| GULSHAN SPINNING MILLS LIMITED |
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| Annual
Report 1997 |
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| CONTENTS |
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| Board
of Directors |
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| Notice of Meeting |
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| Directors' Report |
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| Auditors' Report |
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| Balance Sheet |
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| Profit & Loss Account |
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| Cash Flow Statement |
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| Notes to the Account |
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| Schedule of Fixed Assets |
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| Pattern of Share Holding |
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| BOARD
OF DIRECTORS |
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| CHIEF
EXECUTIVE |
Mr. Naseer Ahmed |
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| DIRECTORS |
Mr. Abdul Shakoor |
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Mr. Tanveer Ahmed |
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Mr. Mohammad Abdullah |
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Mr. N. R. Siddiqui |
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Mr. Mohammad Younus |
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Mr. Riaz Ahmed |
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| SECRETARY |
Mr. Zamir Q. Siddiqui |
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| AUDITORS |
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Messrs. Mushtaq & Co. |
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Chartered Accountants, |
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Karachi |
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| BANKERS |
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Messrs: Habib Bank
Limited. |
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| REGISTERED
OFFICE |
2nd Floor, Finlay House, |
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I. I. Chundrigar Road, |
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Karachi. |
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| MILLS |
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| UNIT I |
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Tibba Sultanpur |
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Distt. Vehari. |
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| UNIT II |
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Jumber Khurd |
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Tehsil Chunnian |
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Distt. Kasur. |
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| UNIT III |
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Warburton |
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Distt. Shaikhupura |
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| NOTICE
OF THE ANNUAL GENERAL MEETING |
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| NOTICE
IS HEREBY GIVEN THAT THE 18TH ANNUAL GENERAL MEETING OF GULSHAN SPINNING
MILLS |
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| LIMITED.,
WILL BE HELD AT KARACHI ON 27TH JANUARY 1998 AT 2.00 P.M. AT ZULEIKHA BAI
V.M. GANY |
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| RANGOONWALA
COMMUNITY CENTRE, PLOT NO. IV & V, K.D.A. SCHEME NO. 7, BLOCK NO. 4,
DHORAJI |
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| COLONY,
KARACHI, TO TRANSACT THE FOLLOWING BUSINESS: |
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| 1)
to confirm the minutes of the preceding meeting of the share holders. |
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| 2)
to receive consider and adopt the audited accounts of the Co. for the year
ended 30th September '97 together with |
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| Directors
and Auditors report thereon. |
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| 3)
to approve 15% cash dividend as recommended by the Directors. |
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| 4)
to appoint Auditors for the year ending 30.9.98 and to fix their
remuneration. The present Auditors M/s. Mushtaq |
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| and
Company Chartered Accountant stand retired and being eligible offer
themselves for reappointment as |
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| Auditors
for the Company for the year ending 30.9.98. |
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| 5) i) The Board of Directors has in its
meeting fixed the number of elected Directors of the Company at |
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| seven
(7). |
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| ii)
To elect Seven (7) Directors of the Company for the term of three (3) years
in accordance with the provisions |
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| of
section 178 of the Companies Ordinance 1984. |
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| iii)
Following are the retiring Directors of the Company |
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| (1)
Mr. Abdul Shakoor (2) Mr. Naseer Ahmed (3) Mr. Tanveer Ahmed |
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| (4)
Mr. N. R. Siddiqi (5) Mr. Mohammad Younus (6) Mr. Riaz Ahmed & |
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| (7)
Mr. Mohammad Abdullah. |
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| 6)
to transact any other business with the permission of the Chair. |
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| NOTES: |
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| The
share transfer book would remain closed from 21st January 1998 to27th January
1998 (both days inclusive) and dividend if approved |
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| will
be paid to such members only whose names appear in the company's register of
members as at the close of 20th January 1998. |
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| Notice
of candidature for the office of the Directors should be received at least 14
days before the meeting at the Registered Office of the |
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| Company
in accordance with the provisions of law. |
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| A
member entitled to attend and vote at this meeting is entitled to appoint
another member as his / her proxy to attend and vote. Proxies |
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| in
order to be effective must be received at the Regd. Office of the Co. duly
stamped and signed not less than 48 hours before the meeting. |
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| Shareholders
are requested to notify us immediately of any change in their Registered
Address currently available with us. |
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| REPORT
OF THE DIRECTORS |
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| Your
Director s present before you the audited annual Accounts with Auditor's
report thereon for the year ending September |
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| 30,
1997, for your consideration and approval. |
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| OVERVIEW |
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| Results
of the Company in comparison to the preceding year are satisfactory. Although
the overall sales of Rs. 1.2 billion |
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| show
an increase of 6.7% over the preceding year but unfortunately due to increase
in the cost of cotton, the profitability |
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| could
not proportionately be increased as in the competitive home and foreign
markets of yarn we could not fully pass on |
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| the
increase in our cost of production to our customers. Inspite of these
factors, your company managed to maintain the |
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| profit
before tax at Rs. 42.2 million by better utilisation of its resources and
timely management policies. |
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| Following
are the results alongwith the recommendations of your Directors for
appropriation. |
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Rupees |
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1997 |
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| Sales |
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1,216,328,994 |
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| Profit
before tax |
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42,216,931 |
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| Profit
after tax |
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32,511,227 |
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| Provision
for prior period taxation |
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(33,412,050) |
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| Provision
for prior period Wapda Surcharge |
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(10,025,352) |
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| Unappropriated
profit b/f |
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180,382,886 |
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| Appropriations: |
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| Proposed
cash dividend @ 15% |
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(18,975,000) |
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| Transfer
to General Reserve |
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(100,000,000) |
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| Available
surplus carried forward |
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50,481,711 |
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| DIVIDEND |
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| Your
Directors are pleased to recommend a cash dividend of Rs. 1.50 per share i.e.
15%. This payout for the year in the |
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| present
circumstances, when according to press reports the cotton crop due to
untimely rains, have again been damaged |
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| creating
a problem of demand and supply, would hopefully be upto the expectations of
our esteemed investors. |
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| TRANSFER
TO GENERAL RESERVE |
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| Your
Directors recommend to transfer Rs. 100 million to General Reserve. |
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| EXCHANGE
RISK FEE |
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| Exchange
risk fee has been paid to avoid exchange losses as our currency is
fluctuating very rapidly. Exchange loss is an |
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| allowable
capital expenditure hence any expenditure incurred to avoid this loss should
also be treated accordingly. |
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| Without
the exchange booking the loss of exchange fluctuation would have been much
more. Hence we have capitalised |
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| exchange
risk fee in the respective assets accounts. |
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| INVESTMENT
IN SHARES |
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| Your
Directors have invested in the shares of quoted Companies at a time when the
stock market was booming. It has all |
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| along
been the intention of your Directors to disinvest it. We are awaiting for an
opportunate time for disinvestment, |
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| possibly
by making Capital gain |
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| The
present stock market prices of the shares are not reflective of their real
value. On the economic revival, for which the |
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| present
Government is all out, the stock market would Insha Allah improve, and hence
no provision has been made in the |
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| accounts
for diminution in the value of shares. |
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| FUTURE
OUTLOOK |
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| Your
Directors are taking all possible measures to ensure that your Company is
fully equipped with the latest technology |
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| for
producing competitive quality of yarn. The past results of the company fully
reflects it. In addition to producing the yarn, |
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| your
Directors are constantly considering for producing value added products in
the textile regime and to implement it |
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| we
are closely looking into the possibilities of setting up a Dyeing / Bleaching
project. |
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| Prior
to setting up Dyeing / Bleaching plant of our own your company during the
year exported dyed and bleached fabrics |
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| manufactured
on contract basis. The sale during the year was satisfactory but the gross
profit was below our expectations. |
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| It
is our expectation, that on gaining experience in this branch of textile
industry our sale and profitability may improve |
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| in
future. |
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| APPOINTMENT
OF AUDITORS |
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| M/s.
Mushtaq & Co., Chartered Accountants, being auditors of the Company,
retire and have offered themselves for |
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| re-appointment
for the year 1997-98. |
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| VOTE
OF THANKS |
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| The
Board of Directors place on record their appreciation for hard work including
sincere efforts of the staff and workers |
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| of
the Company. They further extend their thanks to the bankers, suppliers and
customers for their continued support and |
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| trust
in the company. |
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BY ORDER OF THE BOARD |
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| Karachi; |
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(NASEER AHMED) |
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| 31st
December, 1997. |
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Chief Executive |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed Balance Sheet of GULSHAN SPINNING MILLS LIMITED as
at September 30, 1997 and the |
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| related
profit and loss account and statement of changes in financial position (cash
flow statement) together with the notes |
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| forming
part thereof, for the year then ended and we state that we have obtained all
the information and explanations which |
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| to
the best of our knowledge and belief were necessary for the purposes of our
audit and, after due verification thereof, |
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| we
report that: |
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| a)
in our opinion, proper books of accounts have been kept by the company as
required by the companies Ordinance, |
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| 1984; |
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| b)
in our opinion; |
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| i)
the balance sheet and profit and loss account together with the notes thereon
have been drawn up in |
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| conformity
with the Companies Ordinance, 1984 and are in agreement with the books of
account and are |
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| further
in accordance with accounting policies consistently applied; |
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| ii)
the expenditure incurred during the year was for the purposes of the
company's business; and |
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| iii)
the business conducted, investments made and the expenditure incurred during
the year were in accordance |
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| with
the objects of the company; |
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| c)
except for the effect, on the financial statements, of the matter as
disclosed in note 12.1 and 17.2, in our opinion and |
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| to
the best of our information and according to the explanations given to us,
the balance sheet, profit and loss account |
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| and
the statement of changes in financial position together with the notes
forming part thereof, give the information |
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| required
by the Companies Ordinance, 1984 in the manner so required and respectively
give a true and fair view |
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| of
the state of the company's affairs as at September 30, 1997 and of the profit
and the changes in financial position |
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| for
the year then ended; and |
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| d)
in our opinion, no zakat was deductible at source under Zakat and Ushr
Ordinance, 1980. |
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| Karachi; |
|
MUSHTAQ & COMPANY |
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| 31st
December 1997 |
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CHARTERED ACCOUNTANT |
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| BALANCE
SHEET AS AT SEPTEMBER 30, 1997 |
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1997 |
1996 |
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Note |
Rupees |
Rupees |
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| Capital
and Liabilities |
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| SHARE
CAPITAL AND RESERVES |
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| Authorised
Capital |
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| 15,000,000
Ordinary shares of Rs. 10/- each. |
|
150,000,000 |
150,000,000 |
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|
========== |
========== |
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| Issued Subscribed &
Paid-up Capital |
|
3 |
126,500,000 |
126,500,000 |
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| Reserves |
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| General
reserve |
|
206,000,000 |
106,000,000 |
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| Share
premium account |
|
66,000,000 |
66,000,000 |
|
| Un-appropriated
profit |
|
50,481,711 |
180,382,886 |
|
|
---------- |
---------- |
|
|
322,481,711 |
352,382,886 |
|
|
---------- |
---------- |
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| Total
capital and reserves |
|
448,981,711 |
478,882,886 |
|
| Long
Term Loans |
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| Loans from banks and
financial Institutions |
|
4 |
63,611,622 |
93,541,339 |
|
| Due to associated undertaking |
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5 |
15,000,000 |
30,000,000 |
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|
---------- |
---------- |
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|
78,611,622 |
123,541,339 |
|
| Liabilities
Against Assets Subject |
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| To Finance Lease |
|
6 |
13,297,998 |
4,463,173 |
|
| Deferred Liabilities |
|
7 |
15,539,233 |
14,206,222 |
|
| Current
Liabilities |
|
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|
| Short
term bank borrowings |
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8 |
398,713,099 |
339,017,429 |
|
| Current maturity of long
term liabilities |
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9 |
61,777,017 |
57,539,460 |
|
| Creditors, accrued and
other liabilities |
|
10 |
114,182,027 |
120,676,912 |
|
| Proposed
dividend |
|
18,975,000 |
-- |
|
|
---------- |
---------- |
|
|
593,647,143 |
517,233,801 |
|
| Contingencies and Commitments |
|
11 |
-- |
-- |
|
|
---------- |
---------- |
|
|
1,150,077,707 |
1,138,327,421 |
|
|
========== |
========== |
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| The
annexed notes form an integral part of these accounts. |
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|
1997 |
1996 |
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|
Note |
Rupees |
Rupees |
|
| Property
and Assets |
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|
| Fixed
Assets - Tangible |
|
|
| Operating
Fixed Assets (At Cost |
|
12 |
603,381,943 |
620,123,196 |
|
| Less
Depreciation) |
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|
| Capital
Work in Progress |
|
13 |
3,182,779 |
4,066,145 |
|
|
|
---------- |
---------- |
|
|
|
606,564,722 |
624,189,341 |
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|
| Long
Term Deposits |
|
1,928,598 |
3,737,991 |
|
| Current
Assets |
|
|
| Stocks
and stores |
|
14 |
227,535,691 |
125,793,574 |
|
| Trade
debtors |
|
15 |
71,545,661 |
116,716,797 |
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| Advances,
deposits, prepayments and |
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| other
receivables |
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16 |
124,210,817 |
160,385,107 |
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| Short
term investments |
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17 |
62,806,705 |
61,110,632 |
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| Cash
and bank balances |
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18 |
55,485,513 |
46,393,979 |
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|
---------- |
---------- |
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541,584,387 |
510,400,089 |
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|
---------- |
---------- |
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|
1,150,077,707 |
1,138,327,421 |
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|
========== |
========== |
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|
| PROFIT
AND LOSS ACCOUNT |
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| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
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1997 |
1996 |
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|
Note |
Rupees |
Rupees |
|
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| Sales
(net) |
|
19 |
1,216,328,994 |
1,140,385,099 |
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| Less:
Cost of Sales |
|
20 |
1,001,373,055 |
920,264,704 |
|
|
---------- |
---------- |
|
| Gross
Profit |
|
214,955,939 |
220,120,395 |
|
|
| OPERATING
EXPENSES |
|
| Administrative |
|
21 |
20,147,802 |
17,236,682 |
|
| Selling
and Distribution |
|
22 |
45,631,566 |
42,966,715 |
|
|
---------- |
---------- |
|
|
65,779,368 |
60,203,397 |
|
|
---------- |
---------- |
|
| Operating
Profit |
|
149,176,571 |
159,916,998 |
|
| Other
Income |
|
23 |
77,770 |
181,292 |
|
|
|
---------- |
---------- |
|
|
149,254,341 |
160,098,290 |
|
|
| Financial
Charges |
|
24 |
104,815,466 |
115,579,873 |
|
| Workers'
profit participation fund |
|
2,221,944 |
2,230,191 |
|
|
---------- |
---------- |
|
|
107,037,410 |
117,810,064 |
|
|
---------- |
---------- |
|
| Net
profit for the year before taxation |
|
42,216,931 |
42,288,226 |
|
| Taxation
- Current |
|
9,705,704 |
-- |
|
|
---------- |
---------- |
|
| Net
profit for the year after taxation |
|
32,511,227 |
42,288,226 |
|
|
| Taxation
- Prior periods |
|
(33,412,050) |
-- |
|
| Additional
Wapda Surcharge - Prior period |
|
(10,025,352) |
(10,216,196) |
|
| Un-appropriated
Profit brought forward |
|
180,382,886 |
148,310,856 |
|
|
---------- |
---------- |
|
| Net
Profit available for appropriation |
|
169,456,711 |
180,382,886 |
|
| Appropriation |
|
| Transfer
to general reserve |
|
100,000,000 |
-- |
|
| Proposed
Dividend @ 15% (1996: NIL) |
|
18,975,000 |
-- |
|
|
---------- |
---------- |
|
|
118,975,000 |
-- |
|
|
---------- |
---------- |
|
| Unappropriated
profit carried to Balance Sheet |
|
50,481,711 |
180,382,886 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
| A.
Cash Flow from Operating Activities: |
|
| Net
profit before taxation |
|
42,216,931 |
42,288,226 |
|
| Adjustments
for |
|
|
|
| Depreciation |
|
54,832,797 |
57,585,010 |
|
| Gain
on disposal of fixed assets |
|
|
(142,562) |
|
| Provision
for gratuity |
|
2,449,861 |
1,273,474 |
|
| Financial
charges |
|
104,815,466 |
115,579,873 |
|
| Prior
year's items |
|
(10,025,352) |
(10,216,196) |
|
| Cash
flow from operation before working |
|
---------- |
---------- |
|
| capital
changes |
|
194,289,703 |
206,367,825 |
|
| (Increase)
/ decrease in Working Capital |
|
| Stocks
and stores |
|
(101,742,117) |
19,578,333 |
|
| Trade
debtors |
|
35,223,396 |
(65,158,371) |
|
| Advances,
deposits, prepayments and other receivables |
|
26,135,833 |
(9,054,745) |
|
| Creditors,
accrued and other liabilities |
|
(3,433,348) |
16,812,642 |
|
|
---------- |
---------- |
|
|
(43,816,236) |
(37,822,141) |
|
|
---------- |
---------- |
|
| Cash
generated from operations |
|
150,473,467 |
168,545,684 |
|
| Interest
paid |
|
(111,469,044) |
(118,607,288) |
|
| Interest
received |
|
8,607,998 |
5,006,284 |
|
| Tax paid |
|
(28,147,514) |
(12,421,185) |
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
19,464,907 |
42~523,495 |
|
| B.
Cash flow from investment activities |
|
| Addition
in fixed assets |
|
|
|
|
(38,325,028) |
(18,860,939) |
|
| Net
increase / (decrease) in short term investment |
|
(1,696,073) |
5,480,094 |
|
| Proceed
from sale of fixed assets |
|
-- |
206,640 |
|
| Long
Term Deposits |
|
1,809,393 |
-- |
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(38,211,708) |
(13,174,205) |
|
| C.
Cash flow from financing activities |
|
| Payment
of long term loans |
|
(28,631,866) |
(20,974,981) |
|
| Proceed
from Long Term Loan |
|
15,000,000 |
-- |
|
| Payment
of custom debentures |
|
-- |
(1,552,628) |
|
| Payment
of finance lease obligations |
|
(15,295,511) |
(19,997,887) |
|
| Government
Levies paid |
|
-- |
(9,649,587) |
|
| (Payment)
/ Loans from associates |
|
(15,000,000) |
30,000,000 |
|
| Proceed/(Payment)
of short term bank borrowings |
|
59,695,670 |
(8,982,453) |
|
| Proceed
from lease finance |
|
12,070,042 |
5,500,000 |
|
|
---------- |
---------- |
|
| Net
cash from/(Used) in investing activities |
|
27,838,335 |
(25,657,536) |
|
| Net
Increase/(decrease) in cash and Cash equivalents |
|
9,091,534 |
3,691,754 |
|
| Cash
and cash equivalents at beginning of the year |
|
46,393,979 |
42,702,225 |
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at end of the year |
|
55,485,513 |
46,393,979 |
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
| 1.
Status and Nature of Business |
|
| The
company was incorporated as Public Limited Company in Pakistan on 13th June,
1979= Its main business is manufacturing and |
|
| sale
of cotton yarn and fabric. The shares of the company are listed on Karachi
and Lahore Stock Exchanges. |
|
|
| 2.
Significant Accounting Policies |
|
| 2.1
Accounting Convention |
|
| The
Accounts have been prepared under historical cost convention as modified by
adjustments of exchange rate fluctuations. |
|
|
| 2.2
Provision for Gratuity |
|
| The
company operates an unfunded gratuity scheme for its employees. Annual
provision is made in the accounts to cover |
|
| liability
for gratuity which is calculated with reference to last drawn salary and
length of service of the employees. |
|
|
| 2.3
Taxation |
|
| Provision
for current tax is made on the taxable income, if any, after taking into
account current tax laws. The company does |
|
| not
account for deferred taxation as the timing differences are not likely to
reverse in foreseeable future. The extent of deferred |
|
| tax
not accounted for is disclosed in note No. 25. |
|
|
| 2.4
Fixed Assets |
|
| Fixed
assets are stated at cost less accumulated depreciation except freehold land
and capital work in progress which are |
|
| stated
at cost. Cost of plant and machinery consists of historical cost and
adjustments for exchange rate difference in respect |
|
| of
foreign currency loans utilised for acquisition thereof. |
|
|
| Fixed
assets other than land and capital work in progress are depreciated on
reducing balance method without considering |
|
| extra
shift workings at the annual rates of 5% to 20% of written down values,
depending upon the class of asset. |
|
|
| Full
year's depreciation is provided in the year of acquisition except for
Building and Plant & Machinery where depreciation |
|
| is
provided proportionate to the period of use. No depreciation is charged in
the year of disposal of the asset. |
|
| Normal
repairs and maintenance are charged to income as and when incurred. Major
repairs and renewals are capitalised. |
|
|
| Gain
or loss on disposal of fixed assets is included in the profit and loss
account. |
|
|
| 2.5
Deferred Cost |
|
| These
are amortised over a period of five years. |
|
|
| 2.6
Stores in Spares |
|
| Stores
and spares are valued at moving average cost except stores in transit which
are valued at cost. |
|
|
| 2.7
Stock in Trade |
|
| Raw
Material are valued at annual average cost. |
|
|
| Work
in process represents cost of direct materials and appropriate proportion of
conversion cost. |
|
| Finished
goods are valued at lower of cost and net-realisable value. Goods in transit
and waste are valued at net realisable |
|
| value. |
|
|
| 2.8
Investments |
|
| These
are valued at cost. |
|
|
| 2.9
Translation of foreign currencies |
|
| Foreign
currency liabilities and receivables are translated into rupees at the
exchange rates prevailing on the balance sheet |
|
| date
and differences on exchange of foreign currency liabilities utilised for the
acquisition of assets are transferred to assets. |
|
| All
other exchange differences are included in the profit and loss account for
the year. |
|
|
| 2.10
Accounting for Leased assets |
|
| The
company accounts for assets acquired under finance lease by recording the
assets at the fair value of the leased property |
|
| or,
if lower at the present value of the minimum lease payments. Finance charge
is allocated to accounting periods in a manner |
|
| so
as to produce a constant periodic rate of charge on the outstanding
liability. |
|
| The
assets so acquired are depreciated applying the same accounting policies as
for own assets. |
|
|
|
| 2.11
Revenue recognition |
|
| The
sale is recorded on despatch of goods to customers. |
|
|
| 2.12
Presentation |
|
|
| a.
Figures in these accounts have been rounded off to the nearest rupee. |
|
|
