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Kohinoor Looms Limited

Annual Report 1998

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

1. Mian M. JAVAID SAIGOL

Chairman & Chief Executive

2. Mrs. KATHLEEN MEGAN SAIGOL

3. Miss. MEHREEN SAIGOL

4. Mrs. TARFA SAIGOL

5. Miss. LINA SAIGOL

6. Mr. A. SALEEM GHAURI

7. Mr. KHALID MAHMOOD SHEIKH

8. Mr. TASLIM HAlDER

Nominee Director NDFC

SECRETARY

Mr. A. Saleem Ghauri

AUDITORS

M/S S. M. MASOOD & CO

Chartered Accountants

LEGAL ADVISOR

Mr. SHAHID MAQBOOL SHEIKH

BANKERS

1. ALLIED BANK OF PAKISTAN LIMITED

2. MUSLIM COMMERCIAL BANK LIMITED

3. NATIONAL DEVELOPMENT FINANCE CORPORATION.

4. NATIONAL BANK OF PAKISTAN.

5. HABIB BANK LIMITED

6. STANDARD CHARTERED BANK

REGISTERED OFFICE

111-E/6 MODEL TOWN, LAHORE.

TEL: 5867368, 5867085

TELEX: 47685 KLLTD PK

FAX: 5835590

MILLS

8 KM. MANGA RAIWIND ROAD,

MAUZA ROSA BHAIL

TEH. & DISTT. KASUR

TEL: (04951i 3S3699-700

NOTICE AND AGENDA OF ANNUAL GENERAL MEETING

Notice is hereby given that the 9th Annual General Meeting of the members of Kohinoor Looms Limited

will be held on Friday the April 30, 1999 at 11:00 AM at the Registered Office of the Company at 111/E-6,

Model Town, Lahore to transact the following business.

1. To confirm the minutes of the 8th Annual General Meeting of the Members held on Thursday April

30, 1998.

2. To receive and adopt the audited accounts of the Company for the year ended September 30,

1998 comprising Balance Sheet, Profit & Loss Account and the Reports of the Auditors and

Directors thereon.

3. To appoint Auditors and fix their remuneration.

4. Any other matter with the permission of the Chairman.

BY ORDER OF THE BOARD

LAHORE

(MIAN M. JAVAID SAIGOL)

April 08, 1999.

CHAIRMAN & CHIEF EXECUTIVE

NOTES:

i) The Share Transfer Books of the Company will remain closed from 23-04-1999 to

30-04-1999 (both days inclusive). Transfers received in order on the close of business on

April 22, 1999 will be in time for the purpose of affecting voting rights.

ii) A member entitled to attend and vote at the meeting may appoint another member as

his/her proxy to attend and vote. Votes may be given either personally or by proxy or by

attorney and in case of a corporation by a representative duly authorized. The form of

Proxy duly completed should reach the Registered Office of the Company at least 48

hours before the time of meeting. The signature on the form of proxy should tally with the

signature on the record of the company.

iii) The share holders are requested to notify the Company of the change in their address, if

any.

DIRECTORS' REPORT

On behalf of the Board of Directors I feel pleasure to welcome you to the 9th Annual General Meeting and

present to you the audited accounts together with the Auditors Report thereon for the year ended

30-09-1998.

OPERATION

During the year under review your company after providing for all operational expenses including

depreciation of Rs 23,576,629 and after charging heavy financial expenses of Rs. 72,607,666 made

operating loss of Rs. 11,624,515 (1997: Rs. 14,754,746), I am pleased to report that your company during

the year ended September 30, 1998 earned a Gross Profit of Rs. 3,371,907 as compared to gross loss of

Rs. 2,511,052 in the year 1997

FUTURE OUTLOOK

As reported in the last Report the signs of improvement in the market in the near future will be much

bright with new package declared by the Government. The company continued its production on

conversion basis which is more feasible in the current situation. Like this the company is expected to

repay its loans to the banks.

As per the circular issued by the State Bank of Pakistan for revival of sick unit NDFC has taken no action

on our repeated request inspite of the fact that we got the feasibility prepared by the approved

consultants who recommended that the loan may be restructured.

AUDITORS

The retiring auditors M/s. S.M. Masood & Co., Chartered Accountants retire and being eligible they have

indicated their willingness to continue for the ensuing period and the Directors recommend their re-

appointment.

MILLENNIUM BUG

The Company is using P.C. based software systems. We do not anticipate any problem in compliance of

Year 2000 requirements.

STAFF AND ORGANIZATION

The directors wish to place on record their deep appreciation for the co-operation and devoted hard work

of the officers, staff and workers of the company.

FOR AND ON BEHALF OF THE BOARD

LAHORE

MIAN M. JAVAID SAIGOL

April 08, 1999

Chairman & Chief Executive

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of KOHINOOR LOOMS LIMITED as at September 30,

1998 and the related Profit & Loss Account and Statement of Changes in Financial Position (Cash Flow

Statement) together with the Notes forming part thereof, for the year then ended and we state that:

The company during the year has suffered an after tax loss of Rs. 81,871,401 resulting in an accumulated

loss of Rs. 424.514.541 and its current liabilities exceed its current assets by Rs. 415,646,581 The

company generated net cash of Rs. 22,939,632 from its operating activities, whereas its current liabilities

include Rs 120,536,190 as payable in next 12 months as principal in respect of its long term liabilities. On

account of default in making payment to the banks and financial institutions, liquidation and recoveries

suits, as detailed in note 5.3 & 8.4 to the accounts have been filed against it. These factors raise doubt as

to "Going Concern" assumption, the basis on which financial statements have been prepared.

Subject to the above, 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 & 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 the expenditure incurred during the year

were in accordance with the objects of the Company:

the Balance Sheet, Profit & Loss Account and Statement of Changes in Financial Position (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 respectively give a true and fair view

of the state of the Company's affairs as at September 30, 1998 and of the LOSS and the

Changes in Financial Position for the year then ended: and

(d) in our opinion, no Zakat was deductible at source under the Zakat & Ushr Ordinance, 1980.

Date: April 8, 1999

S.M. MASOOD & CO.

Place: LAHORE

Chartered Accountants

BALANCE SHEET AS AT SEPTEMBER 30, 1998

NOTE

1998

1997

(Rupees)

CAPITAL & LIABILITIES

SHARE CAPITAL & RESERVES

Share Capital

108,267,000

Accumulated Loss

(424,514,541)

(342,643,140)

----------

(316,247,541)

(234,376,140)

Revaluation Surplus

65,111,015

LONG TERM LIABILITIES

Long Term Loan

191,371,491

43,417,055

Liabilities Against Assets Subject

to Finance Lease

375,789,821

15,482,121

----------

56,716,131

58,899,176

CURRENT LIABILITIES

Current Maturity of Long Term Liabilities

120,536,190

106,441,549

Short Term Running Finances

28,741,028

29,641,028

Creditors, Accrued and Other Liabilities

287,897,562

243,150,062

----------

437,174,780

379,232,639

----------

242,754,385

268,866,690

==========

NOTE

1998

1997

(Rupees)

PROPERTY AND ASSETS

TANGIBLE FIXED ASSETS

Operating Fixed Assets

197,870,921

219,137,890

Fixed Assets Subject to Finance Lease

21,229,465

24,461,529

----------

219,100,386

243,599,419

LONG TERM DEPOSITS

2,125,800

2,115,800

CURRENT ASSETS

Stores & Spares

9,447,668

7,240,434

Stock in Trade

8,857,861

5,034,305

Trade Debtors

452,720

3,027,287

Advances, Deposits, Prepayments

and Other Receivables

1,177,378

5,309,666

Cash & Bank Balances

1,592,572

2,539,779

----------

21,528,199

23,151,471

----------

242,754,385

268,866,690

==========

The annexed notes 1 to 28 form an integral part of these accounts.

A. SALEEM GHAURI

MIAN M. JAVAID SAIGOL

DIRECTOR

CHIEF EXECUTIVE

Place: LAHORE

AUDITORS' REPORT

Date: April 8, 1999

(As Per annexed)

PROFIT & LOSS ACCOUNT

FOR THE YEAR ENDED SEPTEMBER 30, 1998

NOTE

1998

1997

(Rupees)

SALES

201,176,512

96,433,411

COST OF GOODS SOLD

197,804,605

98,944,463

----------

GROSS PROFIT

3,371,907

(2,511,052)

OPERATING EXPENSES

Administrative Expenses

14,739,126

11,160,522

Selling & Distribution Expenses

257,296

1,083,172

----------

14,996,422

12,243,694

----------

OPERATING LOSS

(11,624,515)

(14,754,746)

FINANCIAL CHARGES

72,607,666

71,880,330

----------

(84,232,181)

(86,635,076)

OTHER INCOME

3,573,529

714,421

PRIOR YEARS' ADJUSTMENT

167,230

5,745,350

----------

LOSS BEFORE TAXATION

(80,825,882)

(91,666,005)

TAXATION

1,045,519

486,054

----------

LOSS AFTER TAXATION

(81,871,401)

(92,152,059)

ACCUMULATED LOSS BROUGHT FORWARD

(342,643,140)

(250,491,081)

----------

ACCUMULATED LOSS TRANSFERRED TO BALANCE SHEET

(424,514,541)

(342,643,140)

==========

The annexed notes 1 to 28 form an integral part of these accounts.

A. SALEEM GHAURI

MIAN M. JAVAID SAIGOL

DIRECTOR

CHIEF EXECUTIVE

Place: LAHORE

AUDITORS' REPORT

Date: April 8, 1999

(AS PER ANNEXED)

STATEMENT OF CHANGES IN FINANCIAL POSITION

FOR THE YEAR ENDED SEPTEMBER 30, 1998

CASH FLOW STATEMENT

1998

1997

(Rupees)

Cash Flow From Operating Activities

Net Profit/(Loss) Before Taxation

(80,825,882)

(91,666,005)

Adjustments For:

Depreciation

21,230,300

23,650,737

Amortization

2,346,329

2,787,637

Preliminary Expenses Amortized

867,479

Interest Expenses

72,607,666

71,880,330

Income on Disposal of Assets

(640,198)

(372,910)

----------

Operating Profit Before Working Capital Changes

14,718,215

7,147,268

(Increase)/Decrease in Stores and Spares

(2,207,234)

(2,916,922)

(Increase)/Decrease in Stock in Trade

(3,823,556)

2,899,215

(Increase)/Decrease in Trade Debts

2,574,567

(781,770)

(Increase)/Decrease in Advances, Deposits,

Prepayments & Other Receivables

4,132,288

5,264,982

Increase/(Decrease) in Creditors, Accrued

Expenses and Other Liabilities

7,545,352

(5,271,964)

----------

Cash Generated From Operations

22,939,632

6,340,809

Interest Paid

(36,133,415)

(5,672,962)

Tax Paid

(317,622)

(52,506)

----------

Net Cash Generated From Operations

(13,511,405)

615,341

Cash Flow From Investing Activities

Addition to Fixed Assets

(1,893,301)

(3,651,796)

(Increase)/Decrease in Long Term Security Deposits

(10,000)

58,180

Disposal of Assets

3,455,903

1,824,803

----------

Net Cash Used in Investing Activities

1,552,602

(1,768,813)

Cash Flow From Financing Activities

Increase/(Decrease) in Lease Liabilities

11,911,596

4,619,891

Increase/(Decrease) in Short Term Finances

(900,000)

(1,846,947)

----------

Net Cash Used in Financing Activities

11,011,596

2,772,944

Net Increase in Cash & Cash Equivalents

(947,207)

1,619,472

Cash & Cash Equivalents at Beginning of the Period

2,539,779

920,307

----------

Cash & Cash Equivalents at Close of the Period

1,592,572

2,539,779

==========

NOTES TO THE ACCOUNTS

FOR THE YEAR ENDED SEPTEMBER 30, 1998

1. THE COMPANY

The company was incorporated as public limited company on October 12, 1989 in Pakistan and is

listed on Karachi and Lahore stock exchanges. The principle activity of the company is

manufacturing and sale of grey cloth.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Accounting Convention:

These accounts have been prepared under the historical cost convention as modified by

revaluation of land and plant & machinery by adjustment of exchange rate fluctuations as

referred to in Note No. 2.2 & 2.4.

2.2 Tangible Fixed Assets:

All fixed assets are shown at purchase cost together with any incidental expenses of

acquisition.

Operating fixed assets except land, capital work in progress and plant & machinery are

stated at cost less accumulated depreciation. Cost includes purchase price, financial

charges on borrowed funds and other incidental expenses incurred upto the date of

operation.

Capital work in progress is valued at cost, where land and plant & machinery have been

valued on the basis of revaluation carried out on 31st March, 1996 (see note 4).

Depreciation on operating fixed assets is charged to profit on reducing balance method

over their estimated useful lives so as to write off the historical cost of assets at the rates

specified in note 10.

The full annual rate of depreciation is applied on the cost of additions, except for major

additions enhancing the production capacity of the company, on which depreciation is

charged on the basis of proportionate number of days worked during the year. No

depreciation is charged on assets disposed off during the year. Minor renewals,

replacements are charged to current year's income. Major renewals and improvements

are capitalized.

Gain or loss on disposal of assets is included in the income year the asset is disposed

off.

2.3 Assets Subject to Finance Lease:

Assets under finance lease are stated at the fair value. The aggregate amount of obligations

relating to assets subject to finance lease are accounted for at net present value of the

commitments. The assets so acquired are amortized over their useful lives. The financial charges

have been allocated to periods during the lease term so as to produce a constant periodic rate of

interest taking into consideration the remaining balance of the liability for each period.

The amortization and financial charges on leased assets are charged to current year's income.

2.4 Foreign Exchange Conversions:

Assets and liabilities in foreign currencies except for foreign currency balances covered

by forward exchange risk cover are translated in Pak Rupees at the exchange rate

prevailing at the balance sheet date. Exchange differences on export sales are included

in current year's income.

2.5 Retirement Benefits:

The company operates an unfunded gratuity scheme for its permanent employees and

the same is accounted for on payment basis.

2.6 Deferred Cost

Preliminary expenses are amortized over the period of five years.

2.7 Stocks And Stores:

These are stated at lower of cost or net realisable value, the cost is determined as

follows:-

Stores & Spares

- At moving average method.

Raw Material & Packing Material

- At annual average cost.

Work in Process

- At estimated factory cost.

Finished Goods

- Prime cost plus factory overheads determined

on annual average basis.

Net realisable value signifies the estimated selling price in the ordinary course of the

business less costs necessary to be incurred in order to make the sale.

2.8 Taxation:

The charge for taxation for the year is provided after taking into account tax credits, tax

rebates and other allowances available for set off, if any. The company is exempt from

tax under clause 118(E) of the Income Tax Ordinance, 1979. Therefore provision for

turnover tax under section 80(D) of the Income Tax Ordinance, 1979 has been made in

the accounts.

The company accounts for deferred taxation, using the liability method, on all major

timing differences excluding tax effects on those timing differences which are not likely to

reverse in the foreseeable future.

2.9 Revenue Recognition:

Revenue from local sales of goods is recognized on despatch of goods to customers.

Export sales are recognized on receipt of Bill of Lading.

2.10 Contingencies & Commitments:

These are recognized only when they become due.

1998

1997

(Rupees)

3. SHARE CAPITAL

Authorised:

12,500,000 Ordinary Shares of Rs. 10/- each

125,000,000

==========

Issued, Subscribed & Paid-up:

10,826,700 Ordinary Shares of Rs. 10/- each

issued for cash

108,267,000

----------