KOHINOOR SUGAR MILLS LIMITED
ANNUAL REPORT 2004
The Company maintains a website (www.ksuqar.com) and latest accounts may be placed there
for information of the shareholders and the general public. Prior permission of the SECP would be
sought for transmitting the quarterly accounts on Company's website after the approval of the
shareholders. The Company however will make available printed copies of accounts to the
shareholders on demand at their registered address free of charge, within one week of receiving
such request.
b)     The working Directors of the Company were authorized through a special resolution passed by
the shareholders of the Company in the annual general meeting held on March 29, 2003 to start
procedure of buy-back of non-marketable lots of the shares of the Company in accordance with
the requirements of section 95-A of the Companies Ordinance, 1 984.
The   Directors   started   buy-back   procedure   accordingly  and   some   exemptions   from   the
requirements of section 95-A were sought from Securities & Exchange Commission of Pakistan
(SECP) to make the process faster and convenient but the Commission did not accept the
proposed exemptions. Moreover, response from holders of non-marketable lots was very poor.
Now due to laps of appropriate time and above stated reasons, Directors have proposed to stop
the buy-back procedure and withdraw above-referred special resolution.
NOTE:
1.     A member entitled to attend and vote at the meeting may appoint another member as his/her
proxy to attend and vote. Proxies in order to be effective must be received at the Registered
Office of the Company not later than 48 hours before the time of holding of the meeting.
2.     CDC shareholders, entitled to attend and vote for this meeting, must bring with them their
NIC/Passport in original alongwith Participant ID Number and their Account Number to prove their
identity, and in case of Proxy, must enclose an attested copy of his/her NIC or Passport.
Representatives of Corporate members should bring usual documents (Power of Attorney /
Resolution) required for such purpose.
DIRECTORS' REPORT TO THE SHAREHOLDERS
Your Directors are pleased to present the thirty-sixth report together with audited accounts for the
year ended September 30, 2004.
				2004	2003
FINANCIAL RESULTS				(Rs. in thousands)
Profit / (Loss) before taxation				32,783	-29,042
Taxation				-4,100	-3,901
Profit / (Loss) available for appropriations				28,683	-32,943
OPERATING RESULTS
Operating results for the year and comparative figures are as under :
		2004	2003	2002	2001
Crushing days	Nos.	133	166	142	129
Average recovery	%	9.16	7.74	8.49	7.8
Cane crushed	M. Tons	583,339	630,565	529,915	361,843
Sugar produced	M. Tons	53,446	48,786	46,074	35,153
Profitability has been restored due to reduction in the sugar surplus and resultant price stability.
Recovery also showed remarkable improvement because of cane quality improvement and
varietal change. The management is encouraged by recent policy initiative by the Government.
These reflect a realization that sugar and sugarcane prices need to be interlinked to provide a
sustainable base to the sugar agronomy and all its stakeholders.
BMR PLANS
New vapour cell has been commissioned and new continuous vacuum pan is installed and ready
for operation. A new weighbridge has been installed and various equipments for balancing and
modernization are being finalized.
PROSPECTS FOR 2004 - 2005
Area under sugarcane cultivation has reduced but better yields per acre are expected. Crop
quality is slightly lower due to lack of water. Sugar prices have stabilized as mentioned earlier and
the management expects that barring any supply disruptions, we can look forward to a successful
season.
INTERNAL CONTROL SYSTEM
The system of internal control is sound in design and has been effectively implemented and
monitored. The review will continue in future for the improvement in controls.
GOING CONCERN
There are no significant doubts upon the Company's ability to continue as a going concern.
SUMMARIZED FINANCIAL DATA
Operating and financial summarized data for the last six years is annexed with financial
statements.
INVESTMENTS IN PROVIDENT FUND
Value of Investments based on last audited accounts of Provident Fund is Rs. 38.084 million.
AUDIT COMMITTEE
The Board of Directors in compliance to the Code of Corporate Governance has established an
Audit Committee. Following directors are its members.
Mr. M. Farooque Saigol                                                 Chairman
Mr. M. Usman Saigol                                                   Member
Mr. M. Saleem Saigol                                                  Member
SAFETY AND ENVIRONMENTS
The Company strictly complies with the standards of the safety rules & regulations. It also follows
environmental friendly policies.
TRADING COMPANY'S SHARES
Directors, CEO, CFO, Company Secretary and their spouses and minor children have made
transaction of Company's shares during the year as follows:-
Name of Person                                             Status                 No. of Shares
Purchased
Mr. M. Saleem Saigol                                     Director                   37,090
OUTSTANDING STATUTORY DUES
Detail of outstanding statutory dues is given in Note 20 to the Accounts.
COMMUNICATION
Communication with the shareholders is given high priority. Annual, Half Yearly and Quarterly
Accounts are distributed to them within the time specified in the Companies Ordinance, 1984.
Every opportunity is given to the individual shareholders to attend and freely ask questions about
the Company's operations at the Annual General Meeting.
AUDITORS' REPORT
In reply to auditors observations your Directors have to comment as follows :
Recovery of dues from Kohinoor Textile Mills Ltd. (KTML) against the amount decreed in our
favour continues to be stayed in an appeal by KTML in the Lahore High Court. Mark-up has not
been provided.
AUDITORS
The retiring auditors M/s. S. Zafar Shah Naveed & Co. are eligible for the ensuing period, and
have offered themselves for reappointment.
APPRECIATION
Management and employee relations remained highly satisfactory and your Directors place on
record their appreciation to all concerned.
BOARD OF DIRECTORS MEETINGS
During the year 2003-04, four Meetings of the Board of Directors were held. The attendance by
each Director is as follows :
	No. of Meetings Attended
1.     Mr. M. Usman Saigol		2
2.     Mr. M. Farooque Saigol		4
3.      Mr. M. Saleem Saigol		4
4.      Mr. Tariq Rehman		2
5.      Sheikh Zahid Sultan		1
6.      Khawaja Khurshid Anwar		2
7.      Mr. Muhammad Nawaz Tishna - NIT Nominee                    3
PATTERN OF SHAREHOLDING
The pattern of shareholding of the Company is annexed with the financial statements.
COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
The management is fully aware of the compliance with the Code of Corporate Governance and
steps have been taken for its effective implementation. The various statements, as required by
the Code, are given below:
PRESENTATION OF FINANCIAL STATEMENTS
The financial statements, prepared by the management of the Company, fairly present its state of
affairs, the results of its operations, cash flow and changes in equity.
BOOKS OF ACCOUNT
The  Company  has  maintained  proper books  of Account as  required  by the  Companies
Ordinance, 1984.
ACCOUNTING POLICIES
Appropriate accountings policies have been consistently applied in preparation of financial
statements and accounting estimates are based on reasonable and prudent judgment.
INTERNATIONAL ACCOUNTING STANDARDS (IAS)
International Accounting Standards, as applicable in Pakistan, have been followed in preparation
of financial statements.
The directors, CFO and executives do not hold any interest in the shares of the Company
other than that disclosed in the pattern of shareholding.
The Company has complied with all the corporate and financial reporting requirements of the
Code.
The audit committee is continued and it comprised 3 members, of whom, all are non-executive
directors including the Chairman of the Committee.
The meetings of the audit committee were held at least once every quarter prior to approval of
interim and final results of the Company and are required by the Code. The terms of reference
of the committee have been formed and advised to the committee for compliance.
The Board has set-up an effective internal audit function who are considered suitably qualified
and experienced for the purpose and are conversant with the policies and procedures of the
Company and they are involved in the internal audit function on a full time basis.
The  statutory  auditors  of the  Company  have confirmed  that they have  been  given  a
satisfactory rating under the Quality Control Review programme of the Institute of Chartered
Accountants of Pakistan and that the firm and all its partners are in compliance with
International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by
Institute of Chartered Accountants of Pakistan.
The statutory auditors of the persons associated with them have not been appointed to provide
other services  except in  accordance with the  listing  regulations and the auditors have
confirmed that they have observed IFAC guidelines in this regard.
We confirm that all other material principles contained in the Code have been substantially
complied with.
STATEMENT OF COMPLIANCE WITH THE CODE
OF CORPORATE GOVERNANCE
Year Ended   September 30, 2004
This statement is being presented to comply with the Code of Corporate Governance contained in
Regulation No. 37, 43 & 36 of listing regulations of Karachi and Lahore Stock Exchanges respectively
for the purpose of establishing a framework of good governance, whereby a listed 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 manners:
1.         The company encourages representation of independent non-executive directors and directors
representing minority interests on its Board of Directors.    At present the Board includes
independent non-executive 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, being a member of a stock exchange and has been declared as a defaulter by that
stock exchange.
4.          A casual vacancy occurred in the Board on September 2, 2004 was filled up same day by the
directors.
5.         The Company has prepared a Statement of Ethics and Business Practices, which has been
signed by all the directors and employees of the Company.
6.         The Board has developed a vision/mission statement, overall corporate strategy and significant
policies of the Company. A complete record of particulars of significant policies along with the
dates on which they were approved or amended has been maintained.
7.         All the powers of the board have been duly exercised and decisions on material transactions,
including  appointment  and  determination  of remuneration  and  terms  and  conditions of
employment, of the CEO and other executive directors have been taken by the Board.
8.         The meetings of the Board were presided over by the Chairman and the Board met at least
once in every quarter. Written notices of the Board 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           No orientation course has been arranged during the year.
10.        The appointment of CFO, Company Secretary and Head of Internal Audit, including their
remuneration and terms and conditions of employment have been duly approved by the Board.
11.        The Directors' Report for this year has been prepared in compliance with the requirements of
the Code and 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 Board.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of KOHINOOR SUGAR MILLS LIMITED as at September 30,
2004 and the related profit and loss account, cash flow statement and statement of changes in equity
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.
It is the responsibility of the Company's management to establish and maintain a system of internal control,
and prepare and present the above said statements in conformity with the approved accounting standards
and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on
these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
above said statements are free of any material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the above said statements. An audit also includes
assessing the accounting policies and significant estimates made by management, as well as, evaluating the
overall presentation of the above said statements. We believe that our audit provides a reasonable basis for
our opinion and, after due verification, we report that :
(a)     The advance to Kohinoor Textile Mills Limited which was necessitated due to the reorganization of
management in the Saigol Group of Companies, together with interest include up to September 30,
1985, amounted to Rs. 9.715 million. No interest has been provided on the said advance since
September 30, 1985. The balance appearing in the audited accounts of Kohinoor Textile Mills Limited
is Rs. 4.794 million. The balance confirmation in this regard is not provided by the management. The
Company has taken legal action for the recovery of dues. No provision against amount recoverable
has been made in the account (See Note 10.1);
(b)     In our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
(c)     In our opinion :
(i)      the balance sheet and the 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 the expenditure incurred during the year were in
accordance with the objects of the Company;
(d)     in our opinion, except for the effect, if any, of the matter referred to in paragraph (a) above, and to the
best of our information and according to the explanations given to us, the balance sheet, profit and
loss account, cash flow statement and statement of changes in equity together with the notes forming
part thereof conform with approved accounting standards as applicable in Pakistan, and, 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, 2004 and of the
profit, its cash flows and changes in equity for the year then ended; and
(e)     in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980)
was deducted by the Company and deposited in the Central Zakat Fund established under Section 7
of that Ordinance.
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 Kohinoor Sugar Mills Limited to
comply with the Listing Regulation No. 37 (Chapter XI) of Karachi Stock Exchange, Clause 40
(Chapter XIII) of the Listing Regulations of the Lahore Stock Exchange, 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, whether the Statement of Compliance reflects the status of the
Company's compliance with the provisions of the Code of Corporate Governance and report if it
does not. A review is limited primarily to inquiries of the Company personnel 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 internal control systems sufficient to plan the audit and develop an effective audit
approach. We have not carried out any special review of the internal control system to enable us
to express an opinion as to whether the board's statement on internal controls 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 contained in the Code of Corporate Governance as applicable to
the Company for the year ended September 30, 2004.
BALANCE SHEET AS AT SEPTEMBER 30, 2004
			Note	2004	2003
FIXED ASSETS				(Rupees)	(Rupees)
Property, plant and equipments			3	610,815,853	538,411,872
Assets subject to finance lease			4	32,571,000	41,847,888
Capital work in progress			5	26,001,762	70,727,682
				669,388,615	650,987,442
LONG TERM DEPOSITS			6	4,727,201	3,615,651
CURRENT ASSETS
Stores, spares and loose tools			7	63,263,763	60,437,472
Stock in trade			8	95,608,226	96,517,200
Trade debts - unsecured, considered good			9	4,670,597	3,367,174
Advances, deposits and prepayments			10	32,835,943	41,031,951
Taxation			11	31,475,321	25,739,842
Cash and bank balances			12	1,168,854	2,622,035
				229,022,704	229,715,674
CURRENT LIABILITIES
Short term borrowings - Secured			13	163,962,644	152,272,000
Current maturity of long term loans			14	87,059,519	28,666,667
Current maturity of liabilities against assets
subject to finance lease			18	11,330,501	15,742,523
Creditors, provisions and accrued expenses			15	27,821,223	43,458,528
Provision for taxation				4,100,057	3,900,989
Dividend:
Un-claimed