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ITTEFAQ TEXTILE MILLS LIMITED
Annual Report 1997
CONTENTS
COMPANY INFORMATION
NOTICE OF MEETING
DIRECTORS' REPORT TO THE SHAREHOLDERS
PATTERN OF SHAREHOLDING
AUDITORS' REPORT TO THE SHAREHOLDERS
BALANCE SHEET
PROFIT AND (LOSS) ACCOUNT
CASH FLOW STATEMENT
NOTES TO THE ACCOUNTS
FINANCIAL STATISTICS
COMPANY INFORMATION
CHAIRMAN:
Mian Yousuf Aziz
CHIEF EXECUTIVE:
Mian Haroon Yousuf
DIRECTORS:
Mian Khalid Siraj
Mrs. Kausar Yousuf Aziz
Mrs. Saira Farooq
Mrs. Ayesha Haroon
Mr. Muhammad Sadiq
COMPANY SECRETARY:
Anwar Hussain Chaudhry
BANKERS AND FINANCIAL INSTITUTIONS:
Habib Bank Limited
Muslim Commercial Bank Limited
Faysal Islamic Bank of Bahrain
Grindlays Bank plc
Mashreq Bank psc
National Development Finance
Corporation
National Bank of Pakistan
Union Bank Limited
Allied Bank Limited
AUDITORS:
Kaleem & Company
Chartered Accountants
3rd Floor, Hafeez Chambers
85 Sharae Quaide Azam, Lahore
REGISTERED OFFICE:
32 Empress Road, Lahore
MILLS:
Unit No. 1
22 Kilometers
Lahore-Sheikhupura Road
District Sheikhupura
and
Unit No. 2 & 3
48 Kilometers
Lahore-Multan Road
Bhai Pheru
Tehsil Chunian
NOTICE OF MEETING
Notice is hereby given that the 31st Annual General Meeting of the Shareholders of ITTEFAQ TEXTILE
MILLS LIMITED will be held at 71-A, Ahmad Block, New Garden Town, Lahore, on March 28, 1998
at 03:00 p.m. to transact the following Business:
ORDINARY BUSINESS
1. To confirm the minutes of the last Annual General Meeting.
2. To receive, consider and adopt the  audited Balance Sheet and Profit and Loss Account of the
Company together with the Directors' and Auditors' reports for the year ended September 30,
1997.
3. To appoint Auditors and fix their remuneration. The retiring auditors, Messrs Kaleem and
Company, Chartered Accountants, offer themselves for reappointment.
4. To transact any other business with the permission of the Chair.
NOTES
1. The Share Transfer Books of the Company will be closed from March 18, 1998 to March 28, 1998
(both days inclusive).
2. A member entitled to attend and vote at the General Meeting is entitled to appoint another
member as a proxy to attend and vote instead of him/her.
3. The instrument appointing a proxy must be received at the Registered Office of the Company not
later than 48 (forty eight) hours before the time appointed for the meeting. A member shall not be
entitled to appoint more than one proxy. If a member appoints more than one proxy and more than
one instrument of proxy is deposited by a member with the Company, all such instruments of proxy
shall be rendered invalid.
4. Members are requested to promptly notify the Company of any change in their address.
DIRECTORS' REPORT TO THE SHAREHOLDERS
IN THE NAME OF ALLAH, THE MOST GRACIOUS, THE MOST MERCIFUL
Dear Shareholders:
The Directors of the company are pleased to place before you the 31st Annual Report of the company
alongwith the company's accounts for the year then ended.
OPERATING RESULTS:					Rupees in Millions.
					1997	1996
Sales.					188.39	535.25
Cost of Goods Sold.					252.76	526.74
Gross Profit/(Loss).					(64.375)	8.51
Net Profit/(Loss) before Taxation.					(61.162)	(14.842)
Net Profit/(Loss) after Taxation.					(62.107)	(17.523)
Unappropriated Profit brought forward.					83.74	101.26
Unappropriated Profit carried forward.					21.63	83.74
OPERATIONS:
Production and Sales declined during the year because Mill No. 1 and Mill No. 3 remained closed
throughout the year while Mill No. 2 worked for 654 shifts only as against the normal capacity of
1080 shifts owing to a very high cost of inputs and the financial problems being faced by the company.
MANAGEMENT:
The management is grateful to the workers and staff for the cordial relations maintained during the year.
PATTERN OF SHAREHOLDING AS AT SEPTEMBER 30, 1997
No of		Size of Holding of Shares			Total Shares
Shareholders		From	To		Held
34		1	100		2108
155		101	500		37922
33		501	1000		19722
164		1001	5000		357218
11		5001	10000		79621
1		10001	15000		13635
2		15001	20000		32,825
-		20001	25000		Nil
3		25001	30000		83580
1		30001	35000		34718
2		35001	40000		75750
-		40001	45000		Nil
1		45001	50000		48606
1		50001	60000		58706
1		60001	65000		61231
-		65001	75000		Nil
3		75001	80000		234825
-		80001	90000		Nil
1		90001	95000		90900
4		95001	100000		396424
-		100001	105000		Nil
2		105001	110000		217150
-		110001	130000		Nil
1		130001	135000		130037
-		135001	150000		Nil
1		150001	155000		149490
-		155001	170000		Nil
1		170001	175000		173720
-		175001	185000		Nil
2		185001	190000		373699
-		190001	195000		Nil
1		195001	200000		195687
-		200001	215000		Nil
2		215001	220000		437329
-		220001	230000		Nil
1		230001	235000		230406
-		235001	265000		Nil
1		265001	270000		265125
1		270001	275000		272068
-		275001	285000		Nil
1		285001	290000		287218
-		295001	300000		Nil
-		300001	305000		Nil
-		305001	310000		Nil
1		310001	315000		310575
1		315000	380000		379705
---------					---------
433					5050000
=========					=========
Categories of		Number of		Number of		Percentage of
Shareholders		Shareholders		Shares held		Issued Capital
Individual		430		5049814		99.99
Others
The Administrator
Abandoned Properties
Government of Pakistan		3		186		0.01
		-----------		-----------		-----------
		433		5050000		100.00
		=========		=========		=========
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the annexed Balance Sheet of ITTEFAQ TEXTILE MILLS LIMITED as at
September 30, 1997 and the annexed Profit and Loss Account and Cash Flow Statement, 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 and after due verification thereof we report that:
a) in our opinion, proper books of account have been kept by the Company as required
by the Companies Ordinance, 1984,
b) in our opinion,
i) the Balance Sheet and Profit and Loss Account together with the Notes thereon have
been drawn up in conformity with the Companies Ordinance, 1984 and are in agreement
with the books of account and are further in accordance with accounting policies
consistently applied;
ii) the expenditure incurred during the year was for the purpose of the Company's
business; and
iii) the business conducted, investments made and expenditure incurred during the
year were in accordance with the objects of the Company;
c) in our opinion and to the best of our information and according to the explanations given
to us, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement, together
with the Notes forming part thereof, give the information required by the
Companies Ordinance, 1984 in the manner so required and subject to the foregoing
remarks respectively give a true and fair view of the state of the Company's affairs as at
September 30, 1997 and of the loss and the Cash Flow for the year then ended; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance 1980.
			KALEEM AND COMPANY
LAHORE: Feb 28, 1998			CHARTERED ACCOUNTANTS
BALANCE SHEET AS AT SEPTEMBER 30, 1997
					1997	1996
				NOTE	RUPEES	RUPEES
SHARE CAPITAL AND RESERVES
Authorised Capital
17,500,000 Ordinary
Shares of Rs. 10 each					175,000,000	175,000,000
Issued, Subscribed and
Paid up Capital				2	50,500,000	50,500,000
Reserves				3	37,400,000	37,400,000
Unappropriated Profits/(Loss)					21,628,374	83,735,737
Surplus on Revaluation of Fixed Assets				11.20	490,115,513	490,115,513
					----------	----------
					599,643,887	661,751,250
SPONSORS' LOAN					18,339,495	18,339,495
REDEEMABLE CAPITAL				4	39,629,967	59,001,000
DEFERRED LIABILITIES
Deferred Taxation					3,250,000	3,250,000
Staff Retirement Gratuity				5	2,409,022	3,084,742
					----------	----------
					5,659,022	6,334,742
LIABILITY AGAINST ASSET
SUBJECT TO FINANCE LEASE				6	537,832	1,373,818
CURRENT LIABILITIES
Running Finance under
Mark-up Arrangements				7	26,024,204	32,347,279
Current Portion of
Redeemable Capital,
and Leased Asset				8	60,858,473	40,015,737
Trade Creditors, Accrued
Expenses and Other Liabilities				9	344,097,329	262,676,843
	Taxation				17,565,668	16,619,994
					----------	----------
					448,545,674	351,659,853
CONTINGENCIES & COMMITMENTS				10	--	--
					----------	----------
					1,112,355,877	1,098,460,158
					==========	==========
The annexed notes form an integral part of these accounts
TANGIBLE FIXED ASSETS				11
Cost					715,176,721	715,983,856
Less: Depreciation					109,157,221	45,310,605
					----------	----------
					606,019,500	670,673,251
CURRENT ASSETS:
Stores and Spares				12	7,848,338	10,900,459
Stock in Trade				13	4,094,785	2,603,765
Trade Debtors - Unsecured
(Considered Good)					8,606,784	8,622,914
Loans and Advances
(Considered Good)				14	456,939,468	381,766,075
Trade Deposits, Prepayments,
Current Account
Balances with Statutory
Authorities and Other
Receivables				15	26,167,928	23,533,240
Cash and Bank Balances				16	2,679,074	360,454
					----------	----------
					506,336,377	427,786,907
					----------	----------
					1,112,355,877	1,098,460,158
					==========	==========
PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED SEPTEMBER 30, 1997
					1997	1996
				NOTE	RUPEES	RUPEES
Sales				17	188,384,618	535,253,452
Cost of Sales				18	252,760,047	526,743,771
					-------------	-------------
Gross Profit/(Loss)					(64,375,429)	8,509,681
Administrative and Selling
Expenses					11,820,262	31,922,495
Operating Profit/(Loss)					(76,195,691 )	(23,412,814)
Other Income				20	1,527,341	934,324
					-----------	-----------
Net Operating Loss					74,668,350	22,478,490
Financial Charges				21	(13,506,661)	(7,680,229)
Prior Year Adjustment					--	43,312
					-----------	-----------
Profit/(Loss) before Taxation					(61,161,689)	(14,841,573)
Taxation - Current				22	945,674	2,680,939
Profit/(Loss) after Taxation					(62,107,363)	(17,522,512)
Unappropriated Profit/(Loss) brought forward					83,735,737	101,258,249
					-----------	-----------
Unappropriated Profit/(Loss) carried forward					21,628,374	83,735,737
					==========	==========
The annexed notes form an integral part of these accounts.
CASH FLOW STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
					1997	1996
					RUPEES	RUPEES
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(Loss) Before Taxation					(61,161,689)	(14,841,573)
Adjustments for non-cash charges
and other items
Gratuity					65,788	1,654,060
Depreciation & Amortization					64,416,352	18,158,993
Financial Charges					(13,506,661)	7,680,229
					-----------	-----------
					50,975,479	27,493,282
Cash Flows from Operating Activities					----------	----------
Before Working Capital Changes					(10,186,210)	12,651,709
WORKING CAPITAL CHANGES:
(INCREASE)/DECREASE IN CURRENT ASSETS
Store & Spares					3,052,121	2,034,542
Stock in Trade					(1,491,020)	16,468,351
Trade Debtors					16,130	11,060,685
Loans & Advances					(75,173,393)	(97,075,671)
Advances, Deposits & Prepayments					(2,634,688)	(5,342,299)
INCREASE/(DECREASE) IN CURRENT LIABILITIES
Running Finance					(6,323,075)	(4,546,537)
Creditors & Other Liabilities					96,053,533	79,291,845
					-----------	-----------
Effect of Cash Flows Due to
Working Capital Changes					13,499,608	1,890,916
					-----------	-----------
Net Cash Flows from Operating Activities					3,313,398	14,542,625
Financial Charges Paid					(1,126,386)	(16,317,976)
Gratuity Paid					(741,508)	(770,150)
					-----------	-----------
Net cash Inflow from Operating Activities					1,445,504	(2,545,501)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed Assets Acquired					(157,865)	(707,681)
Sale Proceeds of Fixed Assets					395,264	--
					-----------	-----------
					1,682,903	(3,253,182)
					1997	1996
					RUPEES	RUPEES
CASH FLOWS FROM FINANCING ACTIVITIES
Redeemable Capital & Long Term Loans	I				739,907	--
Payment of Finance Lease					(104,190)	1,693,754
					-----------	-----------
Net Cash Flows from Financing Activities					635,717	1,693,754
					-----------	-----------
Net Increase/(Decrease) in Cash and
Cash Equivalent					2,318,620	(1,559,428)
Cash & Cash Equivalent at Beginning
of the Year					360,454	1,919,882
					-----------	-----------
Cash & Cash Equivalent at end of the Year					2,679,074	360,454
					==========	==========
NATURE AND STATUS OF THE COMPANY
The Company was incorporated in Pakistan on April 30, 1966 as a Public Limited Company under the
repealed Companies Act 1913 and its shares are quoted on the Karachi Stock Exchange. It is principally
engaged in purchase of raw cotton and sale of cotton yarn both in the local and international
markets.
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
1.1 Accounting Convention
These accounts have been prepared in accordance with the historical cost convention without any
adjustment for the effects of inflation or the prevailing values.
1.2 Employees Retirement Gratuity
The Company operates an unfunded Retirement Gratuity Scheme. Necessary provision is made
annually to cover the obligations under the Scheme.
1.3 Taxation
The provision for taxation is based on taxable income. The liability for deferred tax is not
accounted for.
1.4 Fixed Assets and Depreciation
a) Fixed assets of Unit Nos. 2 & 3 are stated at revaluation, less accumulated depreciation.
Fixed Assets of Unit No. 1 are stated at cost less depreciation except freehold land which is
stated at cost.
b) Depreciation on fixed assets is provided on the reducing balance method at the rate specified in
the Schedule of Fixed Assets attached.
c) Maintenance and normal repairs are charged to current year's income. Major renewals and
improvements are capitalised.
d) Acquisitions in a year are depreciated for a full year irrespective of the date of purchase. No
depreciation is charged on assets sold during the year.