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Packages Limited

Annual Report 1999

Contents

Introduction

Company information

Board of directors

Amjad Waheed

Asadullah Khawaja

Kirsten Rausing

Najeeb Samie

Rafi Iqbal Ahmad

Saulat Said

Seppo Hietanen

Syed Hyder Ali

Syed Wajid Ali

(Chairman & Chief Executive)

Tariq Hamid

Advisor

Syed Babar Ali

Company secretary

Adi J. Cawasji

Auditors

A.F. Ferguson & Co.

Chartered Accountants

Legal advisors

Hassan & Hassan - Lahore

Orr, Dignam & Co. - Karachi

Bankers

ABN Amro Bank

American Express Bank Limited

ANZ Grindlays Bank Limited

Bank of America, N.T. & S.A.

Citibank N.A.

Credit Agricole Indosuez

The Global French Bank

Deutsche Bank A.G.

Emirates Bank International P.J.S.C.

Faysal Bank Limited

Habib Bank Limited

Mashreq Bank

Muslim Commercial Bank Limited

Societe General

The French & International Bank

Standard Chartered Bank

The Hongkong & Shanghai

Banking Corporation Limited

United Bank Limited

Head office & works

Shahrah-e-Roomi

P.O. Amer Sidhu

Lahore-54760

Pakistan

PABX: 5811541-46, 5811191-94

Cable: PACKAGES LAHORE

Telex: 44866 PKGS PK

Fax: (042) 5811195, 5820147

Registered office &

Regional sales office

1st Floor, Hilal-e-Ahmer House

Khayaban-e-Iqbal

Main Clifton Road

Karachi-75600

Pakistan

PABX: 5863941-42, 5874047-49

Cable: PACKAGES KARACHI

Fax: (021) 5860251

Regional sales office

1st Floor, Yasin Plaza

74 West Blue Area

Islamabad-44000

Pakistan

Paktel: (0303) 7370694

PABX: 276765, 276768

Fax: (051) 829411

Zonal sales offices

1st Floor, 61 Khan Plaza

Qasim Road

Multan Cantt

Pakistan

Tel & Fax: (061) 587370

1st Floor, Room No. 7

Glamour Centre

Mission Road, Sukkur-65200

Tel & Fax: (071) 26581

Highlights

Year to June 30,

1999

1998

Sales - million rupees

3,925.70

3,512.27

Profit before tax - million rupees

512.39

162.75

Profit after tax - million rupees

384.15

220.08

Cash dividend - percentage of paid up capital

37.34

10.00

Stock dividend - percentage of paid up capital

15.00

Earnings per share - rupees

9.33

6.15

Shareholders' equity - million rupees

1,927.10

1,696.61

Total assets - million rupees

6,327.31

6,252.70

Paper and board produced - tonnes

61,026

56,370

Paper and board converted - tonnes

54,080

51,943

Number of shareholders

2,647

2,624

Number of shares

41,157,646

35,789,258

Number of employees

2,770

2,674

Notice of meeting

Notice is hereby given that the Forty Fourth Annual General meeting of Packages

Limited will be held at Beach Luxury Hotel, Moulvi Tamizuddin Khan Road, Karachi

on Tuesday, December 7, 1999 at 10.30 a.m. to transact the following business:-

1. To receive, consider and adopt the Audited Accounts for the year ended June 30,

1999, the Report of the Auditors thereon and the Report o the Directors.

2. To approve dividend. The Directors have recommended a final dividend at the rate

of 37.335% (Rs. 3.7335 per share of Rs. 10) on the existing issued share capital

of the Company.

3. To appoint Auditors and to fix their remuneration.

4. To transact any other business with the permission of the Chairman.

By Order of the Board

Adi J. Cawasji

October 22, 1999

Company Secretary

Notes:

1. The Share Transfer Books of the Company will be closed from November 2,

1999 to November 15, 1999 (both days inclusive) for the purposes of entitlement

of dividend and to attend the Annual General Meeting on December 7, 1999.

2. Any member of the Company entitled to attend and vote at the Meeting may

appoint another member as his/her proxy to attend and vote instead of him/her.

Proxies must be received at the Registered Office of the Company (First floor,

Hilal-e-Ahmer House, Khayaban-e-Iqbal, Main Clifton Road, Karachi-75600)

not less than 48 hours before the time of holding the Meeting.

3. Any individual Beneficial Owner of the Central Depository Company, entitled to

vote at this Meeting must bring his/her National Identity Card with him/her to

prove his/her identity, and in case of proxy must enclose an attested copy of his/

her National Identity Card. Representatives of corporate members should bring

the usual documents required for such purpose.

4. Members are requested to promptly notify the Company of any change in their

addresses.

Directors' report to the shareholders

The Directors are pleased to present their annual report together with the Company's

audited accounts for the year ended June 30, 1999.

Operating Results

The year under review has been better than last year. The sales increased by 12% and

were just under Rs. 4 billion. Your Company has posted a post tax profit of Rs. 384

million as against Rs. 220 million during the last year. The improvement in profit is

due to increased capacity utilization resulting from the completion of the earlier expansion

program, decrease in financial charges because of loan repayments and much improved

dividend from investments in companies sponsored by our Group.

The Company's paper and board production was 61,026 tonnes against 56,370 tonnes

and conversion was 54,080 tonnes against 51,943 tonnes last year.

New Expansion

Balancing, Modernization, Replacement and Expansion (BMR & E) is a continuous

feature of your Company We continue to invest in upgrading our equipment to increase

output and productivity, to improve quality to meet changing market demands and to

ensure that we remain competitive in an increasingly demanding world.

Your Company has invested Rs. 650 million in the BMR & E program. The program is

being financed through medium term loans frown local financial institutions. The program

is expected to be completed by December, 1999. The major components of the program are:

1. The expansion of Flexible Packaging Line by installation of our third new rotogravure

printing machine; and

2. The expansion o the Carton Line by a new Lemanic rotogravure inline printing

and cutting creasing machine.

ISO 9001 Certification

Your Company reached another landmark with the ISO 9001 certification of its Corrugator

Division. We have so far received ISO certification for our Packaging and Tissue Divisions.

The work for certification of Paper Board Division is in progress and is expected to be

completed within the year. This will, Insha Allah, then make all our production areas

ISO 9001 certified.

Millennium Compliance

The Millennium Compliance has been achieved to the extent of 99% and the Directors

are confident that the Company's internal operations will not be disrupted due to this

issue. A contingency plan has been made to take care of any unforeseen event at the

time of Millennium changeover.

Appropriation

The Directors recommend a payment of cash dividend of 37.335 percent (Rs. 3.7335

per share) on the paid up capital of the Company.

Accordingly, the following appropriations have been made:-

The Company made an after tax profit of

384,154

Adding thereto the unappropriated profit at June 30, 1998

407

------------------

Makes available for appropriation a sum of

384,561

From that sum the Directors recommend payment

of a cash dividend of Rs. 3.7335 per share

153,662

and transfer to general rescue

230,000

------------------

383,662

------------------

and propose to carry toward to 1999-2000 the balance of

899

==========

Auditors

The Auditors, Messrs A. F. Ferguson & Co., Chartered Accountants retire at the

conclusion of the meeting. Being eligible, they have offered themselves for re-appointment.

Directors

Since the holding of the last Annual General Meeting on December 16, 1998, following

changes have taken place in the Board of Directors:-

- Nominee of Stora Kopparbergs Bergslags AB, Sweden, Mr. Lars Ake Helgesson

resigned and Mr. Bjorn Hagglund was appointed in his place.

- Nominee of Stora Kopparbergs Bergslags AB, Sweden, Mr. Bjorn Hagglund

retired and Mr. Seppo Hietanen was elected in his place.

- Nominee of National Investment Trust Limited, Mr. Razi-ur-Rahman Khan

retired and Dr. Amjad Waheed was elected in his place.

- Nominee of State Life Insurance Corporation of Pakistan, Sayed Muzafar

Ali Shah resigned and Dr. Najeeb Samie was appointed in his place.

- Mr. Saulat Said has been elected by the vacancy caused by the demise of

Syed Asad Ali whose contribution to the Company was valuable.

The Board of Directors wishes to record its appreciation for the valuable services rendered

by the retiring Directors and extends its warm welcome to the incoming Directors.

Customers

We believe in forming long term, mutually beneficial relationship with our customers,

which is based on solid business principles. Dedicated staff in daily contact with customers

is the means by which we can serve the needs of the customers in an effective manner.

Human Resources

Your Company continues to actively support training and development activities. We

believe that our people are the lifeblood of the organization. During the year, the staff

contributed actively to the quality and productivity improvement programs. By investing

in our people, we invest in our future.

Future

We hope that current slow down in the demand for consumer goods is temporary and

view the future with cautious optimism.

Shareholding Pattern

A statement reflecting the pattern of shareholding is attached to the Annual Report.

For and on behalf of the Board

(Syed Wajid Ali)

Lahore, September 21, 1999

Chairman and Chief Executive

Auditors' report to the members

We have audited the annexed balance sheet of Packages Limited as at June 30, 1999

and the related profit and loss account and the cash flow statement, 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 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 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;

given to us, the balance sheet, profit and loss account and the 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 June 30, 1999 and

of the profit and the cash flow for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,

1980 was deducted by the Company and deposited in the Central Zakat Fund

established under section 7 of that Ordinance.

A.F. FERGUSON & CO.

Lahore, September 22, 1999

Chartered Accountants

Balance sheet as at June 30, 1999

Note

1999

1998

(Rupees in thousand)

Share Capital and Reserves

Authorised capital

50,000,000 (1998: 40,000,000)

ordinary shares of Rs. 10 each

500,000

400,000

==========

Issued, subscribed and paid up capital

411,577

357,893

Reserves

1,514,625

1,338,309

Unappropriated profit

899

407

------------------

1,927,101

1,696,609

Redeemable Capital - Secured

205,944

89,270

Liabilities against Assets

subject to Finance Lease

20,412

Long-Term Loans and Deferred

Liabilities

Long-term loans and other payables - secured

- for operations

929,272

1,274,836

- for hedging

471,264

673,829

------------------

1,400,536

1,948,665

Deferred liabilities

440,564

326,613

------------------

1,841,100

2,275,278

Current Liabilities

Current portion of

Redeemable capital

89,270

113,145

Liabilities against assets subject to finance lease

20,412

22,345

Long-term loans and other payables for operations

480,780

487,241

Loans for hedging

202,566

308,888

Finance under mark up arrangements - secured

698,777

706,342

Creditors, accrued and other liabilities

707,698

497,381

Proposed dividend

153,662

35,789

------------------

2,353,165

2,171,131

Contingencies and Commitments

------------------

6,327,310

6,252,700

==========

Fixed Capital Expenditure

Operating fixed assets - tangible

2,335,378

2,541,543

Assets subject to finance lease

65,171

71,378

Capital work-in-progress

351,722

7,183

------------------

2,752,271

2,620,104

Long -Term Investments

291,952

266,014

Long-Term Loans, Deposits

and Other Receivables

919,162

1,203,141

Current Assets

Stores and spares

253,660

237,416

Stock-in-trade

508,411

323,648

Trade debts

450,887

429,488

Loans, advances, deposits, prepayments

and other receivables

281,066

199,234

Cash and bank balances

869,901

973,655

------------------

2,363,925

2,163,441

------------------

6,327,310

6,262,700

==========

The annexed notes form an integral part of these accounts.

Syed Wajid Ali

Asadullah Khawaja

Chief Executive

Director

Profit and loss account

for the year ended June 30, 1999

Note

1999

1998

(Rupees in thousand)

Sales

3,925,696

3,512,272