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GULISTAN SPINNING MILLS LIMITED

ANNUAL REPORT 2003

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

Mr. Abdul Shakoor (Chairman)

Mr. Tanveer Ahmed (Chief Executive)

Mr. Naseer Ahmed

Mr. N. R. Siddiqui

Mr. Mohammad Abdullah

Mr. Riaz Ahmed

Mr. Mohammad Younus

AUDIT COMMITEE

Mr. Abdul Shakoor (Chairman)

Mr. N. R. Siddiqui

Mr. Riaz Ahmed

CHIEF FINANCIAL OFFICER

Mr. Mohammad Shahid

COMPANY SECRETARY

Mr. Zameer Q. Siddiqui

AUDITORS

M/s. Hameed Chaudhri & Company

Chartered Accountants

Karachi

LEGAL ADVISOR

M/s. Akhtar Javed - Advocate

TAX CONSULTANT

M/s. Sharif & Company - Advocate

BANKERS

United Bank Limited

Habib Bank Limited

National Bank of Pakistan

SHARE REGISTRAR OFFICE

M/s. Hameed Majeed Associates (Pvt) Ltd.

Karachi Chamber

Hasrat Mohani Road

Karachi

Ph. 2424826, 2412754

Fax. 2424835

REGISTERED OFFICE

2nd Floor Finlay House

I.I. Chundrigar Road

Karachi

REGIONAL OFFICE

58 Main Gulberg

Lahore

MILLS

Jumber Khurd Tehsil Chunnian Distt.Kasur

Corporate Vision / Mission Statement

Vision

We aim at transforming Gulistan Spinning Mills Limited (GTSM) into a complete

Textile unit to further explore international market of very high value products. Our

emphasis would be on product and market diversification. Value addition and cost

effectiveness. We intend to fully equip the Company to acquire pioneering role in

the economic development of the Country.

Mission

The Company should secure and provide a rewarding return on investment to its share

holders and investors, quality products to its customers, a secured and environment

friendly place of work to its employees and present itself as a reliable partner to all

business associates.

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of the Shareholders of Gulistan Spinning Mills

Limited will be held on Thursday, 29 January 2004 at 10.00 a.m. at Trading Hall, Karachi Cotton

Exchange Building, I.I. Chundrigar Road, Karachi to transact the following business:

1. To confirm the minutes of the preceding meeting of the shareholders.

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

September 30. 2003 together with the Directors' and Auditors' Report thereon.

3. To approve the dividend as recommended by the directors of the company.

4. The board of directors based on the recommendation of the audit committee, recommend the

appointment of M/s. M. Yousuf Adil Saleem & Co. Chartered Accountants as the auditors of

the Company for the year 2003-2004 on such remuneration as fixed by the Chairman of

the Company.

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

KARACHI BY ORDER OF THE BOARD

07 JANUARY, 20O4 COMPANY SECRETARY

NOTES:

1. The Register of Members of the Company will remain closed from 28-01-2004 to 01-02-2004

(both days inclusive). Transfer received in order at the office of Share Registrar of the Company

i.e. Hameed Majeed Associates (Pvt) Limited, 5th Floor, Karachi Chambers, Hasrat Mohani Road,

Karachi at the close of business on 27-01-2004 will be treated in time for the purpose of entitle

ment of cash dividend, if approved, in respect of the year ended 30th September 2003.

2. Proxies in order to be effective must be received duly completed in all respect by the Company at

the Registered Office not less than 48 hours before the time for holding the meeting.

3. CDC Shareholders, entitled to attend and vote at this meeting, must bring with them their

National Identity Cards / Passport in original to prove his / her identity, and in case of Proxy

must enclose an attested copy of his / her NIC or Passport. Representative of corporate members

should bring the usual documents required for such purpose.

4. Member are requested to notify immediately for any change in their addresses to our Company's

Share Registrar, M/s. Hameed Majeed Associates (Pvt) Limited.

DIRECTORS' REPORT TO THE SHAREHOLDERS

Dear Shareholders,

Assalam-o-Aliakum,

Your directors present before you the annual aufited accounts for the year ended September 30, 2003

together with auditors report thereon & recommend the following appropriations for your approval.

2003

2002

RUPEES

Profit before tax

13,174,156

-539,057

Profit after tax

5,715,053

-9,671,676

Un-appropriated profits brought forward

92,506,757

102,178,433

Total profit available for appropriation

98,221,810

92,506,757

Appropriations

Proposed dividend @ 7.5 %

7,500,000

Un-appropriated profits carried forward

90,721,810

92,506,757

Earning per share

0.57

-0.97

DIVIDEND

The board proposes payment of final dividend of 7.5% i.e. Rs. 0.75 per share for the year under

reviewe.

OPERATIONS

As brought to your notice in the report of last quarter the results of the Company at the close of the year

had improved due to stable prices of yarn as the prices of yarn remained stable.

As a whole the conditions of the market during the year under report were volatile. The prices of yarn

both in home & foreign market remain low and therefore could not absorb the increased input cost of

cotton which was around 10 % more than the previous year cotton prices. As brought to your notice

earlier the prices of yarn were picked up in the month of April due to increase in cotton prices in

international market but SARS epidemic in far eastern countries again depressed the demand which

reduced the prices.

Though the sales had increased from Rs. 691 million of the last year to Rs. 701 million. Still the gross

margin had reduced in comparison to the last year due to heavy input cost. The company has earned a

profit before tax of Rs. 5.7 million as compared to Rs. (0.539) million of the last year. The increase in profit

is mainly attributed to the reduction of financial cost.

BMR / EXPANSION

Adhering to the policy of the Company to keep the production unit fully equipped with the latest

technology in the field of yarn your directors are taking positive action in this direction so that we achieve

so that we achieve the optimum production with acceptable quality & competable price.

FUTURE OUTLOOK

Unfortunately the prices of raw cotton in the beginning were as high as Rs. 3,500 per mound. It is due to

damage of crop by rains but specially due to severe pest attack. On the International Market the prices

were also increased due to increased demand of cotton from China etc. The cotton requirements of our

Spinning Industry are growing. Against the growing requirements of cotton the local production of cotton

is stagnant around 10 million bales (Ex Farms). The Spinning Industry locally tremendously expanded &

presently the industry needs 12 million bales against the expected production of around 9.5 million bales

(Ex-ginning). The imbalance between the demand and the supply of cotton has necessitated its import as

we failed to maintain equilibrium between the demand which is increasing and the supply which is

stagnant rather decreasing.

In this scenario we foresee a difficult time for the spinning units if the prices of yarn do not improve in the

home & export market. It is our earnest endeavor that we increase our production, improve the quality,

arrest the production cost so that we could maintain the viability of the Company by successfully market-

ing our products.

The marketing force has been restructured by inducting qualified professionals to face the increasing

competition of our product in the market.

CORPORATE & FINANCIAL REPORTING FRAME WORK

The board is mindfull of its responsibilities as may be obligatory by the code of corporate governance and

confirms that

i) That the financial statement prepared by the management of the Company, present fairly its

state of affairs, the results of its operations, cash flows and changes in equity.

ii) Proper books of accounts of the Company have been maintained.

iii) Appropriate accounting policies have been consistently applied in preparetion of financial state

ments and accounting estimates are based on reasonable and prudent judgement.

iv) International Accounting Standards, as applicable in Pakistan have been followed in preparation

of financial statements and any departure there from has been adequatley disclosed.

v) The system of internal control is sound in design and has been efectively implemented and

monitored.

vi) There are no significant doubts upon the Company's ability to continue as going concern.

vii) There has been no material departure from the best practices of corporate governance as

detailed in the listing regulations.

As required by the code of corporate governance we include the following informations in this report.

1. Statement of pattern of shareholding is annexed.

2. Statement of shares held by associated undertaking & related persons are annexed.

3. Statement of 09 board meetings held during the year and attendance by each director is as

follows:-

Name of Directors

No. of meeting attended

Mr. Abdul Shakoor

Mr. Naseer Ahmed

Mr. Tanveer Ahmed

Mr. Mohammad Abdullah

Mr. N. R. Siddiqui

Mr. Riaz Ahmed

Mr. Mohammad Younus

(Leave of absence on request was granted in case the directors who could not attend the Board

meetings due to other pre occupation).

4. Key operating & financial statistics for (he last six years is annexed.