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Khurshid Spinning Mills Ltd.
Annual Reports 2003

Contents

Company's Information
Vision and Mission Statement
Statement of Ethics alongwith key operating
and Financial Data
Statement of Compliance
Review Statement to the Members
Notice of Meeting
Directors' Report
Auditors' Report
Balance Sheet
Profit and Loss Accounts
Statement of Changes in Financial Position
Statement of Changes in Equity
Notes to the Accounts
Pattern of Shareholding
Categories of Shareholders

INFORMATION

BOARD OF DIRECTORS	Khawaja Khurshid Anwar		Chairman
	Khawaja Amer Khurshid		Chief Executive
	Khawaja Asem Khurshid		Director
	Mrs. Sharmeen Asem		Director
	Missjabeen Khurshid		Director
	Mr. Zahid Sultan Sheikh		Director
	Khawaja Shahid Amin Sethi		Director

AUDIT COMMITTEE	Mrs. Sharmeen Asem		Chairperson
	Missjabeen Khurshid		Member
	Mr. Zahid Sultan Sheikh		Member
	Mr. Muhammad Tariq Awan		Secretary

CFO/COMPANY SECRETARY	Mr. Ijaz Ahmed Faizi

HEAD OF INTERNAL AUDIT	Mr. Muhammad Saeed Butt

AUDITORS	M. Hussain Chaudhury & Co.
	Chartered Accountants
	25-E, Main Market
	Lahore.

BANKERS	Habib Bank Limited
	The Bank of Punjab
	Meezan Bank Limited
	AI-Baraka Islamic Investment	Bank Ltd.
	Citibank N.A.
	Metropolitan Bank Limited
	Union Bank Limited

REGISTERED OFFICE	69-G, Gulberg-lll,
	Lahore - (Pakistan)

HEAD OFFICE	Regency, The Ma!!
	Faisalabad.

FACTORY	35th Kilometer,
	Sheikhupura Road,
	Faisalabad.

Mission

We aim to strive for market leadership, to maintain full confidence of our customers, ensure
continuous improvement in profitability and at maintenance of industry standards by striving
for quality products and introduction of innovative quality applications.

Vision

• We aim at maintaining the confidence of our valued customers by fulfilling their needs,
demands and stipulations.

• We will achieve consistent financial performance which creates value for the shareholders.

• GUI organization encourages employee participation that also helps us achieve quality
results.

• We believe in innovative technology applications to achieve continuous improvement
and ability to avail the required opportunities.

• We intend to involve all employees in the development and implementation of quality
systems, which will be reviewed periodically to ensure their effectiveness.

» We aim to improve the profitability of our company through improved efficiency and
cost controls.

• We will take effective measures so as to protect the environment and contribute towards
the economic strength of the country and function as a good corporate citizen.

Statement of Ethics

and Business Practices

Statement of Ethics and Business Practices

We believe that a complete code of ethics is essential for the maintenance of professionalism and integrity in the day-
to-day functioning of Khurshid Spinning Mills Limited. Our aim is to develop highest standards of excellence for the
product and the betterment for all those involved directly or indirectly with our Company, by providing a stimulating
and challenging team oriented work environment that encourages, develops and rewards excellence and diligently
serves our communities with integrity and pride.

Key Operating
and Financial Data

	2003	2002	2001	2000	1999	1998	1997
				Rupees in '000'
Sales	361,879	362,441	375,9U2	337,764	304,932	304,320	327,146
Gross Profit	14,203	41,710	44,159	49,248	-3,067	-1.931	16,522
Profit/(ioss) before taxation	-9,025	15,503	17,562	20,556	-26,493	-14,138	-10,819
Taxation	11,777	1,812	1,592	1,773	321	1,521	1,636
Profit/i, loss) after taxation	20,802	13,691	15,970	18,783	-26,814	-15,659	-12,455
Total Assets	305,781	303,732	291,155	287,071	276,786	270,902	265,671
Current Liabilities	111,299	74,758	61,861	66,706	68,752	39,424	86,615
Presented by:
Share Capital	131,748	131,748	131,748	131,748	131,748	131,748	131,748
Equity	-38,144	-92,092	-105,782	-125,564	-137,760	-110,945	-95,285
Long Term Loans and Leases	49,749	113,826	130,049	140,296	153,832	146,725	116,931
Deffered Liability	34,144	2,531	1,716	3,174	1,009	747	3,004
Ratios:
Gross Profit to Sales %age	3.92	12	12	15	-1	-1	5)
Profit/(loss) before tax to sales %age	-2.49	4	5	6	-9	-5	-3
Profit/(loss) after tax to sales %agc	-5.75	4	4	6	-9	-5	-4
Current Ratio	0.91	0.93	0.94	1.35	1.75	2.08	2.44
Debt Equity Ratio	0.39	0.81	0.94	0.89	0.89	0.76	0.81

Statement of Compliance

with best practices of the Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance contained in listing regulation
of stock exchanges in Pakistan for the purpose of establishing a framework of good govenance, whereby a liste<
company is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:

1. The company encourages the representation of non-executive directors on its Board of Directors. At presen
the Board of Directors includes two non-executive directors which is expected to be changed in next clectio:
of directors.

2. The directors have confirmed that none of them is serving as a director in more than ten listed companies
including this company.

3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted i
payment of any loan to a banking company, a DPI or an NBFI or, being a member of a stock exchange, \\i
been declared as a defaulter by that stock exchange.

4. No casual vacancy occurred in the Board during the year.

5. The Company has prepared a 'Statement of Ethics and Business Practices' which has been signed by all tr
directors and employees of the company.

6. The Board has developed a vision/mission statement. Overall corporate strategy and significant policies <
the company are under process of approval.

7. Ail the powers of the Board have been duly exercised and decisions on material transactions, includir
appointment and determinatin of remuneratin and terms and conditions of employment of the CEO and oth
executive directors, have been taken by the Board,

8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected I
the Board for this purpose and the Board met at least once in every quarter. Written notices of the Boa
meetings, along with agenda and working papers, were circulated at least seven days before the meeting
The minutes of the meetings were appropriately recorded and circulated.

9 The cheif executive recomends that members of the board should approach him, should they feel at

necessity to conduct other orientation courses in this regard.

10. The Board has approved appointment of CEO, Company Secretary and Head of Internal Audit, including the
remuneration and teims and conditions of employment, as determined by the CEO.

11. The directors report for this year has been prepared in compliance with the requirements of the Code ar
fully describes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Baord.

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that
desclosed in the pattern in shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

15. The Board has formed an audit committee. It comprises three members, of whom two are non-executive
directors including the chairman of the committee.

16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and
final results of the Company as required by the Code. The terms of reference of the committee have been
formed and advised to the committee for compliance.

17. The Board has set up an effective audit function.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under
the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any
of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the
firm and all its partners are in compliance with Internation Federation Accountants (IFAC) guidelines on code
of ethics as adopted by the Institute cf Chartered Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the listing regulation and the auditors have confirmed that they have observed IFAC
quidelines in this regard.

20. We confirm thai all other material principles contained in the Code have substantially complied with.

On behalf of the Board of Directors

Lahore KHAWAJA AMER KHURSHID

Dated: 09th December 2003 Chief Executive

Review report to the members

on statement of compliance with best practices
of Code of Corporate Governance

We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance
prepared by the Board of Directors of KHURSHID SPINNING MILLS LIMITED, to comply with the Listing
Regulation No.37 (Chapter XI) and No.40 (Chapter XIII) of the Karachi Stock Exchange and Lahore Stock Exchange
respectively, where the Company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the
Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whethei
the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code ol
Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personne
and review of various documents prepared by the Company to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and interna
controls systems sufficient to plan the audit and develop an effective audit approach. We have not carried out an¹
special review of the internal control system to enable us to express an opinion as to whether the Board's statemen
on internal control covers all controls and the effectiveness of such internal controls.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance
does not appropriately reflect the Company's compliance, in all material respects, with the best practices containei
in the Code of Corporate Governance as applicable to the Company for the year ended September 30, 2003

Lahore. (M. HUSSAIN CHAUDHURY & CO.

Dated: 09th December 2003 Chartered Accountant*

Notice is hereby given that the 18th Annual General Meeting of the shareholders
of Khurshid Spinning Mills Limited will be held on Wednesday, the 31st
December, 2003 at the REGISTERED OFFICE, situated at 69-G, GULBERG-III,
LAHORE at 9:00 A.M. to transact the following business:

ORDINARY BUSINESS

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

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended 30th September,
2003 and reports of the Directors and Auditors thereon.

3. To appoit Auditors and fix their remuneration, M/S. M. Hussain Chaudhury and Company, Chartered
Accountants, the icuring Auditors being eligible to offer themselves for re-appointment.

4. To transact any other ordinary business with the permission of the chair

By order of the Board

Lahore. IJAZ AHMED FAIZI

Dated: 9th December 2003 Company Secretary