51,750,000 -536,492,296 -484,742,296

Loss for the year after taxation - -51,414,408 -51,414,408
Balance as at September 30, 2002 51,750,000 -587,906,704 -536,156,704
Loss for the year after taxation - -33,766,031 -33,766,031
Transfer from surplus on revaluation of fixed assets on
incremental depreciation charged to:
Prior years - 37,120,221 37,120,221
Current year - Net of deferred tax 3,479,141 3,479,141
Balance as at September 30, 2003 51,750,000 -581,073,373 -529,323,373

NOTES TO THE ACCOUNTS

FOR THE YEAR ENDED SEPTEMBER 30, 2002

1. THE COMPANY AND ITS OPERATIONS

Amin Spinning Mills Limited was incorporated as a Public Limited Company in Azad Kashmir under the
repealed Companies Act, 1913 (now Companies Ordinance, 1984 as applicable to Azad Government of
the State of Jammu and Kashmir). The Company is listed on Karachi and Lahore Stock Exchanges.
The principal activity of the Company is to manufacture and sale of textile yarn.

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1.1 Change of Management

On April 19, 2002 the management of the Company was taken over through appointment of a new
Chief Executive Chaudhary Muhammad Saeed, in the Meeting of the Board of Directors, herein
referred to as the "Present Management". The Present Management filed a FIR against the Previous
Management in Mirpur, AJK on May 5, 2002 for non production of books of accounts and
misplacement of assets with estimated value of Rs.26.5 million. The Present Management also filed an
application under Section 263 of the Companies Ordinance, 1984 with the Corporate Law Authority,
Azad Jammu & Kashmir for investigation into the affairs of the Company managed by the Previous
Management. Consequentially the financial statements for the year ended September 30, 2002
included information for the period from October 01, 2001 to April 18, 2002 extracted on the basis of
incomplete records and documents available at mill premises.

1.2 Going Concern Assumption

The Company has incurred net loss of Rs.33.766 million during the year and has accumulated losses
of Rs.621.673 million. Its total liabilities exceed its total assets by Rs.493.511 million and its current
liabilities exceed current assets by Rs.524.151 million as at balance sheet date. These factors raise
doubts about the Company being a going concern and therefore it may be unable to realize its assets
and discharge its liabilities in the normal course of business. However, any adjustment relating to the
recoverability of recorded assets and liabilities have not been incorporated in these accounts as the
management is negotiating with its lenders for settlement of the loans and has also deposited down
payment of Rs.16.6 million against the its loans. The present management is also making efforts for
improvement in the production, quality and marketing of its products.

2 ACCOUNTNG POLICIES

1.2 Going Concern Assumption

The Company has accumulated losses of Rs. 587.907 million. Its total liabilities exceed its total assets
by Rs. 536.157 million and its current liabilities exceed current assets by Rs. 460.345 million as at
balance sheet date. These factors raise doubts about the Company being a going concern and
therefore it may be unable to realize its assets and discharge its liabilities in the normal course of
business. However, any adjustment relating to the recoverability of recorded assets and liabilities have
not been incorporated in these accounts as the management expects continuous support from its
lenders and newly elected directors for injection of funds and improvement in the production, quality
and marketing of its products.

2. ACCOUNTING POLICIES

2.1 Basis of preparation:

These financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan and the requirements of Companies Ordinance, 1984 except for information
prepared as stated in 1.1 and compliance with the requirements of IAS -19 (Employee Benefits).
Approved accounting standards comprise of such International Accounting Standards as notified under
the provision of the Companies Ordinance, 1984. Wherever the requirements of the Companies
Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ
with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the
requirements of the said directives take precedence.

2.2 Accounting convention:

These accounts have been prepared under the historical cost convention without any adjustment for
the effect of inflation or reference current values, except certain fixed assets that have been recorded
on their revalued amounts.

2.3 Staff retirement benefits:

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The Company operates an unfunded gratuity scheme for all its employees. Liability is provided
annually on the basis of the last drawn salary, length of services of the employee in accordance with
the rules.

2.4 Provisions

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

2.5 Trade and Other Payables

Liabilities 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.

2.6 TAXATION

Current

The charge for current tax is based on the taxable income for the year determined in accordance with
the prevailing law for taxation of income. All tax credits and tax rebates have been taken into account
in calculating this charge. Necessary adjustments have been made to provision for tax made in
previous years due to various assessments framed during the year.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all 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 the taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax
assets, as required by IAS-12 (Income Taxes), 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. The remaining unused carried forward allowable tax losses not
recognised in the accounts amounted to Rs. 102.072 million.

During the year the Company has adopted IAS-12 (Income Taxes) which became applicable during
the current year. Previously the Company was using the liability method on timing differences. The
Company now also accounts for deferred tax liability on surplus on revaluation of fixed assets.

The change in policy has resulted in reduction in after tax loss by Rs.28.190 and surplus on
revaluation of fixed assets by Rs.16.860 million and pro forma comparative information has been
given in note 28.2.

2.7 Fixed Assets and Depreciation

All fixed assets are stated at cost less accumulated depreciation except buildings on leasehold land,
plant and machinery, electric installation and diesel generator which are stated at revalued amounts
less accumulated depreciation and capital work in progress which is stated at cost. The cost includes
incidental charges of acquisition of fixed assets including differences arising due to exchange rate
fluctuations on foreign currency principal loans acquired for acquisition of imported plant and
machinery.

Depreciation is charged on reducing balance method at the rates specified in Note 14. Full year's
depreciation is charged on additions whereas no depreciation is charged on assets disposed off during
the year.

Maintenance and normal repairs are charged to income as and when incurred. Major renewals and

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replacements are capitalized and assets retired, if any, are kept as standby. Gains or losses on
disposal of fixed assets are included in income currently.

2.8 Stores and Spares

These are valued at moving average cost except for items in transit which are valued at cost
comprising invoice value plus other charges paid thereon.

2.9 Stores and Spares

These are valued as under:
Raw materials - At average cost
Raw materials in transit - At invoice price and related expenses incurred upto the
balance sheet date
Work in process - At estimated average manufacturing cost
Finished goods - At average cost and net realizable value whichever is lower
Wastes - At net realizable value

Net realizable value signifies the selling price at which goods in stock could be currently sold less any
further costs which would be incurred to complete the sale.

2.10 Trade Debts

All the outstanding receivables are reviewed at the year end. The Company recognizes and carries
these receivables at original invoice amount less an allowance for any uncollectible amounts. Bad
debts, if any, are written off as incurred and provision is made against debts considered doubtful
when collection of the full amount is no longer probable.

2.11 Financial Instruments

Financial instruments are recognized in the financial statements when the Company becomes a party
to the contract and ceases to recognize when it loses control of contractual rights, in case of financial
assets, and in case of financial liability when liability is extinguished. Any gam or loss on subsequent
remeasurement / derecogpition is charged to income.

A financial asset and financial liability is offset and ihe amount is reported in the balance sheet if the
Company has a legally enforceable right to set-off the recognized amounts and intends either to settle
on a net basis or to realize the asset and settle the liability simultaneously.

2.12 Foreign Currency Translation

Transactions denominated in foreign currencies are initially recorded at Pak Rupees by applying the
foreign exchange rate ruling on the date of transaction. All monetary assets and liabilities in foreign
currencies are translated into Pak Rupees at exchange rate prevailing at the balance sheet date
except for balances covered under forward exchange contracts, which are converted at the contracted
rates. Exchange differences are included in income currently.

2.13 Impairment

The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any such indication exists, the asset's recoverable
amount is estimated and impairment losses are recognized in the profit and loss account.

214 Cash and Cash Equivalents

For the purpose of cash flow statement, cash and cash equivalents include cash in hand, cheques in
hand and deposits with banks.

2.15 Borrowing Costs

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Interest, mark-up and other charges on long term liabilities are capitalized upto the date of
commissioning of respective fixed assets acquired out of the proceeds of such long term liabilities. All
other interest, mark-up and other charges are charged to income.

2.16 Revenue Recognition

Sales are recognized on dispatch of goods to customers.

3. ISSUED, SUBSCRIBED AND PAID UP CAPITAL 2003 2002

No. of shares Rupees Rupees
2003 2002

4,000,000 4,000,000 Ordinary shares of Rs. 10 each 40,000,000 40,000,000

Fully paid up in cash
1,175,000 1,175,000 Ordinary shares of Rs. 10 each
Issued as bonus shares 11,750,000 11,750,000
5,175,000 5,175,000 51,750,000 51,750,000

4. SHARE DEPOSIT MONEY

Balance as at September 30 4,500,000 4,500,000

4.1 This represents amount deposited by directors of the Company in 1991. The Present
Management does not have any record relating to any transaction that might have taken place
during the period from October 01, 2002 to April 18, 2002. However, this amount has not been
adjusted due to pending application filed with the Corporate Law Authority for investigation into
affairs of the Company.

5. SURPLUS ON REVALUATION OF FIXED ASSETS

Buildings on leasehold land

- Factory 31,375,429 31,375,429
- Non factory 494,578 494,578
31,870,007 31,870,007
Plant and machinery 52,912,971 52,912,971
Electric installation 2,180,389 2,180,389
Diesel generator 3,682,090 3,682,090
90,645,457 90,645,457
Incremental depreciation charged on revalued fixed assets in prior
Years transferred to retained earnings 5.1 -37,120,221
53,525,236 90,645,457
Related deferred taxation -18,733,833
Incremental depreciation charged on revalued fixed assets in current
Years net of deferred taxation transferred to retained earnings 5.1 -3,479,141
31,312,262 90,645,457

5.1 The incremental depreciation charged on revalued assets during the year and in prior years has
been transferred to retained earnings (accumulated loss) to record realization of surplus to the
extent of incremental depreciation to comply with the amendment in section 235 of the Companies
Ordinance, 1984 and further notification of SECP to clarify the treatment of surplus arising on
revaluation of fixed assets.

5.2 Revaluation was carried out by M/s. Hamid Mukhtar & Co., valuers and surveyors, as at
September 30, 1997 and was certified by an independent firm of Chartered Accountants.

5.3 The Present Management does not have any record relating to any transaction, if any, which might
have taken place during the period from October 01,2002 to April 18, 2002.

2003 2002
6. LONG TERM LOANS Rupees Rupees

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National Bank of Pakistan - Secured

Demand finance - I 6.1 127,623,900 127,623,900
Demand finance - II 6.2 50,000,000 50,000,000
Forced Demand Finance 6.3 13,909,500 13,909,500
191,533,400 191,533,400
Less : Payments made during the year 6.4 -16,600,000
174,933,400 191,533,400
Less : Current maturity -15,664,808 -16,159,601
Overdue portion -52,546,861 -52,987,260
-68,211,669 -69,146,861
106,721,731 122,386,539

The demand finance I & II were created during the year 1997 by restructuring of five demand
finances created by the National Bank of Pakistan on payment of five overdue installments of
machinery suppliers' credit obtained by the Company.

6.1 Demand finance

Principal amount 93,000,000 93,000,000
Grace period mark-up upto June 4, 1999 34,623,900 34,623,900
127,623,900 127,623,900

A grace period of two years from June 05, 1997 and further extended for one year was sanctioned
during which simple interest was accrued @ 18.615% p.a. The total interest accrued for the grace
period of two years has been capitalized in the principal portion at the end of grace period i.e. June
04, 1999. Thereafter the principal and the grace period capitalized interest is payable in 18 equal
biannual installments alongwith interest charged @ 18.615% p.a. on the total outstanding amount.
First installment was payable on December 04, 1999. The company has not paid its obligation.

In case of default in:

Two consecutive Installments:

Penal interest @ Re. 0.13 per thousand rupees calculated on daily product basis shall be
charged by the Bank. The management has provided the applicable penal interest.

Four consecutive Installments:

The Bank may at its discretion after serving one month notice rescind the restructuring
agreement, withdraw the entire package and initiate legal proceedings for recovery of the
entire outstanding liabilities.

The demand finance I and demand finance II as stated in note 6.2 are secured by way of first
charge on all present and future assets of the Company and personal guarantee of the directors
except nominee director.

2003 2002
6.2 Demand finance II Rupees Rupess
Balance as at September 30 50,000,000 50,000,000

An interest free moratorium period of three years commencing from June 05, 1997 and a further
grace period of nine years commencing from June 04, 2000 during which interest is payable
biannually @ 17.885% p.a. was approved by the Bank.

The principal amount of this demand finance will be paid in 6 equal biannual installments along with
interest @ 17.885% p.a. The first installment falls due on December 04, 2009. However the
Company could not meet its obligation as the mark up of Rs. 38.415 million (2002: Rs. 29.711)
thereupon remained unpaid as at the balance sheet date. Refer to note 6.1 for securities.

6.3 Forced Demand finance

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Principal outstanding 13,909,500 13,909,500

This foiced demand finance has beer, created against guarantee given by the bank on import of
plant and machinery in the year 1987. Surcharge and Iqra surcharge were levied by the Customs
Collectorate on import of plant and machinery. The National Bank of Pakistan, being the guarantor,
paid the duties on behalf of the Company by creating the forced demand finance for the same
amount. The amount is repayable in 36 monthly installments of Rs 314.777 each commencing from
June 1999. During the year 2001, the bank further paid guarantee of Rs 5,937,500 on behalf of the
Company. The amount is repayable in 36 equal monthly installments commencing from July 2001.
However, no installment has been paid during the year.

6.4 During the year the management has opted to settle the outstanding liabilities of the bank under
Circular no. 29 dated October 15, 2002 of the State Bank of Pakistan issued to all banks and NBFI's
regarding settlement of outstanding amounts with the borrowers. The Company falls in category C
as its outstanding liability is more than Rs 2.5 million. Under the guidelines of the said Circular,
outstanding liabilities falling in category C are restricted upto the forced sale value of the securities
pledged with the bank that has been determined at Rs 112 million by an independent valuer. One of
the settlement criteria prescribed by the circular requires atleast 10% of the settled value be paid as
down payment at the time of signing of agreement and the balance amount to be repaid in
quarterly installmets within a period of three years from the date of agreement. Accordingly the
Company has paid the down payment of Rsl6.6 million that has been adjusted against the entire
loan liability. The said settlement agreement is under process as at the balance sheet date and the
effect of which shall be incorporated in subsequent year.

2003 2002
7. DEFERRED LIABILITIES Rupees Rupees
Opening balance 3,128,287 2,968,610
Add: Provision for the year 1,022,525 854,127
4,150,812 3,822,737
Less: Payments made during the year -1,124,600 -694,450
3,026,212 3,128,287

7.1 The closing balance for both 2003 and 2002 includes balance of Rs 1,189,773 that is being carried
forward from October 01,2001 without any movement. The Present Management further does not
have any record relating to any transaction, if any, which might have taken place during the period
from October 01, 2001 to April 18, 2002. However, this amount has not been adjusted due to
pending application filed with the Corporate Law Authority for investigation into affairs of the
Company.

2003 2002
8. CURRENT AND OVER DUE PORTION OF LONG TERM Rupees Rupees
LOANS
Current maturity 15,664,808 16,159,601
Overdue portion 52,546,861 52,987,260
68,211,669 69,146,861

9. DUE TO AS i
Balance as at September 30
- Present Management 21,821,562 7,046,276
- Previous Management 9.1 - 11,225,084
21,821,562 18,271,360

9.1 The closing balance for 2003 and 2002 relates to previous management and is being carried
forward from October 01,2001 without any movement. The Present Management further does not
have any record relating to any transaction, if any, which might have taken place during the period
from October 01,2001 to April 18, 2002. During the year the balance has been transferred to
creditors, accrued and other liabilities (refer to Note 11), as these Companies are no longer
associated companies, as a result of change in the composition of Board of Directors of the
Company.

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10. BORROWING FROM DIRECTORS UNSECURED

Balance as at September 30
- Present Management 10.1 27,146,480
- Previous Management 10.2 - 180,589,134
27,146,480 180,589,134

10.1 This represents interest free amount extended by the directors, in order to encounter the financial
squeeze and settlement of debts of financial institutions of the Company. The terms of repayment
have not yet been finalized.

10.2 The balance as at October 01, 2002 includes an adjustment of Rs. 14.499 million on account of
netting off transactions relating to the period from October 01, 2001 to April 18, 2002, presuming
that receipts and payments during the said period were made by the Previous Management. During
the year this amount has been transferred to creditors, accrued and other liabilities (refer to Note
9.1) as a result of retirement of Directors representing the Previous Management.

2003 2002
11. CREDITORS, ACCRUED AND OTHER LIABILITIES Rupees Rupees
Creditors 37,072,740 34,202,847
Advances from customers 8,719,194 11,339,874
Expenses payable 6,267,517 5,398,272
Interest/profit payable on:
- Secured long term finances/ loans 151,817,183 122,844,181
- Unsecured borrowing from associated undertakings 9,708,409 9,708,409
- Others 9,736,900 9,736,900
Salaries/wages payable 1,786,192 1,449,404
Unpaid salaries 513,634 478,500
Income tax deducted at source 2,760,955 2,802,073
Sales tax payable 176,272 1,683,916
Others 5,627,714 7,301,272
Payable to Previous Management (Refer to Note 9.1 and 9,2) 191,814,218
426,000,928 206,945,648

11.1 The closing balance for 2003 includes balance of Rs. 262,616,337 (2002: Rs. 70,802,119) that is
being carried forward from October 01, 2001 without any movement. The Present Management
further does not have any record relating to any transaction, if any, which might have taken place
during the period from October 01, 2001 to April 18, 2002. However, this amount has not been
adjusted due to pending application filed with the Corporate Law Authority for investigation into
affairs of the Company.

12. PROVISION FOR TAXATION

Opening balance 3,313,876 3,455,597
Add: Provision for current year 12.1 986,261 970,784
4,300,137 4,426,381
Less: Paid during the year - -1,112,505
4,300,137 3,313,876

13. CONTINGENCIES AND COMMITMENTS

Contingencies

13.1 The Sales Tax Department has raised demand of Rs. 2.852 million on account of sales tax,
additional tax and penalties. The management has not admitted the liability and has filed
appeals before appellate authorities. No provision has been made in the accounts as the
management expects favorable outcome of the decisions.

13.2 Income tax assessments upto the Assessment years 2000-2001 have been finalized / framed
resulting in additional tax liability of Rs. 84.512 million. The management has not admitted

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this liability and has filed appeals before appellate forums against the alleged amount. No
provision has been made in these accounts for this additional liability as appeals filed are
pending for adjudication and management believes that its view point shall be upheld.

Commitments:
13.3 Commitment outstanding as at the balance sheet date Nil

14. OPERATING FIXED ASSETS

COST/REVALUED AMOUNT
as at Additions / Total as at Rate As at
PARTICULARS 01-10-2002 (deletions) 30-09-2003 01 10-2002

Rupees Rupees Rupees % Rupees

Owned:
Buildings on leasehold
land
Factory 45,994,000 - 45,994,000 10 18,835,003
Non-factory 902,000 902,000 10 369,378
Plant and machinery 174,842,049 239,824 175,081,873 10 68,942,820
Electric installation 4,555,000 305,752 4,860,752 10 1,861,367
Diesel generator 5,955,000 - 5,955,000 10 2,438,632
Tools and equipment 393,038 27,000 420,038 10 262,082
Furniture and fixtures 1,906,924 26,984 1,933,908 10 1,172,033
Office equipment 227,994 - 227,994 10 129,481
Laboratory equipment 11,682,010 - 11,682,010 10 8,138,511
Arms and ammunition 7,000 - 7,000 10 5,022
Computers 922,837 41,200 964,037 10 468,898
Vehicles 976,265 - 976,265 20 892,309
Bi-Cyde 2,102 - 2,102 20 1,835
Total 2003 248,366,219 640,760 249,006,979 103,517,371
Total 2002 247,312,112 1,054,107 248,366,219 87,411,355

14.1 Revaluation was carried out by M/s. Hamid Mukhtar & Co., valuers and surveyors, as at September 30, 1997 and was certified
by an independent firm of Chartered Accountants. Had there been no revaluation, the cost, accumulated depreciation and the
book values of the revalued assets would have been as follow:

As on September 30, 2003

Cost Accumulated Book Value
Depreciation
Rupees Rupees Rupees
Buildings on leasehold land
Factory 35,465,997 27,697,089 7,768,908
Non-factory 783,715 567,194 216,521
Plant and machinery 241,276,571 183,923,480 57,353,091
Electric installation 5,733,080 4,480,680 1,252,400
Diesel generator 4,276,882 3,068,964 1,207,918
287,536,245 219,737,407 67,798,838

2003 2002
14.2 Depreciation for the year has been allocated as under: Rupees Rupees
Cost of good manufactured 22.1 14,480,978 16,023,356
Administrative and general 23 76,406 82,660
14,557,384 16,106,106

14.3 The opening balances of fixed assets as at October 01, 2001 were taken from last year financial
statements in the absence of any record of fixed assets. Additions in plant and machinery amounting
to Rs. 843,797 during the period from October 01, 2001 to April 18, 2002 were recorded in books
without any supporting documents.

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14.4 The Present Management has prepared a list of fixed assets with the estimated value of Rs. 26.5
million representing the amount of assets missing / allegedly taken away by the Previous Management
before the take over of the Present Management. No adjustment has been made as the recoverable
amount of the said assets can not be reliably measured until the disposal of FIR.

2003 2002
15. DEFERRED TAX ASSET -NET Rupees Rupees
Recognized losses 41,947,354
Accelerated tax depreciation -16,690,337
Surplus on revaluation of fixed assets -16,860,449
Staff retirement benefits 1,059,174
9,455,742
16. STORES AND SPARES
Stores 1,687,134 1,199,091
Spares 1,480,762 844,690
3,167,896 2,043,781
17. STOCK IN TRADE
Raw materials 2,454,932 4,074,812
Work in process 3,027,031 1,884,148
Finished goods 1,902,482 853,927
7,384,445 6,812,887
18. TRADE DEBTORS
Unsecured
- Considered good 2,392,327 715,459
- Considered doubtful 18.2 1,633,137 1,633,137
4,025,464 2,348,596
18.1 The balances of associated undertakings are as follows:
Chakwal Spinning Mills Limited - 554,674
Kohinoor Spinning Mills Ltd. - 581,374
- 1,136,048

The maximum aggregate amount outstanding at the end of any month during the year was
Rs. 1,136,048 (2002: Rs. 1,136,048). These companies are no longer associated companies as a
result of change in the composition of Board of Directors of the Company during the year.
Therefore, these balances are now considered as normal trade receivable.

18.2 This balance is being carried forward from October 01, 2001 without any movement. The Present
Management further does not have any record relating to any transaction, if any, which might have
taken place during the period from October 01, 2001 to April 18, 2002. However, this amount has
not been provided / written off due to pending application filed with the Corporate Law Authority for
investigation into affairs of the Company.

19. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER

RECEIVABLES
Advances (considered good)
- Suppliers 218,287 916
- Employees 125,446 152,815
Tax deducted at source 4,897,921 3,155,071
Prepaid expenses 31,501 19,539
Advances, deposits and
other receivables (considered doubtful) 19.1 3,376,303 3,376,303
8,649,458 6,704,644

19.1 This balance is being carried forward from October 01, 2001 without any movement. The Present
Management further have any record relating to any transaction, if any, which might have taken place
during the period from October 01, 2001 to April 18, 2002. However, this amount has not been
provided / written off due to pending application filed with the Corporate Law Authority for
investigation into affairs of the Company.

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2003 2002
20. CASH AND BANK BALANCE Rupees Rupees
In hand 36,603 11,702
At banks in current accounts 65,776
102,379 11,702
21. SALES - Net
Yarn Local 196,064,044 193,267,576
Waste 1,188,082 889,246
197,252,126 194,156,822
21.1 Sales are exclusive of sales tax of Rs. 29.583 million (2002: Rs. 29.124 million).
22. COST OF SALES
Finished goods -Opening stock 853,927 1,320,912
Cost of goods manufactured 22.1. 220,165,762 199,942,160
221,019,689 201,263,072
Finished goods-Closing stock -1,902,482 -853,927
219,117,207 200,409,145
22.1 Cost of goods manufactured
Raw materials consumed 22.2 142,876,109 122,731,694
Salaries, wages and benefits 16,910,657 18,851,961
Stores consumed 3,243,616 2,854,916
Fuel and power 34,360,348 32,070,853
Repairs and maintenance 8,963,156 6,608,645
Insurance 32,646 36,360
Other manufacturing expenses 441,135 608,308
Depreciation 14,480,978 16,023,357
221,308,645 199,786,094
Work in process: 1,884,148 2,040,214
- Opening stock -3,027,031 -1,884,148
- Closing stock -1,142,883 156,066
220,165,762 199,942,160
22.2 Raw materials consumed
Opening stock 4,074,812 1,040,561
Purchases during the year 141,256,229 126,273,344
145,331,041 127,313,905
Sold during the year - 507,399
145,331,041 126,806,506
Closing stock -2,454,932 -4,074,812
142,876,109 122,731,694

2003 2002
23. ADMINISTRATIVE AND GENERAL Rupees Rupees
Staff salaries and benefits 6,391,002 3,226,975
Travelling expenses 24,070 66,033
Printing and stationery 112,809 108,858
Entertainment 87,888 64,290
Postage, telegrams and telephone 270,523 419,847
Newspapers and periodicals 17,105 2,971
Rent, rates and taxes 7,113 22,100
Vehicle running and maintenance 376,585 179,521
Medical expenses 28,421 59,159
Subscription 2,090 10,920
Advertisement 62,760 5,918
Electricity, water and gas charges 2,421,223 24,343
Repairs and maintenance 30,841 64,235
Charity and donation - 500
Textile cess 12,480 12,480
Director traveling 32,000
Filling fee 42,300

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Miscellaneous 2,017 15,844

Depreciation 14.2 76,406 82,660
9,997,633 4,366,654
24. SELLING
Freight and octroi 64,762 23,511
Miscellaneous 129,236
193,998 23,511
25. OTHER INCOME
Miscellaneous income 386,126 312,363
386,126 312,363
26. FINANCIAL CHARGES
Interest on:
Secured long term finances/loans 28,973,003 39,625,639
Bank charges and others 80,756 31,860
29,053,759 39,657,499
27. OTHER CHARGES
Legal and professional charges 45,000 301,000
Auditors' remuneration 7.1 150,000 105,000
Listing fee 50,000 50,000
245,000 456,000
27.1 Auditors' remuneration
Audit fee 105,000 85,000
Half yearly review and review of Code of Corporate Governance 45,000 20,000
150,000 105,000

2003 2002
28. TAXATION Rupees Rupees
Current year taxation 28.1 986,261 970,784
Deferred taxation 28.2 -28,189,575
-27,203,314 970,784

28.1 The charge for the current taxation is based on the minimum tax liability under section 113 of the
Income Tax Ordinance, 2001.

28.2 As mentioned in Note 2.6, the Company has changed its accounting policy for recording deferred tax
assets. The cumulative effect of this change in policy under the allowed alternative treatment of IAS-8
(Net Profit or Loss for the period, Fundamental Errors and Changes in Accounting Policies) has been
adjusted in the accounts for the current year. As required by the IAS, the pro forma of profit and loss
account and statement of changes in equity assuming the accounting policy had been applied
retrospectively is given below:

Pro forma profit and loss account Restated

(Loss)/Profit before taxation as reported -60,969,345 -50,443,624
Taxation:
- Current -986,261 -970,784
- Deferred tax expense / (income) relating to the origination
and reversal of temporary differences 19,457,150 15,573,730
- Deferred tax expense / (income) resulting from change
in tax rates - -68,413
18,470,890 14,534,533
-42,498,455 -35,909,091
Pro forma statement of changes in
equity - Unappropriated profit
Balance as on October 01, as previously reported -587,906,704 -536,492,296
Effect of change in accounting policy with respect to
recognition if deferred tax 8,732,424 -6,772,894
Opening retained earnings as restated -579,174,280 -543,265,190
Net loss for the year as restated -42,498,455 -35,909,091
Transfer from surplus on revaluation of fixed assets

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- Prior years 37,120,221

- Current year - Net of deferred tax 3,479,141
Balance as on September 30, -581,073,373 -579,174,280
29. EARNINGS PER SHARE - BASIC
Net loss after taxation -33,766,031 -51,414,408

Number of Shares
Weighted average number of ordinary shares 5,175,000 5,175,000
29.1 Basic
Earnings per share - Basic -6.52 -9.94

29.2 There is no dilutive effect on the basic earnings per share of the Company as the Company has no
such commitments.

30. PAYMENTS TO CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

The aggregate amounts charged in the accounts for the year as remuneration including all benefits to
chief executive, directors and executives of the Company are as follows:

Particulars Directors Chief Executive

2003 2002 2003 2002

Managerial remuneration 22,000 - - 10,000

Utilities - _ _
Total 22,000 - - 10,000
Total number of persons - - -

2003 2002
31. TRANSACTIONS WITH ASSOCIATED UNDERTAKINGS Rupees Rupees
These comprise of:
- Purchases of goods 247,518 414,000
- Purchase of services 200
- Sale of goods and services - 644,000
- Financial assistance 18,800,000
32. NUMBER OF EMPLOYEES
Total number of employees at September 30 593 490
33. PLANT CAPACITY AND PRODUCTION
Number of spindles installed 12,480 12,480
Number of spindles worked 11,835 11,835
Total capacity at 20/S count per year 4,420,000 4,420,000
Total production for the year at 20/S 5,872,564 5,287,198
No. of shifts worked during the year 1,065 1,065
No. of shifts worked per day 3

Actual production for the year includes trial run production of 8 Second hand ring frames that were
subsequently retired from active use and returned to the Supplier.

34. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

34.1 The Company's exposure to interest rate risk and the effective rates on its financial assets and liabilities as at
September 30, 2003 are summarized as follows:

2003
Mark-up bearing Non mark-up bearing
Maturity Maturity Maturity upto Maturity
upto one after one Sub total one year after one
year year year
Financial Assets
Trade debtors 4,025,464

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Advances, deposits
and other
receivables - - 1,413,529
Cash & bank balance - - - 102,379
Rupees - - 5,541,372
Financial liabilities
Lona term loans 68,2 1 ! .669 106,721,731 I74.y33.4no -
Due to associated
Undertakings - - - 2I.S2I.562
Borrowing from
Directors - - - 27,146,480
Creditors, accrued
and other
Liabilities 420,674,301
Rupees 68,211,669 106,721,731 174,933,400 469,642,343

The Company's exposure to interest rate risk on its financial assets and liabilities as at September 30, 2002 are summarized as
follows:

2002
Mark-up bearing Non mark-up be
Maturity Maturity Sub total Maturity upto Maturity
upto one after one one year after one
year year year
Financial Assets
0 2,348,596
Trad debtors
Advances, deposits
and other
receivables - 3,530,034
Cash & bank balance - 11,702
Rupees - 5,890,332
Financial liabilities
Long term loans 69,146,86 122,386,539 191, 531 ,400
Due to associated
Undertakings - 18.271,360
Borrowing from
Directors - - 180,589.13
Creditors, accrued
and other
Liabilities - - 202,459,659
Rupees 69,146,861 122,386,539 191,533,400 220,731,019 180,589,134

34.2 Concentration of Credit Risk and Credit Exposures of the Financial Statements

Credit risk represents the accounting loss that would be recognized at the reporting date if counter
parties failed completely to perform as contracted. Out of the total financial assets of Rs.5,541,372
(2002: Rs.5,890,332 ) the financial assets which are subject to credit risk are amounted to
Rs.5,504,769 (2002: Rs.5,878,630 ). The Company believes that it is not exposed to major
concentration of credit risk. To manage exposure to credit risk, the Company applies credit limits to its
customers.

34.3 Foreign Exchange Risk Management

Foreign currency risk arises mainly where receivables and payables exist due to sale and purchase
transaction with foreign undertakings. The Company has not entered into transactions with foreign
undertakings, therefore, the Company is not exposed to foreign exchange risk.

34.4 Interest rate risk

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Interest rate risk arises from the possibility that changes in interest rates will affect the value of
financial instruments. The Company is exposed to interest rate risk in respect of long term loans /
finances. Effective interest rates for the monetary financial liabilities are mentioned in the respective
notes to the accounts.

34.5 Fair Value of the Financial Instruments

The carrying value of all the financial instruments reflected in the financial statements approximates
to their fair values.

35. DATE OF AUTHORIZATION OF ISSUE

These financial statements were authorized for issue on January 09, 2004 by the Board of Directors of
the Company through resolution by circulars.

36. GENERAL

Figures have been rounded off to the nearest rupee; and

Corresponding figures have been re-arranged and re-grouped, wherever necessary, to facilitate

comparison.

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