GRAYS OF CAMBRIDGE (PAKISTAN) LIMITED

ANNUAL REPORTS 2003

CONTENTS

CORPORATE INFORMATION

VISION AND MISSION STATEMENT

NOTICE OF THE MEETING

COMPANY PROFILE

DIRECTORS' REPORT

STATEMENT OF VALUE ADDED AND ITS DISTRIBU

DECADE AT A GLANCE

REVIEW REPORT ON STATEMENT OF COMPLIANC

BEST PRACTICES OF CODE OF CORPORATE GQN

AUDITORS REPORT

BALANCE SHEET

PROFIT AND LOSS ACCOUNT

CASH FLOW STATEMENT

STATEMENT OF CHANGES IN EQUITY

NOTES TO THE ACCOUNTS

PATTERN OF SHAREHOLDINGS

CORPORATE INFORMATION

BOARD OF DIRECTORS

Mr. Harold John Gray (Chairman)

Mr. Khawar Anwar Khawaja (Chief Executive)

Mr. Paul Douglas Gray

Mr. Khurram Anwar Khawaja

Mr. Neil Douglas James Gray

Mr. Muhammad Tahir Butt

Mrs. Nuzhat Khawar Khawaja

Mr. Sarfraz Mahmood

(Alternate to Mr. Harold John Gray)

AUDIT COMMITTEE

Mr. Muhammad Tahir Butt

Mrs. Nuzhat Khawar Khawaja

Mr. Paul Douglas Gray

CORPORATE SECRETARY

Mr. Saeed Ahmed

CHIEF FINANCIAL OFFICER

Mr. Muhammad Azeem

AUDITORS

Messrs. M.A. Tabussum & Co.

Chartered Accountants

S-8, Ahmed Arcade

161-Ferozepur Road

Lahore

Phone: (042) 7580098 - 7587323

Fax: (042)7675510

MANAGEMENT CONSULTANTS

Messrs. Sarfraz Mahmood (Pvt) Limited

10-B, Saint Mary Park

Main Boulevard, Gulberg-lll

Lahore-54660 (Pakistan)

Tel: (042)5718136-39

Fax: (042) 5714340

E-mail: sarfrazm@paknet1.ptc.pk

REGISTERED OFFICE AND WORKS

Small Industries Estate,

Sialkot (Pakistan)

Phone: (0432) 555338, 563051 - 563052

Fax: (0432) 551252 - 553609

E-mail: grays@skt.comsats.net.pk

VISION

GRAYS is the Internationals' First Choice; and

we continuously strive to maintain this edge through building

a sustainable relationship with them all over the globe

by establishing and maintaining a strong production

and marketing network with a team of adroit, enchanting,

and skillful craftsmen and experienced professionals.

We aim at the best of

our Customers' Satisfaction. We also aim at a sustainable

growth to ensure our company's

prosperous future & healthy returns

to all our stakeholders

MISSION

To endeavor consistently to be a dynamic, profitable and growth

oriented company through excellence in all spheres of business activities

optimizing value for our associates and shareholders.

To seek a high standard of performance and to strive for a long-term

leadership position through operating efficiency and dedicated

service to customers in a competitive environment.

To be an exemplary corporate citizen maintaining high moral standards

and fulfilling its social responsibilities. GRAYS firmly believes

in behavioral conformance.

To create further opportunities for employees at all levels so

that they become a real team of dedicated workers

and professionals who are rewarded according to their

ability and performance; honesty, integrity and talent

are the only pre-requisites.

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 40^th Annual General Meeting of Grays of Cambridge (Pakistan)

Limited will be held on Friday, October 31, 2003 at 11.30 a.m. at the Registered Office of the

Company, Small Industries Estate, Sialkot to transact the following business:

1. To confirm the minutes of the last meeting.

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

June 30, 2003 together with the Reports of the Auditors and Directors.

3. To approve the payment of cash dividend at the rate of 150 percent (Rupees 15.00 per

share) for the year ended June 30, 2003.

4. To appoint auditors and fix their remuneration for the year ending June 30, 2004. The

present auditors Messrs M. A. Tabussum & Company, Chartered Accountants, Lahore

retire and being eligible, offer themselves for reappointment.

5. To transact any other ordinary business of the Company with the permission of the Chair.

By Order of the Board

(SAEED AHMED)

Sialkot: September 29, 2003 Company Secretary

NOTES:

1. The Share Transfer Books of the Company will remain closed from October 24, 2003

to October 30, 2003 (both days inclusive).

2. A member entitled to attend and vote at this Meeting may appoint another member

as his/her proxy to attend and vote on his/her behalf. Proxies in order to be effective

must be received at the Registered Office of the Company not later than forty eight

hours before the time of meeting.

3. CDC account holders will have to follow the following guidelines for attending the

meeting:

i) In case of individuals, the account holders, sub account holders and the person

whose securities are in group account and their registration details are uploaded

as per the regulations, shall authenticate his/her identity by showing original I.D.

card or passport at the time of attending the meeting. The shareholders

registered in on CDS are also requested to bring their participants I. D. numbers

and account number in CDS.

ii) In case of corporate entity, the Board of Directors, resolution / power of attorney

with specimen signature of the nominee shall be produced (unless provided

earlier) at the time of meeting.

4. Shareholders are advised to notify any change in their addresses.

COMPANY PROFILE

Industrial Profile

Gray of Cambridge (Pakistan) Limited was incorporated in Pakistan on June 02,1964 to incarnate a

strong yearn of Late Anwar Khawaja, the first Managing Director of the Company, of making the

WORLD'S BEST hockey stick in collaboration with Messrs H. J. Gray & Sons of Cambridge, England

[presently named as "Grays of Cambridge (International) Limited"] under an agreement made and

signed in1963.

The formal inauguration of this Pak-British joint enterprise was held on May 08, 1965 although the

unit commenced its commercial production on April 01,1965 under the elite supervision of an English

technician, Mr. D. Fosket who had actually made Hockey Sticks with his own hands for more than half

a century. This great expert gave training to Pakistani workers and carved them into a team of a adroit

and enchanting craftsmen by inculcating them with all his expertise, elegance and excellence.

During 1983, while the company continued progressively conventional hockey sticks (around 90,000

sticks a year), the management acquired technical know-how from Mr.Toon Coolen of Netherlands

and started making a Novelty Stick with a U-Shaped head approved by the Rules Committee of the

International Hockey Federation. By virtue of this blending mechanization with the skills of the local

craftsmen, the hockey sticks produced by this unit have met with a global acceptance as the best

ever-made and the venture proved to be an International success. The fact that the first mark of

17,590 hockey sticks produced and exported during 1965 has culminated to its present volume of

150,000 sticks a year, has evidently placed GRAYS PAKISTAN fairly and squarely on the World

Hockey Map.

Equally important was the year 1973 which also witnessed expansion in Company's Product Line. A

Cricket Ball manufacturing unit was established to produce balls with the World's most famous brand

names "DUKE & SONS" and "GRAY-NICOLLS". This unit has also shown a tremendous growth as

evidenced by rising production of completely hand-sewn cricket balls from a few thousand in its first

year of inception to around forty thousand a year at present. These balls are being used in first class

as well as the Test Cricket in Pakistan and abroad.

The company has a global net work of marketing agents as well as a full fledged quality control wing

consisting of on-job trained supervisors headed by a professional, all working under a regular control

of the Company's Chief Executive / Technical Director Mr. Khawar A. Khawaja who did his B.E. from

the University of Engineering and Technology, Lahore.

Corporate Profile

The company which was incorporated as a private limited company went public in April 1986 and

was listed on Karachi and Lahore Stock Exchanges in January 1987. The issue was very well

received by public and was ever-subscribed by 200 times, a record response by public. Since then,

the share of the company has a very strong demand which is well supported by the fact that its 10

rupees share has touched a 450 rupees price and is being quoted at Rupees 335 at present.

At the same time, a plan for diversification in financial and economic activities is also underway, and

as a result thereof, the Company co-sponsored a leasing company named GRAYS LEASING

LIMITED, listed on Karachi and Lahore Stock Exchanges with an equity capital of 100 million Rupees

which was also oversubscribed even under the prevailing crunch in the investment market.

The financial performance of the company is also revealed by a simple statistic that the shareholders'

equity has grown from 225 thousand rupees in 1965 to 250 million rupees in 2003 inspite of high

payouts.

1992

200 percent

_

1993

100 percent

-

1994

1 00 percent

-

1995 (Half year)

100 percent

-

1996

1 50 percent

-

1997

200 percent

-

1998

1 60 percent

40 percent

1999

200 percent

25 percent

2000

400 percent

25 percent

2001

200 percent

-

2002

110 percent

-

2003

1 50 percent

-

Surely, it is due to this performance that the company was flanked as first by "Corporate Excellence

Award" by the Management Association of Pakistan during 1995 and has been declared as one of the

Top 25 Companies by the Karachi Stock Exchanges for eight consecutive years from 1989 to 1996.

For the years 1997 and 1998, company was not ranked among Top 25 Companies just for lack of

some membership criteria. For 1999 and onwards, it has again been ranked among the Top 25

Companies.

GRAYS PAKISTAN, under the chairmanship of Mr. John Gray and Chief Executive Officer, Mr.

Khawar A. Khawaja, has pledged itself to a very strong commitment to realism and honesty with its

principals which legislates for the benefits of the public and not least of the Sports and sportsmen.

DIRECTORS' REPORT

I am pleased to present the annual report together with audited financial statements for the year

ended 30 June 2003 and the auditors' report thereon. The statement of compliance with best

practices of the Code of Corporate Governance and the auditors' review report on the said report are

also given for perusal thereof.

PERFORMANCE REVIEW

As experienced during last four consecutive years, shift in sales from wooden hockey stick to

composite hockey, particularly in the top and middle range continued in the year under review too. As

a result thereof, the export of hockey sticks has come down from 192,524 in 1998-99 to 143,526 in

2002-03 in number and from 2.54 million dollars a year to 1.2 million dollars a year in value.

Consequently, export revenue from hockey stick has decreased at 26.42 % as compared to the last

year. However, the management endeavored its best to minimize this loss by aggressive marketing

of other products such as cricket balls, roller and bandy hockey and various accessories. The export

of these items have thus improved, though marginally, which successfully contained the decline in

overall sales revenue of the company to 23.75 % despite an approximate 12% fall in dollar exchange

rate. Also government slashed duty draw-back rates from 10% to 1.14%.

The management also exercised a very strict check over cost of production and other operating

overheads and succeeded to control these expenses in line with the rate of inflation. As such, the

operating performance of the company has been modest in absolute terms.

The financial results: in a snmmari7erl form are aiven hereunder:

2003

2002

Rupees

Profit for the year ended 30 June, 2003 after providing

for administration, marketing and financial charges

40,144,291

52,281,425

Less : Workers' profit participation fund

1,952,101

2,549,372

Donations

1,102,275

1,293,995

3,054,376

3,843,367

Profit before taxation

37,089,915

48,438,058

Less : Provision for taxation

4,196,962

5,953,881

Profit after taxation

32,892,953

42,484,177

Un-appropriated profit brought forward

480,937

961,817

Profit available for appropriations

33,373,890

43,445,994

Appropriations :

Proposed final dividend Rs.15 per share

24,497,805

17,965,057

Transfer to general reserve

8,000,000

25,000,000

32,497,805'

42,965,057

Un-appropriated profit

876,085

480,937

Earnings per share

20.14

26.01

FUTURE OUTLOOK

As informed earlier, we have acquired / imported the necessary plant and equipments and the

technical know-how and expertise and established a pilot project for the manufacture of composite

sticks. We have started trial production and placed our products among national as well as

international hockey players to check its quality and acceptability at various levels. You will surely be

pleased to know that the results so far conveyed to us are very encouraging rather more than our

expectations.

At the same time, the development of roller and bandy stick which has been taken well in the market,

will also help us in resetting on to the past growth tracks and maintaining healthy returns to the

shareholders.

DIVIDEND

Dear shareholders, handsome and exemplary returns to you is undoubtedly our first priority. At the

same time we should also be alive of the importance of company's financial health for its future

growth and expansion of its business through profit plough backs. This will save us with ample funds

for heavy investment in various expansion and diversification projects in future.

You will surely appreciate that despite the decline in profits, the Directors have recommended one

hundred and fifty percent (150 %) cash dividend for the year and transfer a sum of rupees 8 million to

the reserves while the balance to be carried forward as un-appropriated profit.

GRAYS LEASING LIMITED

Grays of Cambridge (Pakistan) Limited holds 40 percent of the paid up capital of rupees one hundred

and eighty million of Grays Leasing Limited. The shareholders' equity of this company has grown

from rupees 205.555 million to 220 million during the year ended June 30, 2003 The company has

also declared 10 percent cash dividend for the year.

CODE OF CORPORATE GOVERNANCE

Your directors support and endorse the implementation of the Code of Corporate Governance for the

listed companies and believe that this will strengthen the corporate sector of the country in line with

the Global trends. The directors have implemented the code as required and there has been no

material departure from it. All major disclosures as required under the code, have been complied with

some re-affirmations. The Audit Committee of the Board has also been established.

The financial statements annexed hereto, present fairly its state of affairs, the results of its operations,

cash flows and changes in equity. Proper books of accounts have been maintained and appropriate

accounting policies have been applied consistently using reasonable and prudent accounting

estimates as well as accordance with the International Accounting Standards and other relevant

provisions of law. An effective system of internal controls has also been implemented and regularly

monitored. There is no significant doubt upon the ability of the company to continue its operations as

a going concern.

MEETINGS OF BOARD OF DIRECTORS

During the year, seven meetings of the board were held. Attendance of each director is as under:

Name of director

Attended

Leave granted

Mr. Harold John Gray

1

6

Mr. Khawar Anwar Khawaja

6

1

Mr. Khurram Anwar Khawaja

6

1

Mr. Muhammad Tahir Butt

6

1

Mr. Neil Douglas James Gray

1

6

Mrs. Nuzhat Khawar Khawaja

5

2

Mr. Paul Douglas Gray

1

6

Mr. Sarfraz Mahmood (Alternate to

Mr. Harold John Gray)

1

-

KEY OPERATING AND FINANCIAL DATA

Key operating and financial data for the last decade is given in a summarized form hereafter this

report.

PATTERN OF SHAREHOLDING

The pattern of shareholdings as at June 30,2003 is also given with this report.

INTERNAL CONTROLS

The company has implemented a computer-based management information system. We have also

made significant progress in the development of in-house programs and implementation of new

software and its applications which provide a centralized database, support integration between the

manufacturing and financial systems, and assist the company in providing meaningful data in time for

management decision making. This system is being continuously reviewed by internal and statutory

auditors; hence it works as a strong internal control over company operations in all spheres of

corporate and financial management.

PERSONNELS, WORKING ENVIRONMENT

Your company is well aware of the importance of a team of skilled workers and staff. Therefore, in-

house programs designed for this purpose are regularly undertaken. Fresh apprentices are trained

through on-job practical working methods. At the same time, other important areas like health, safety

and better working environment are also being looked after very well.

The company also affords opportunity to its employees to attend workshops and training seminars

arranged by various management training institutions.

RETIREMENT BENEFITS

The company operates a funded contributory provident fund scheme for its employees. Value of

investment based on respective audited accounts is Rs. 5.740 million (2002:Rs. 4.543 million).

AUDITORS

The present auditors Messrs M.A. Tabussum & Company, Chartered Accountants, retire, and being

eligible, have offered themselves for re-appointment.

APPRECIATION

Before conclusion, I, on behalf of the board of directors, wish to place on record my very special

thanks to all whose contribution helped us to achieve this performance in a difficult situation.

ON BEHALF OF THE BOARD OF DIRECTORS

Sialkot: September29,2003 Khawar A. Khawaja

Chief Executive/Director

STATEMENT OF VALUE ADDED AND ITS DISTRIBUTION

2003

2002

(Rupees in '000) %

VALUE ADDED

Net Sales

92,448

121,236

Less : Materials and services

53,545

60,297

38,903

60,939

Other income

27,988

20,991

66,891

100

81,930

100

DISTRIBUTION

To Employees

Salaries, wages and benefits

23,656

35.36

25,644

31.3

Worker's profit participation fund

1,952

2.92

2,549

3.11

25,608

38.28

28,193

34.41

To Government

Taxes on income

4,197

6.27

5,954

7.27

To Banks

Interest, commission etc.

530

0.79

1,249

1.52

To Shareholders

Dividend

24,498

36.62

17,965

21.93

To Service to community

Donations

1,102

1.65

1,294

1.58

Retained in business

Depreciation

2,561

3.83

2,756

3.36

Retained profits

8,395

12.55

24,519

29.93

10,956

16.38

27,275

33.29

66,891

100