annual report 2010 6th - crescent textile millscrescenttextile.com/finance/annual report...

Contents

Company Information

Notice of Annual General Meeting

Mission, Vision and Values

Directors’ Report to the Shareholders

Key Operating / Financial Highlights

Statement of Compliance with best practices ofCode of Corporate Governance

Review report to the Members on Statement of Compliancewith Best Practices of Code of Corporate Governance

Pattern of Shareholding

Auditors’ Report to the Members

Balance Sheet

Profit & Loss Account

Comprehensive Income

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

Proxy Form

Statement of

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4

6

7

16

17

19

20

23

24

26

27

28

29

30

83

2

3

Company information

Al Baraka Islamic Bank B.S.C (E.C)

Allied Bank Limited

Faysal Bank Limited

Habib Bank Limited

Meezan Bank Limited

MCB Bank Limited

National Bank of Pakistan

NIB Bank Limited

Standard Chartered Bank (Pakistan) Limited

United Bank Limited

Mr. Muhammad Anwar

Mr. Ahmad Shafi

Mr. Khalid Bashir

Mr. Muhammad Arshad

Mr. Muhammad Asif

(Nominee NIT)

Mr. Nasir Shafi

Mr. Tariq Shafi

Chairman &

Chief Executive

Director

Director

Director

Director

Director

Director

Audit Committee

Mr. Khalid Bashir

Mr. Nasir Shafi

Mr. Ahmad Shafi

Chairman

Member

Member

Chief Financial Officer

Mr. Sadiq Saleem

Mr. Naseer Ahmad Chaudhary

Corporate Secretary

Mr. Muhammad Attiq ur Rehman

Head of Internal Audit

Riaz Ahmad & Company

Chartered Accountants

Auditors

Mujtaba Jamal Law Associates

Raza Abbas Chaudhary Advocate

Legal Advisor

The Crescent Textile Mills Limited is a listed Company

and its shares are traded on all three Stock Exchanges

in Pakistan.

Stock Exchange Listing

The Company's shares are quoted in leading dailies

under textile personal goods sector.

Sargodha Road,

Faisalabad, Pakistan

T: + 92-041-111-105-105

F: + 92-041-111-103-104

E: [email protected]

Mills & Head Office

Registered Office

40-A, Off: Zafar Ali Road, Gulberg-V,

Lahore, Pakistan

T: + 92-042-111-245-245

F: + 92-042-111-222-245


Share Registrar

Crescent Group Services (Pvt) Ltd,

306, 3rd Flr, Siddiq Trade Centre,

72-Main Boulevard, Gulberg,

Lahore, Pakistan

T: + 92-042-35787592

F: + 92-042-35787594


www.ctm.com.pk

Notice of Annual General Meeting

1.

2.

3.

4.

5.

Registered Office:40-A, Off: Zafar Ali Road, Gulberg-V, Lahore:T: +92-042-111-245-245F: +92-042-111-222-245Dated: October 04, 2010

By Order of The Board

(Naseer Ahmad Chaudhary)Corporate Secretary

4

To confirm the minutes of last Annual General Meeting of the shareholders held on October29, 2009.

To receive, consider and approve the audited accounts of the company for the year endedJune 30, 2010 together with the Directors' and Auditors' Reports thereon.

To approve, as recommended by the Board of Directors, payment of cash dividend @ 15%i.e. Rs. 1.50 per share for the year ended June 30, 2010.

To appoint auditors of the company and fix their remuneration for the year ending June 30,2011. Present auditors M/s. Riaz Ahmad and Company, Chartered Accountants, retire andbeing eligible to offer themselves for re-appointment.

To transact any other business with permission of the Chairman.

Notice is hereby given that the 61st Annual General Meeting of the shareholders of the Company will be held on Saturday, the October 30, 2010 at 9:30 a.m. at the registered office of the company at 40-A, Off: Zafar Ali Road, Gulberg V, Lahore to transact the following business:-

Notes

The Members' Register will remain closed from October 22, 2010 to October 30, 2010 (both days inclusive). Physical / CDC transfers received at the Registered Office of the Company by the close of business on October 21, 2010 will be considered in time for the purpose of payment of cash dividend to the transferees.

1.

5

A member eligible to attend and vote in this meeting may appoint another member as proxy to attend and vote in the meeting. Proxies in order to be effective must be received by the company at the Registered Office not later than 48 hours before the time for holding the meeting.

2.

Shareholders are requested to immediately notify the change in address, if any.3.

CDC account holders will further have to follow the guidelines as laid down in circular No.1 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan:

4.

a.

i).

ii).

For attending the meeting:

In case of individuals, the account holder or sub-account holder and/or 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 his original Computerized National Identity Card (CNIC) or original passport at the time of attending the meeting.

b. For Appointing Proxies:

In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall submit the proxy form as per the above requirement.

i).

ii).

iii).

iv).

v).

In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signatures of the nominee shall be produced (unless it has been provided earlier) at the time of the Meeting.

The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.

Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form.

The proxy shall produce his original CNIC or original passport at the time of the Meeting.

In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signatures shall be submitted (unless it has been provided earlier) along with proxy form to the company.

Mission, Vision and Values

To be the 1st Choice of Customers and achieve a leading role in the economy through enhancement of quality of life style for Stakeholders.

6

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010

Break up value (Rupees/share)

Rupees

(100)

-

100

200

300

400

500

2005 2006 2007 2008 2009 2010

Profi t before tax and after tax

Profit before tax Profit after tax

Rupees in million

Directors' Report to the Shareholders

Directors of your company are pleased to present the 61st Annual Report and Audited Financial Statements of the company for the year ended June 30, 2010 together with the Auditors' Report thereon.

Highlights for the year:

7

Achieved stable sales revenue of Rs.10,863 million against Rs.10,751 million of last year.

Net profit after tax was 3.17% of sales against 1.67% during last year; which improved earnings per share to Rs 7.00 from Rs 3.64.

Other operating expenses and financial costs declined by 63.63% and 34.28% respectively from last year.

Operations remained smooth and stable despite serious energy crises and difficult security situation in the country.

Yarn prices remained bullish on sharp increase in cotton prices and higher international demand but value added sector faced brunt of high input costs.

Summary of highlights is as below:

Particulars 2010 2009 % Change

(Rupees in million)

Sales revenueNet profit before taxNet profit after taxOther operating costFinance cost

10,863.386 463.491 344.670 136.872 536.270

10,750.512 238.518 179.020 376.284 815.948

1.0594.3292.53

(63.63)(34.28)

The strategy and focus:

Company is fully integrated into composite textile chain and strategically poised to enhance revenues from its home textile products. Therefore, growth in value added sales through maximum use of own manufactured products is the way forward.

Achieve greater consistency and safety of operational strength to inculcate more confidence into all stakeholders for reliance on achievements and commitments.

Ru

pe

es

in m

illio

nR

up

ee

s

-5%

0%

5%

10%

15%

20%

2005 2006 2007 2008 2009 2010

Profit % of Sales

Gross profit to sales (%) Operating profit to sales (%)

Profit afte r tax to s ales (%)

-

3,000

6,000

9,000

12,000

2005 2006 2007 2008 2009 2010

Sales: Export & Local

Local Sales Export Sales

Rupees in million

8

To be resilient in order to face challenges of difficult business environments in all times to come through attaining financial and operational stability.

Company also places emphasis on investing in human resource for improving organizational strength to cope with complex and strategic business ventures.

Over view of economy and business environment:

In the backdrop of stagnant economy marred with bleak energy and security situation, the country was able to achieve 4.1% GDP growth against 1.2% of last year mainly due to manufacturing and service sector growth. Country saw some consolidation in recovery but power shortages, circular debt and increased external debt servicing continue to impede recovery. Trade deficit was down, largely through increase in exports by 8.43% (from $17.8 billion to $19.3 billion). Exports showed resilience despite global recession, no concessional treatment for Pakistan's exports, severe competition and high input costs. Textile exports also registered increase mainly driven by three segments including cotton, yarn and synthetic textiles. Increasing cotton prices, persistent power and gas shortages, higher mark up rates and unstable security and political situation had affected industry's performance. Contrary to proclamation in Textile Policy 2009 the Govt did not exempt export industry from gas and power load shedding. Gas curtailment by utility company for supply to power plants not only halted operations but also reduced margins of industry due use of alternate fuel at high cost. An average increase in gas rates @6.20% over last year also negatively impacted performance of textile industry. To overcome energy deficiency Govt took various measures besides resorting to two weekly holidays; which had serious effects in shape of financial loss by way of non utilization of exports proceeds remitted by customers due to shortened working week.

On IMF support and record increase in home remittances PKR remained stable (81.10 on June 30, 2009 to 85.40 on June 30, 2010) and declined only by 5.30% during the year. So, in comparative terms exchange rate did not contribute towards increase in exports.

Continuation of achieving legal, corporate, social, and local as well as international laws and norms for satisfaction of all concerned parties.

Ru

pe

es

in m

illio

n

Assets

Fixed assets Investments

Loans & advances Current as sets

Equity & Liabilities

Equity Surplus o n revaluation

Non current lia bilities Current liab ilities

9

Local yarn prices also followed upward path and moved ahead of cotton rates on higher global demand. The value added sector's margins came under severe pressure due to high yarn prices. In order to protect valued sector Govt imposed 15% Regulatory Duty on yarn export ignoring outcry of spinning sector.

Financial performance:

During the year your company demonstrated improved financial results amidst rising cost pressures, severe power crises and exacerbating cotton prices. Sales revenue showed relatively stable trend and growth in yarn and home textile sales helped to achieve this level; which were up by 34.95% and 12.74% respectively.

Under Textile Policy, 2009 the Govt provided some financial relief to industry through mark up rebates/ subsidy on long term loans and export finances. But due to lack of budgetary allocation these benefits were not fully disbursed. During the year Textile Ministry also helped industry by arranging disbursement of all R&D pending claims of financial year 2008. Cash starved Govt hammered industry by blocking sales tax refunds and rebates thereby increasing finance cost and liquidity crunch.

Gross profit of the company lagged behind previous year (down by 7.52%) due depressed margins of value added segments but all time high margins on yarn sales offset the decline in manufacturing profit. The margins were also affected by substantial gas curtailment; which not only halted production but forced the company to use alternate expensive fuel for power generation. Operations also remained under stress due prolonged gas outages and could not pick momentum despite having ample export orders.

Cotton crop size of 12.8 million bales was short to industry's requirement of 15.5 million bales. Local shortfall in cotton crop coupled with global rising demand pushed prices to new apogee of Rs.6,700/Md against previous high of Rs.4,200/Md. Similarly, polyester prices also toed line of cotton prices and showed consistently rising trend. On higher international oil prices POL and HFO prices also remained strong negatively affecting energy generation on HFO based capacity.

Local29%

Export68%

Other operating income

2%

Share of associate profit

1%

Sources of Revenue

Cost of sales84%

Distribution4%

Admin & o ther cos ts3%

Finance co st5%

Tax1%

NAT profit3%

Utilization of Revenue

10

Sales revenue 2010Million Rs. %

Local: Yarn Fabric Others

2,439.279506.740307.125

2253

2009Million Rs. %

1,843.253559.806314.749

1753

3,253.144 30 2,717.808 25Export: Yarn Fabric- Own manufactured Fabric- Direct purchases Home textiles

393.725 1,608.305

2,347.5503,260.662

4152130

257.4041,507.6403,375.4172,892.243

2143227

7,610.242 70 8,032.704 75

10,863.386 100 10,750.512 100

Export sales were marginally lower by 5.26% as frequent gas curtailment severally disrupted power generation facilities and production processes of the company. Partly, higher yarn prices were also responsible for decline in exports of value added goods as foreign buyers had reacted conservatively to rising textile prices and booked lesser orders. Our exports originated from all regions but majority were from EU and USA.

In overall sales revenue exports constituted 70% against 75% during last year. In export category home textiles exports contributed 61% against 62% of last year, depicting stable trend of company's sales of value added segment. Despite tough business conditions, recession in US and Europe and un-favourable international business environment for Pakistan's textiles, exports of value added segment of company has been showing growth over the years as below:

Rising fuel, freight and distribution expenses also had an impact on profitability of the company. However, company was able to combat these pressures and improved its bottom line by reducing 'Other operating expenses' by 63.63% and 'Finance cost' by 34.28%. The retirement of long term loans and use of low cost financing to cater borrowing needs of company for increased working capital requirements, helped in saving of finance cost.

Sales:

Overall sales of the company were slightly higher (1.05%) compared to previous year's sales as domestic sales surged by 19.70%. Major thrust in such sales was coming from yarn which rose by 32.34%. Composition of sales during the year with combination of local and exports was as below:

Yarn

26%

Fabric

20%

Home Text ile

51%

Other

3%

Product mix 2010

0%

20%

40%

60%

80%

100%

120%

2005 2006 2007 2008 2009 2010

Capital mix (Debt & Equity)

Debt Equity

11

Particulars 2010 2009 ChangeMillion Rs. ( % )

Yarn purchases Fabric purchasesWeaving and processing chargesPacking materials Fuel and power

821.830382.891376.884369.779976.607

424.348391.942286.817325.025859.546

94(2)311414

Million Rs.

Factors responsible for increase in these costs were:

Yarn prices were higher on increase in cotton prices and high export demand.Fabric purchase prices were also higher by 37% but less dependence on out side purchases had slight saving in cost through procurement of lesser quantities.Weaving and processing charges increased due requirement of outside weaved fabric and processing of some fabric from other sources for lack of availability of gas.Packing material was higher due to growth in home textile exports. Power cost rose considerably as frequent gas curtailment forced to shift to alternate expensive fuel to keep manufacturing processes operational although not fully. Company absorbed Rs.128.360 million due to extra fuel cost incurred during the year.

§

§

§

§

§

Distribution and shipment cost increased mainly due higher ocean freight charged by shipping lines on revival of export market and rising fuel costs.

Administrative and general expenses were slightly higher but major decrease in other operating costs (reduced from Rs.376.284 million to Rs.136.872 million in current year) had significant impact on improving bottom line of the company. Finance cost decreased due stable PKR as lower interest rates on availing US $ loans proved very economical and also utilization of export refinance / SBP loans at concessional rate contributed favourably. Although average use of banking facilities was slightly higher but saving through mark-up rates resulted substantial reduction in finance cost. Share of profit from associate also improved bottom line of the company.

Year Yarn Fabric Home Textiles Total


Yarn

Fabric

Home Textile

Trading

Others

2,833

2,115

3,261

2,348

307

2,100

2,068

2,893

3,375

315

35

2

13

(30)

(3)

Million Rs.

Total sales revenue 10,863 10,751 1

Operations and other costs:

The impinging cost trends had an adverse impact on input cost but over all cost of sales of company remained in check through close monitoring, planning and cost effective measures. Rising raw materials prices increased input cost by 8.72% with cotton contributing 7.85% (avg rate was higher by Rs.500/ Md from Rs.3,700/ Md to Rs.4,200/ Md) and polyester 13.51% (avg rate increased from Rs.101/ Kg to Rs.114/ kg). The surge in raw materials prices was due to shortfall in cotton crop, use of imported cotton and higher PSF prices.

Other costs which had increased compared to previous year were as below:

To further boost exports of home textiles, your company has added more machines, and employed qualified and skilled work force. Growth in home textiles exports reflects on company's intention to convert maximum processed fabric in house in order to strengthen its bottom line.

Comparison of total sales revenue composition with previous year is given as below:

Million Rs. %

271

204

277

257

394

10

07

06

06

07

Million Rs. %

1,620

1,565

1,825

1,508

1,608

58

52

45

32

32

Million Rs. %

879

1,223

1,980

2,892

3,261

32

41

49

62

61

Million Rs. %

2,770

2,992

4,082

4,658

5,263

100

100

100

100

100

2006

2007

2008

2009

2010

12


Sales revenueGross profitOperating costsOther operating incomeFinance costProfit share from associateProfit before taxTaxation

10,8631,457

789212536120464119

10,7501,575

93725181616523859

1(8)

(16)(16)(34)(27)

95102

Million Rs.

Summarized financial results for the year 2010 were as below:

Profit after tax 345 179 93

Operational performance:

Frequent and continued gas load shedding badly disrupted operations of the company but use of alternate energy source helped to achieve satisfactory performance of operations. Reduced gas availability affected power and fabric processing facilities besides increasing fixed costs for not operating fully during the year. The gas load shedding increased from 36 days to 55 days in current year.

Operational performance of company during the year was normal in spinning, lower in weaving and improved in value added segments. Comparison of the same with last year's data is as below:

Internal use of semi and intermediate products was favourable to some extent as surge in prices of these products in local market would have considerable impact on profitability. Internal capacity to feed up-

Particulars 2010 2009 Change( % )

Spinning:Yarn converted into 20's (000 kgs) 36,281 36,091 0.53

( Qty ) ( Qty )

Weaving:Fabric converted into 50 picks(000 Sq Meters)

Processing:Fabric processed(000 in linear meters)

Home Textiles:Fabric stitched (000 in linear meters)

75,527 78,220 (3.44)

34,890 33,415 4.41

21,282 20,170 5.51

During the year company received mark-up support, subsidy and past pending R&D claims and part of Duty Draw Back claims under Textile Policy, 2009.

Year

a) Yarn (in '000' Kgs):

Available for useSold(%) Used in weaving(%)

Company continued to improve its assets base and added various machinery items in spinning, processing, home textiles and power generation facilities to cope with the current and future requirements. These machines were required to improve / enhance the efficiency of these processes.

The operational efficiency of various processes was achieved 88% ~ 98% which helped in achieving yield from 85% in spinning and 97% in the other value added processes. This performance of various operations of company would have improved had there not been severe gas load shedding during year under reference.

Compliance to systems, laws andsocial environment:

The company maintained its systems, procedures and work place according to local and international laws. These compliances were helpful in achieving various certifications which were obtained through repellence audits conducted during the year. To ensure healthy and safe working environment all required arrangements were made in accordance with international standards.

Data given below clearly depicts this philosophy:

2006 2007 2008 2009 2010

26,70413,706

(52)12,999

(48)

23,82212,408

(52)11,414 (48)

25,79811,974

(46)13,824

(54)

24,29912,315

(49)12,684

(51)

25,06412,581

(50)12,484

(50)

b) Grey fabric (in '000' Mtrs):

Available for useSold(%) Used in processing(%)

17,31618,449

(64)12,010

(69)

16,32716,994

(58)11,249

(69)

26,00414,539

(42)17,790

(68)

27,23411,234

(33)19,886

(73)

24,1257,006(29)

17,119(71)

c) Processed fabric (in '000' Mtrs):

Available for useSold(%) Used in home textile(%)

28,89318,449

(64)10,445

(36)

29,29416,994

(58)12,301

(42)

34,71914,539

(42)20,179

(58)

34,13511,234

(33)22,900

(67)

35,47711,026

(31)24,451

(69)

stream processes saved company from rising costs and was able to demonstrate considerably well under difficult business conditions.

13

Information technology:

Information technology provides requisite leverage to company to boost its performance. New IT assets were added to fulfill business needs more efficiently and existing ones were upgraded. Company had installed OF (Oracle Financial) to cater its ERP needs. New developments on Oracle based platform are in progress and with passage of time being annexed to main system. Company is also planning to convert its existing OF to Release 12 which is an enhanced version and will have added features to cope requirements of newest technological changes.

Social and welfare responsibilities:

Cognizant of its social responsibilities company responds to the need of local communities and civil society organizations which include contributions in kind and in cash to health care centers, social welfare organizations and educational institutions. It has been funding to charitable institution and also established two Campuses in the vicinity of Faisalabad run by The Citizen Foundation (TCF) besides providing annual support fund for running of these schools. Company has its outreach to supports various other social and welfare organizations spread across the country.

Future prospects and plans:

Going forward, company envisages various challenges as cotton prices have hit record high levels to an expected shortfall in supplies from flood affected in Pakistan and rain hit in China. High cost is very disconcerting for textiles as it will affect margins due very limited scope to pass through the rising price impact to customers under intense global competition environment. Sever gas load shedding as witnessed in last year is likely to effect more in future due increasing gap between demand and supply. To avoid interruptions in processing operations the company has arranged LPG gas supply system which will not only ensure timely execution of export orders but and will also reduce fixed costs.

In an overall operating set up workers, contractors and visitors were given required safety awareness and these were followed throughout plant operations. Various executives and employees attended courses / seminars of professional training at different forums which were either arranged in house or at outstation places. These steps in recognizing value of human resource were essentials to create a team of trained and professional people.

Followings certifications given by accredited agencies were available with company:

ISO 9001:2008ISO 14001:2004C-TPAT/ GSVOE 100GOTSOeko-Tex 100Oeko-Tex 100 SUPIMA SA 8000

Quality Management SystemsEnvironment Management SystemsSecurity Management SystemsProduct Standards, Organic ExchangeProduct Standards, Global Organic TextilesProduct Standards for Fabric, Human Ecology Product Standards for Home TextilesCertification for use SUPIMA CottonSocial accountability (In process)

Company is also striving to obtain accreditation of ISO 17025 for Competence of Testing and Laboratory Calibration respectively.

Human resource and industrial relations:

Harmonious working environment and cordial industrial relations prevailed during the year. Operations of the company were carried out keeping in view the dignity, respect, support, protection and international standards set to meet working environment. All workmen performed their duties and jobs at standard hours and if they were required to put extra workings to meet the exigencies and to fill man power shortage they were compensated and paid per legal criteria. There were no complaints of work abuse or of not fulfilling their legal requirements. All employees were provided suitable working environment and climate to ensure accomplishment of their jobs, smoothly. During the year company gave bonuses to workers and paid expenses of 05 workmen to perform Hajj. They were paid their remunerations well in time and disbursement of pays / wages were made within the legally specified days. Besides extending coverage to social security scheme the workmen were able to get benefit of ambulance service and also provided conveyance facility to outstation workforce. These things helped for industrial harmony as company had always taken lead and made it a

suitable workplace for its employees where all required necessary steps are taken to protect their legal rights and for their safety. For recreation of executive employees club facilities were provided for entertainment activities.

14

Appropriations:

The company has earned profit Rs.7.00 per share in the year 2010 as against earning per share of Rs.3.64 in previous year. Board of directors have recommended cash dividend for shareholders of the company @15% i.e. Rs.1.50/ share (2009: Nil) to be paid after approval by the shareholders in Annual General Meeting.

Corporate governance and Financial framework:

Board of the company attaches utmost importance in adhering to local and international principles of good corporate governance and committed to inculcating this culture at all levels of organization. All directors and employees are required to sign the code of ethics in acknowledging of their understanding and acceptance of same. Before each board meeting closed period is declared during which directors and executives are not allowed to trade into shares of the company. Directors of the company are fully aware of their duties and responsibilities and strive to discharge fiduciary responsibilities in best possible manner in compliance with all applicable corporate laws and regulations.

During the year Board was actively involved in performing their duties including those required to be performed under various laws and Memorandum and Articles of Association of the company with ultimate objective of safeguarding interests of the stakeholders, enhancing profitability of the company, increasing shareholders' wealth and promoting market confidence. The directors are pleased to state that:

Financial statements prepared by the management represent fairly and accurately company's state of affairs, results of its operation, cash flows and changes in equity.Proper books of accounts have been maintained.

a.

b.

International Accounting Standards as applicable in Pakistan have been followed in preparation of financial statements and any departure there from has been adequately disclosed.System of internal control is sound in design, has been effectively implemented and being monitored continuously. On-going review will continue in future for further improvement in controls.The company has sound potentials to continue as going concern.There has been no material departure from best practices of corporate governance.Information about outstanding taxes and levies is given in Notes to the Accounts.Transactions undertaken with related parties during the financial year have been ratified by the Audit Committee and approved by the Board. The value of investment in respect of Employees Provident Fund was Rs.537.373 million (as per audited accounts of 2009).During the year under review, four (04) meetings of the Board were held and following were in attendance:

d.

e.

f.

g.

h.

i.

j.

k.

S#

01020304

050607

Director's Name

Mr. Muhammad AnwarMr. Ahmad ShafiMr. Khalid BashirMr. Muhammad Iqbal Hussain Nominee NITMr. Muhammad ArshadMr. Muhammad Asif- Nominee NITMr. Nasir Shafi

MeetingsAttended

343

1414

Leave of absence was granted to directors who could not attend Board meetings.

The recent upward revisions in discount rate by SBP in two MP announcements will also have a negative impact on borrowing costs in ensuing period. However, we shall focus on our processes, products, customers to improve from present level through efficiency and more dedicated efforts.

Appropriate accounting policies have been consistently applied in preparation of financial statements and any changes in accounting policies have been disclosed in the financial statements. The accounting estimates are based on reasonable and prudent judgment.

c.

Changes in accounting policies and estimates:

Company has changed policies in current year regarding IAS1 'Presentation of Financial Statements', IFRS7 'Financial Instruments Disclosures', adoption of IFRS8 'Operating Segments' and change in accounting estimate regarding useful life of building.

15

Audit Committee:

The committee comprises of three members, two of them are non-executives independent directors including Chairman. Committee meets every quarter for review of audit reports, interim and annual financial results prior to approval of the Board.

Investment in 'Preference Shares' of CrescentBahuman Ltd - CBL:

Board of Directors and shareholders of the company had resolved conversion of all sums due from Crescent Bauman Limited, an associate of the company, on account of long term loans and interest receivables thereon till date of conversion into Preference Shares of investee company subject to regulatory approvals to be obtained by said company.

The terms of Preference Shares as approved by the shareholders are 5%, unlisted, non-voting, cumulative, participatory and convertible preference shares of Rupees 10 each.

Pattern of shareholding:

A statement showing the pattern of shareholding of the company as at June 30, 2010 is included in these financial statements.

Auditors:

The auditors M/s. Riaz Ahmad & Co., Chartered Accountants, retire and offer themselves for re-appointment for the year 2011.

Events after the reporting period:

There was no significant event after the reporting period which may warrant mentioning in Directors' Report.

Key operating financial highlights:

Financial data of the last six (06) years is attached.

Acknowledgements:

I take this opportunity to thank the Board of Directors, management, staff and workers, customers, bankers, vendors and all other stake holders for support, efforts, commitment and ownership in what we have achieved as a team.

(Muhammad Anwar)Chief Executive Officer

For and on behalf of the Board of Directors

The impact of above changes in accounting policies and estimate has properly been disclosed in the financial statements as per the requirement of 'International Accounting Standards' as mentioned in Note 2.1 (d) (i) , 2.20 and 2.7 (d).

To the best of our knowledge, Directors, CEO, CFO and Company Secretary, auditors, their spouses and minor children have not undertaken any trading of company's shares.

l.

Key Operating / Financial Highlights

KEY INDICATORS

Operating

20102005 2006 2007 2008 2009

16

Gross profit marginOperating profit marginPre tax marginAfter tax margin

%%%%

13.13 11.60 7.35 6.18

10.54 6.84

(0.34) (1.15)

9.24 10.15 2.04 1.53

10.95 5.83

(0.48) (0.70)

14.65 8.27 2.22 1.67

13.41 8.10 4.27 3.17

Performance

Return on total assetsTotal assets turnoverFixed assets turnoverInventory turnoverReturn on paid up share capital

%TimesTimesTimes

%

3.71 0.60 2.04 3.55 62.57

(0.80) 0.70 2.31 4.58

(14.02)

0.86 0.56 1.29 5.36 19.63

(0.55) 0.79 2.09 5.17

(12.54)

1.66 0.99 2.57 5.88 36.38

3.14 0.99 2.73 7.22 70.04

Leverage

Debt equity ratioCurrent ratioQuick ratio

TimesTimesTimes

0.36 0.92 0.54

0.40 0.83 0.44

0.36 0.82 0.52

0.35 0.76 0.50

0.33 0.70 0.51

0.20 0.70 0.50

Valuation

Earning per shareEarnings growthBreak up valueDividend - (cash/stock)Price earning ratioMarket price per shareMarket capitalization

Rs%Rs%

TimesRs

Rs(M)

6.26 519.80 60.26 10.00 8.75 54.80 2,229

(1.27) (120.29) 55.03 10.00 (17.72) 22.50 1,007

1.78 240.16 66.82 10.00 38.76 69.00 3,087

(1.25) (170.22) 49.02

- (46.67) 58.52 2,880

3.64 391.20 45.96

- 6.73 24.50 1,206

7.00 92.31 54.31

15.00 3.08 21.57 1,061

Trade results

HISTORICAL TRENDS

Sales - netGross profitProfit from operationsProfit / (loss) before taxProfit / (loss) after tax

4,117 541 477 302 254

4,973 524 340

(17) (57)

5,730 529 582 117 88

8,845 968 515

(43) (62)

10,751 1,575 889 239 179

10,863 1,457 880 463 345

Rupees in million

Financial position

Shareholders' equityProperty, plant and equipmentWorking capitalNon current liabilities

2,451 1,686 (235) 1,374

2,462 1,926 (500) 1,713

2,989 4,441 (688) 1,745

2,412 4,226 (1,419) 1,287

2,262 4,182 (1,720) 1,108

2,672 3,981

(1,808) 665

Statement of Compliance with Best Practices of Code of Corporate Governance

17

This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges 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.

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 two executive Directors, four non-executive Directors and one independent non executive Director but no Directors representing minority interest.

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

2. The Directors have confirmed that none of them is serving as a Director in more than ten listed companies.

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

4. Casual vacancy occurred in the Board during the year 2010 was filled within the stipulated period of 30 days.

5. Statement of Ethics and Business Practices has been circulated to directors and employees.

6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies. 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, terms and conditions of employment of the CEO 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 meetings. The minutes of the meetings were appropriately recorded and circulated.

9. Directors of the company have participated in Orientation Course at group level to apprise them of their duties and responsibilities. Director(s), who have not participated in these, have been apprised and adequately briefed.

10. The Board has approved the appointment of company CFO and Head of Internal Audit including their remuneration and the terms of appointment as determined by the CEO.

18

(Muhammad Anwar)Chief Executive Officer

On behalf of 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 by the Board.

13. The Directors, CEO and Executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

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

15. The related party transactions have been placed before the audit committee and approved by the Board of Directors.

16. The Board has formed an Audit Committee. It comprises 3 members, two of them are non-executive Directors including the Chairman of the Committee.

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

18. The Board has set-up an effective internal audit function manned by suitably qualified and experienced personnel who are conversant with the policies and procedures of the Company and they are involved in the internal audit function on a full time basis.

19. 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 International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan.

20. The statutory auditors or 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.

21. The company has fully complied with the best practices on transfer pricing as contained in the Listing Regulations of the Karachi, Lahore and Islamabad Stock Exchanges.

22. We confirm that all other material principles contained in the Code have been complied with.

Faisalabad: October 05, 2010

21

Review Report to the Members on Statement of Compliancewith Best Practices of Code of Corporate Governance

We have reviewed the Statement of Compliance with the best practices contained in the code of Corporat Governance prepared by the Board of Directors of THE CRESCENT TEXTILE MILLS LIMITED (”the Company”) for the year ended June 30, 2010, to comply with the Listing Regulations of the respective Stock Exchanges, 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 and understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board’s statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedure and risks.

Further, Listing Regulations of the Karachi, Lahore and Islamabad Stock Exchanges require the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm’s length transactions and transactions which are not executed at arm’s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm’s length price or not.

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 June 30, 2010.

(Riaz Ahmad & Company)Chartered Accountants

Liaqat Ali Panwar

20

No. ofShareholders

Shareholding

From To

TotalSharesHeld

No. ofShareholders

Shareholding

From To

TotalSharesHeld

1,757 49,209,922

Categories of Shareholders

G. Total

Total

Number Shares Held Percentage

1,757

13

49,209,922 100

0.03

Financial InstitutationIndividualInsurance CompaniesJoint Stock CompaniesAssociated CompaniesMore than 10%Mutual FundsModaraba & Modaraba CosOthers

81,679

4398123

13

801,708 20,536,274 1,867,486 7,531,948 4,748,525 12,207,111 1,467,446 32,089 17,335

1.63 41.73 3.79

15.31 9.65

24.81 2.98 0.07 0.03

OthersAbondand PropertyAssociationNon ResidentTrust

3154

1,422 13 5,128

10,772

0.00 0.00 0.01 0.02

17,335

Pattern of Shareholding - (Form “34”)as at June 30, 2010

50747118331683331313115

118444342242122221232131125

132121212111112211111111111111111111

1101501

1,0015,001

10,00115,00120,00125,00130,00135,00140,00145,00150,00155,00165,00170,00175,00180,00185,00190,00195,001

105,001110,001115,001120,001135,001150,001155,001160,001165,001170,001175,001180,001190,001195,001

200,001205,001210,001215,001220,001230,001240,001260,001300,001305,001310,001320,001335,001375,001390,001405,001410,001415,001440,001450,001460,001485,001510,001550,001675,001

1,030,0011,080,0011,245,0011,270,0011,295,0011,440,0011,445,0011,815,0012,060,0012,680,001

12,205,001

100500

1,0005,000

10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00070,00075,00080,00085,00090,00095,000

100,000110,000115,000120,000125,000140,000155,000160,000165,000170,000175,000180,000185,000195,000200,000

205,000210,000215,000220,000225,000235,000245,000265,000305,000310,000315,000325,000340,000380,000395,000410,000415,000420,000445,000455,000465,000490,000515,000555,000680,000

1,035,0001,085,0001,250,0001,275,0001,300,0001,445,0001,450,0001,820,0002,065,0002,685,000

12,210,000

17,636122,020132,300755,131607,087410,607223,442293,319295,808162,412414,329341,425191,601210,734235,448200,242292,966151,380169,962353,775184,30297,312

214,171224,492235,844245,459137,973308,892473,684326,955169,484517,596179,523183,004384,311988,545

202,090625,773425,265218,780445,050231,306487,711262,000602,714307,005313,122324,663335,075376,489789,452815,212414,675419,333440,811452,379460,124488,951510,309552,245675,484

1,030,8611,080,0771,245,9041,271,6331,295,0311,442,0631,446,1291,819,9812,060,0682,681,875

12,207,111

Categories of Shareholders

a) Directors, Chief Executive Officer, Their Spouse and Minor Children

b) Associated Companies, Undertaking & Related Parties

c) NIT & ICP

Directors' Spouse

Chief Executive/Director

Directors

Mr. Muhammad Anwar

2,155,838

323,474

4,748,525

3,320,807

Number ofshares held


21

Ahmad ShafiTariq ShafiMuhammad ArshadNasir ShafiKhalid BashirMuhammad Asif (Nominee NIT)

Salma ParveenNaryman TariqTanveer Khalid BashirShaheen NasirAbida Anwar

Crescent Sugar Mills & Distillery Ltd.Crescent FoundationCrescent Steel And Allied Products Ltd.Trustees The Crescent Textile Mills Emp Provident Fund TrustPremier Insurance LimitedShakarganj Mills LimitedAhsan Associates (Pvt) LimitedJubilee Spinning & Weaving Mills Limited

National Bank of Pakistan-Trustee Department Ni(U)T FundNational Bank of PakistanInvestment Corporation of PakistanNational Bank of Pakistan Investar Accounts NDFCIDBP (ICP Unit)

510,309

1,080,077 107,432 212,011 239,473 6,536

-

159,194 92,199 58,802 8,157 5,122

2,681,875 1,030,861 452,379 313,122 262,000 5,898 1,563 827

2,060,068 1,245,904 10,891 2,054 1,890

Number ofshares held

801,708

1,867,486

32,089

10,772

1,467,446

4,211,141

5,128

1,422

13

12,207,111

18,056,962

49,209,922


22

(d) Banks, DFIs, NBFIs

Insurance Companies

Modarabas

Trusts

Mutual Funds

Other companies (Public Sector Companies, Corporations & Joint Stock Cos)

Non-Residents

Abondand Property

Association

Shareholders More than 10%

General Public

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

(m)

(n)

Auditors’ Report to the Members

We have audited the annexed balance sheet of THE CRESCENT TEXTILE MILLS LIMITED as at June 30, 2010 and the related profit and loss account, statement of comprehensive income, 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.

(a) in our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984;

Faisalabad: October 05, 2010(Riaz Ahmad & Company)

Chartered Accountants

23

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:

(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 except for the change stated in Note (2.1)(d)(i) and Note 2.20 with which we concur;

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;

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, 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 June 30, 2010 and of the profit, its comprehensive income, its cash flows and changes in equity for the year then ended; and

d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980(XVIII of 1980).

Liaqat Ali Panwar

Balance Sheet as at June 30, 2010

1,000,000

492,099

2,180,340 2,672,439

1,640,407

656,351 8,813 665,164

521,393 106,719 4,840,018 451,668 90,890

10,988,698

1,000,000

492,099

1,640,393

315,065 177,207 4,883,207 356,845 73,361

10,815,934

2010 2009

Note

EQUITY AND LIABILITIES

Share capital and reserves

100 000 000 (June 30, 2009: 100 000 000) ordinary shares of Rupees 10 each

Issued, subscribed and paid up share capital

ReservesTotal equity

Surplus on revaluation of operating fixed assets - net of deferred tax

Non-current liabilities

Long term financingDeferred tax liability

Current liabilities

Trade and other payablesAccrued mark-up Short term borrowingsCurrent portion of long term financingProvision for taxation

Total liabilities

Contingencies and commitments

The annexed notes form an integral part of these financial statements.

3

4

5

67

89106

11

(Rupees in thousand)

(Muhammad Anwar)Chairman & Chief Executive

24

1,769,738 2,261,837

1,108,019 - 1,108,019

6,010,688 6,675,852

5,805,685 6,913,704

TOTAL EQUITY AND LIABILITIES

Authorised share capital

3,981,181 617,870 255,197 1,928,720 2,827

- 6,785,795

4,182,387 485,335 227,883 1,812,096 2,217 20,344 6,730,262

Note ASSETS

Non-current assets

Property, plant and equipmentInvestment in an associateLong term investmentsLong term loans and advancesLong term deposits and prepayments Deferred tax - asset

121314151617

169,769 1,047,150 2,579,901 224,556 5,956

- 109,446 49,706 16,419

4,202,903

10,988,698

174,116 940,421 2,562,348 239,191 1,422 22,081 61,909 65,253 18,931

4,085,672

10,815,934

Current assets

Stores, spare parts and loose toolsStock-in-tradeTrade debtsLoans and advancesShort term deposits and prepaymentsInterest accruedOther receivablesShort term investmentsCash and bank balances

TOTAL ASSETS

18 19 20 21 22

23 24 25

2010 2009(Rupees in thousand)

(Khalid Bashir)Director

25

Balance Sheet as at June 30, 2010

Note

10,863,386

9,406,644

1,456,742

470,413

182,018

136,872

789,303

667,439

212,300

879,739

536,270

120,022

463,491

118,821

344,670

7.00

10,750,512

9,175,267

1,575,245

392,885

168,350

376,284

937,519

637,726

251,433

889,159

815,948

165,307

238,518

59,498

179,020

3.64

Sales

Cost of sales

Gross profit

Distribution cost

Administrative expenses

Other operating expenses

Other operating income

Profit from operations

Provision for taxation

Profit after taxation

Finance cost

Share of profit of associate

Profit before taxation

Earnings per share - basic and diluted (Rupees)


26

27

28

29

30

31

32

33

34

Profit and Loss Account for the Year Ended June 30, 2010

2010 2009




26

344,670 179,020 Profit after taxation

Other comprehensive income

Statement of Comprehensive Income for the Year Ended June 30, 2010

2010 2009




27

54,658 (329,376)Surplus / (deficit) on remeasurement of available for sale investments

399,328 (150,356)Total comprehensive income / (loss) for the year


1,159,785 (606,758) (94,909)

(7) (4,138) (610)

453,363

(63,383) 6,295 1,247 (55,841)

- (356,845)

(43,189)

(400,034)

(2,512)

18,931

16,419

1,009,643 (757,853)

(90,693) (17) - 1,341 162,421

(256,452) 27,149 947

(228,356)

90,183 (311,553)

297,664

76,294

10,359

8,572

18,931

Note

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operationsFinance cost paid Income tax paidDividend paid Workers' profit participation fund paidNet (increase)/decrease in long term deposits and prepaymentsNet cash generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure on property, plant and equipmentProceeds from sale of property, plant and equipmentNet decrease in long term loans and advances Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long term financingRepayment of long term financingShort term borrowings - net

Net cash (used in) / from financing activities

Net (decrease) / Increase in Cash and Cash Equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year


35

Cash Flow Statement for the Year Ended June 30, 2010

2010 2009




28

25

Balance as at June 30, 2008

Transfer from surplus on revaluation of operating

fixed assets on account of incremental

depreciation - net of deferred tax

Total comprehensive loss for the year


Transfer from surplus on revaluation of operating

fixed assets on account of incremental

depreciation - net of deferred tax

Share of associate's realized surplus on revaluation

of property, plant and equipment

Total comprehensive income for the year





29

Statement of Changes in Equity for the Year Ended June 30, 2010

RESERVES

CAPITALRESERVE

GeneralDividend

equalization

492,099

-

-

-

492,099

350,507

75,789

1,773,643

1,773,643

30,000

30,000

(234,064)

300,908

1,569,579

2,104,551

1,920,086

2,180,340

2,412,185

8

(150,356)

2,672,439


SHARECAPITAL

Fair value

REVENUE RESERVES

Unappropriatedprofit /

(accumulatedloss)

Sub totalTOTAL

TOTALEQUITY

-

-

-

(329,376)

-

-

-

-

8

179,020

8

179,020

8

(150,356)

492,099 21,131 1,773,643 30,000 (55,036) 1,748,607 1,769,738 2,261,837

-

-

54,658

-

-

-

-

-

-

12

11,262

344,670

12

11,262

344,670

12

11,262

399,328

12

11,262

399,328

Notes to the Financial Statements for the Year Ended June 30, 2010

1. THE COMPANY AND ITS ACTIVITIES

30

The Crescent Textile Mills Limited (the Company) is a public limited company incorporated in Pakistan under the Companies Ordinance, 1984. The registered office of the Company is located at 40-A, Off: Zafar Ali Road, Gulberg-V, Lahore. Its shares are quoted on all the Stock Exchanges in Pakistan. The Company is engaged in business of textile manufacturing comprising of spinning, combing, weaving, dyeing, bleaching, printing, stitching, buying, selling and otherwise dealing in yarn, cloth and other goods and fabrics made from raw cotton and synthetic fiber(s) and to generate, accumulate, distribute, supply and sale ofelectricity. The Company also operates a cold storage unit.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented,unless otherwise stated:

2.1 Basis of preparation

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, theprovisions or directives of the Companies Ordinance, 1984 shall prevail.

Statement of compliancea)

These financial statements have been prepared under the historical cost convention, except freehold and leasehold land measured at revalued amounts and the financialinstruments which are carried at fair value.

Accounting conventionb)

The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgments wereexercised in application of accounting policies are as follows:

Critical accounting estimates and judgmentsc)

31


Estimates with respect to residual values and useful lives and pattern of flow of economic benefits are based on the analysis of the management of the Company. Further, the Company reviews the value of assets for possible impairment on annual basis. Any change in the estimates in the future might affect the carrying amount of respective item of property, plant and equipment, with a corresponding effect on the depreciation charge andimpairment.

Useful lives, patterns of economic benefits and impairments

In making the estimates for income tax currently payable by the Company, the management takes into account the current income tax law and the decisions ofappellate authorities on certain issues in the past.

Taxation

The Company reviews its receivable balances against any provision required for any doubtful balances on an ongoing basis. The provision is made while taking intoconsideration expected recoveries, if any.

Provision for doubtful debts

Standard and amendments to published approved accounting standards thatare effective in current year

d)

Changes in accounting policies and disclosures arising from standard andamendments to published approved accounting standards that are effectivein the current year

i)

IAS 1 (Revised) 'Presentation of Financial Statements' (effective for annual periods beginning on or after January 01, 2009). The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. As a result the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects,there is no impact on earnings per share.

IFRS 7 (Amendment) ‘Financial instruments: Disclosures’ (effective for annual periods beginning on or after January 01, 2009). This amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact onearnings per share.

32


IFRS 8 'Operating Segments' (effective for annual periods beginning on or after January 01, 2009). It introduces the "management approach" to segment reporting. IFRS 8 requires presentation and disclosure of segment information based on the internal reports regularly reviewed by the Company's chief operating decision makers in order to assess each segment's performance and to allocate resources to them. Previously, the Company did not present segment information as IAS 14 limited reportable segments to those that earn a majority of their revenue from sales to external customers and therefore did not require the different stages of vertically integrated operations to be identified as separate segments. Under the management approach, the Company has determined operating segments on the basis of business activities i.e. Spinning, Weaving, Processing and Home Textile, Trading, Power Generation and Cold Storage. As the change in accounting policy only results in additional disclosures of segment information, there is no impact on earningsper share.

Other amendment to published approved accounting standard that is effectivein the current year

ii)

IAS 23 (Amendment) 'Borrowing Costs' (effective for annual periods beginning on or after January 01, 2009). It requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The Company's accounting policy on borrowing cost, as disclosed in note 2.14, complies with the above mentioned requirements to capitalize borrowing cost and hence this change hasnot impacted the Company's accounting policy.

Standards, interpretations and amendments to published approved accountingstandards that are effective in current year but not relevant

e)

There are other new standards, interpretations and amendments to the published approved accounting standards that are mandatory for accounting periods beginning on or after July 01, 2009 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in thesefinancial statements.

Standards and amendments to published approved accounting standards thatare not yet effective but relevant

f)

Following standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after July 01, 2010 orlater periods:

33


IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after January 01, 2013). IFRS 9 has superseded the IAS 39 'Financial Instruments: Recognition and Measurement'. It requires that all equity investments are to be measured at fair value while eliminating the cost model for unquoted equity investments. Certain categories of financial instruments available under IAS 39 will be eliminated. Moreover, it also amends certain disclosure requirements relating to financial instruments under IFRS 7. The management of the Company is in the process of evaluating impacts of the aforesaid standard on theCompany's financial statements.

There are other amendments resulting from annual improvements projects initiated by International Accounting Standards Board in April 2009 and May 2010, specifically in IFRS 7 'Financial Instruments: Disclosures', IFRS 8 'Operating Segments', IAS 1 'Presentation of Financial Statements', IAS 7 'Statement of Cash Flows', IAS 24 'Related Party Disclosures' and IAS 36 'Impairment of Assets' that are considered relevant to the Company's financial statements. The amendments are unlikely to have a significant impact on the Company'sfinancial statements and have therefore not been analyzed in detail.

Standards, interpretations and amendments to published approved accountingstandards that are not effective in current year and not considered relevant

g)

There are other accounting standards, amendments to published approved accounting standards and new interpretations that are mandatory for accounting periods beginning on or after July 01, 2010 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in thesefinancial statements.

Employees retirement benefits2.2

The Company operates a recognized provident fund for all its permanent employees. Equal monthly contributions are made to the fund both by the Company and the employees at the rate of 6.25 percent of the basic salary plus cost of living allowance. Obligation for contributions to defined contribution plan is recognized as an expense in the profit and loss account as and when incurred. Employees are eligible under the scheme on completion ofprescribed qualifying period of service.

Liabilities against assets subject to finance lease2.3

Leases, where the Company has substantially all the risks and rewards of ownership of assets are classified as finance leases. At inception, finance leases are recorded at the lower of present value of minimum lease payments under the lease agreement and the fair value of the assets. The related rental obligations, net of finance cost, are included in liabilities against assets subject to finance lease. The liabilities are classified as current and non-current depending upon the timing of the payment. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The interest element of the rental is charged to profit over the leaseterm.

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliableestimate can be made of the amount of the obligation.

2.4 Provisions

34


Dividend is recognized as a liability in the period in which it is declared.

2.5 Dividend

2.6 Taxation

Provision for current tax is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing current tax rates or tax rates after taking into account rebates and tax credits, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising fromassessments framed during the year for such years.

Current

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profits will be available against which the deductible temporarydifferences, unused tax losses and tax credits can be utilized.

Deferred

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensiveincome or directly in equity, respectively.

35


2.7 Property, plant and equipment

Operating fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any identified impairment loss, except freehold land which is stated at revalued amount less any identified impairment loss and leasehold land which is stated at revalued amount less accumulated depreciation and any identified impairment loss. Capital work-in-progress is stated at cost less any identified impairment loss. Cost of operating fixed assets consists of purchase cost, revalued amount, borrowing cost pertaining to the construction / erection period referred to Note 2.14 and directly attributable cost of bringing the assets to working condition.

Cost / revalued amounta)

2.7.1

Valuations are performed frequently enough to ensure that the fair value of arevalued asset does not differ materially from its carrying amount.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged toprofit and loss account during the period in which they are incurred.

Any revaluation surplus is credited to surplus on revaluation of operating fixed assets except to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or loss, in which case the increase is recognized in profit or loss. A revaluation deficit is recognized in profit or loss, except to the extent that it offsets an existing surplus on the same assetrecognized in surplus on revaluation of operating fixed assets.

An annual transfer from surplus on revaluation of operating fixed assets to unappropriated profit is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. All transfers from surplus on revaluation of operating fixed assets are net of applicable deferredtaxation.

Depreciation on assets is charged from the month in which an asset is acquiredwhile no depreciation is charged for the month in which the asset is disposed of.

Depreciation b)

36


Depreciation is charged to income on reducing balance method, except leasehold land on which depreciation is charged on straight line method to write off the cost of operating fixed assets over their expected useful lives at the rates mentioned inNote 12.1.

Derecognition c)

An item of property, plant and equipment is derecognized upon disposal or whenno future economic benefits are expected from its use or disposal. Any gain orloss arising on derecognition of the asset (calculated as the difference betweenthe net disposal proceeds and carrying amount of the asset) is included in profitand loss account in the year the asset is derecognized.

Change in accounting estimated)

Previously depreciation on the office building on leasehold land at Hattar Unit was being charged at the rate of 10%. Now the Company has changed its accounting estimate to charge depreciation at the rate of 5% as a result of annual review of useful lives of assets. The change in accounting estimate has been applied prospectively in accordance with IAS 8 'Accounting policies, Changes in Accounting Estimates and Errors'. Had there been no change in this accounting estimate, the figures recognized in these financial statements would have beendifferent as follows:

3532

Net book value of building on leasehold landwould have been lower by Profit after taxation would have been lower by


Assets subject to finance lease2.7.2

These are initially recognised at lower of present value of minimum lease payments under the lease agreements and fair value of assets. Subsequently, these assets are stated at cost less accumulated depreciation and any identified impairment loss. Assets so acquired are depreciated over their expected useful lives. Depreciation ofleased assets is charged to profit and loss account.

Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset isdisposed of.

37


Assets subject to operating lease2.7.3

Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss account on astraight line basis over the lease term.

Investments2.8

Classification of an investment is made on the basis of intended purpose for holding such investment. Management determines the appropriate classification of itsinvestments at the time of purchase.

Investments are initially measured at fair value plus transaction costs directly attributable to acquisition, except for “Investment at fair value through profit or loss”which is measured initially at fair value.

The Company assesses at the end of each reporting period whether there is any objective evidence that investments are impaired. If any such evidence exists, the Company applies the provisions of IAS 39 'Financial Instruments: Recognition and Measurement' to all investments, except investment in an associate, which is tested for impairment inaccordance with the provisions of IAS 36 'Impairment of Assets'.

Investments at fair value through profit or loss2.8.1

Investments at fair value through profit or loss includes financial assets held for tradingdesignated upon initial recognition as at fair value through profit or loss.

Investments which are acquired principally for the purpose of generating profit from short term fluctuations in price or dealer’s margin are classified as held for trading. After initial recognition, these are stated at fair values with any resulting gains or losses recognized directly in the profit and loss account. Transaction costs are charged to profit and lossaccount when incurred.

Investments with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long-term investments that are intended to be held-to-maturity, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit and loss account when the investments are derecognised or impaired, as well as through the amortisation process.

Held-to-maturity investments2.8.2

38


Investments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity, or changes to interest rates or equity prices areclassified as available for sale. These are sub-categorized as under:

Available for sale investments2.8.3

After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized directly in statement of other comprehensive income until the investment is sold, de-recognized or is determined to be impaired, at which time the cumulative gain or loss previously reported in statement of other comprehensive income is included in profit and loss account. Fair value is determined by reference to stock exchange quoted market bidsat the close of business on the balance sheet date.

Quoted

The investments that do not have a quoted market price in an active market and whose fair value can not be reliably measured, subsequent to after initial recognitionare carried at cost less any identified impairment loss.

Unquoted

The Company’s investment in its associate is accounted for under the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the Company’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized. The profit and loss account reflects the share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes and discloses this, when applicable, in thestatement of changes in equity.

Investment in an associate2.8.4

The reporting dates of the associate and the Company are identical and the associate’s accounting policies conform to those used by the Company for like transactions andevents in similar circumstances.

Inventories, except for stock in transit and waste materials, are stated at lower of cost and net realizable value. Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make suchsale. Cost is determined as follows:

Inventories2.9

39


Usable stores, spare parts and loose tools are valued at moving average cost, while items considered obsolete are carried at nil value. Items-in-transit are stated at invoice amountplus other charges paid thereon.

Stores, spare parts and loose tools

Stock of raw materials, except for stock-in-transit, is valued principally at the lower of weighted average cost and net realizable value.

Stock-in-trade

Raw materials-in-transit are valued at cost comprising invoice value plus other chargespaid thereon.

Cost of work-in-process and finished goods comprises of cost of direct materials, labourand appropriate manufacturing overheads.

Stock of waste materials is stated at net realizable value.

Cash and cash equivalents comprise cash in hand, cash at banks on current accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in values.

Cash and cash equivalents2.10

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specificrecognition criteria must also be met before revenue is recognized:

Revenue recognition2.11

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on the delivery of the goods.Revenue from sale of electricity is recognized at the time of transmission.

Sale of goods and electricity

Revenue is recognized as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life ofthe financial instrument to the net carrying amount of the financial asset).

Interest income

Dividends

Dividend income is recognized when right to receive the dividend is established.

40


Financial instruments carried on the balance sheet include investments, deposits, trade debts, loans and advances, interest accrued, other receivables, cash and bank balances, long term financing, short term borrowings, accrued mark-up and trade and otherpayables etc.

Financial instruments2.12

Financial assets and liabilities are recognized at the time the Company becomes aparty to contractual provisions of the instruments.

Initial recognition is made at fair value plus transaction costs directly attributable to acquisition, except for "financial instruments at fair value through profit or loss”which is measured initially at fair value.

The particular measurement methods adopted are disclosed in the following individual policy statements associated with each item and in the accounting policy ofinvestments.

Interest bearing loans and borrowingsa)

All loans and borrowings are initially recognized at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, long term interest-bearing loans and borrowings are measured at amortized cost using the effective interest method while short term borrowings are measured at fair value. Gains and losses are recognized in net profit or loss when the liabilities are derecognized as well as through the amortizationprocess.

Trade debtsb)

Trade debts originated by the Company are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. Known bad debts are written off and provision is made against debts considered doubtfulwhen collection of the full amount is no longer probable.

Loans and receivablesc)

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortized cost using the effective interest method. Gains and losses are recognized in profit and loss account when the loans and receivablesare derecognised or impaired, as well as through the amortization process.

Trade and other payablesd)

Liabilities for trade and other amounts payable are initially recognized at fair value,which is normally the transaction cost.

41


The Company uses derivative financial instruments such as forward currency contracts and forward currency swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positiveand as liabilities when the fair value is negative.

Derivative financial instruments2.13

Any gains or losses arising from changes in fair value on derivatives during the year thatdo not qualify for hedge accounting are taken directly to profit or loss.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of cross currency swap contracts is determined by reference to market values for similarinstruments.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain inequity until the forecast transaction or firm commitment occurs.

Interest, mark-up and other charges on long term finances are capitalized upto the date of commissioning of respective qualifying assets acquired out of the proceeds of such long term finances. All other interest, mark-up and other charges are charged toprofit and loss account.

Borrowing cost2.14

Impairment2.15

Impairment of assets other than financial assetsa)

The carrying amounts of the assets other than financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss account.

42


Impairment of financial assetsb)

The Company assesses at each balance sheet date whether a financial asset orgroup of financial assets is impaired.

Assets carried at amortized cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowanceaccount. The amount of the loss shall be recognized in profit or loss.

The Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to berecognized are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the income statement, to the extent that the carrying value of the asset does not exceed its amortizedcost at the reversal date.

Assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is carried at cost, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at thecurrent market rate of return for a similar financial asset.

43


Available for sale financial assets

If an available for sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from equity to the income statement. Reversals in respect of equity instruments classified as available for sale are not recognized in profit. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an eventoccurring after the impairment loss was recognized in profit or loss.

Derecognition of financial assets and liabilities2.16

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized where:

the rights to receive cash flows from the asset have expired;-

the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third partyunder a ‘pass-through’ arrangement; or

-

the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks andrewards of the asset, but has transferred control of the asset.

-

Where the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Company’s continuing involvement is the amount of the transferred asset that the Company may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Company’s continuing involvement is limited tothe lower of the fair value of the transferred asset and the option exercise price.

44


Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged orcancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carryingamounts is recognized in profit or loss.

Related party transactions and transfer pricing

Transactions and contracts with related parties are carried out at arm's length price determinedin accordance with comparable uncontrolled price method.

2.17

Off setting2.18

Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is legally enforceable right to set off and the Company intends either to settle on a net basis, or to realize the assets and to settle the liabilitiessimultaneously.

Foreign currencies2.19

The financial statements are presented in Pak Rupees, which is the Company's functional currency. Transactions in foreign currency during the year are initially recorded in the functional currency at the rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at functional currency using the rate of exchange prevailing at the balance sheet date. All differences are taken tothe profit and loss account.

Segment reporting2.20

Segment reporting is based on the operating (business) segments of the Company. An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Company's other components. An operating segment's operating results are reviewed regularly by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess itsperformance, and for which discrete financial information is available.

Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those income, expenses, assets, liabilities and other balances which can not be allocatedto a particular segment on a reasonable basis are reported as unallocated.

45


The Company has six reportable business segments. Spinning (Producing different quality of yarn using natural and artificial fibres), Weaving (Producing different quality of greige fabric using yarn), Processing and Home Textile (Processing greige fabric for production of printed and dyed fabric and manufacturing of Home Textile articles), Trading (Buying and selling of garments and Home Textile articles), Power Generation (Generating and distributing power) and Cold Storage (Making of ice andwarehousing of perishable goods).

Transactions among the business segments are recorded at arm's length prices using admissible valuation methods. Inter segment sales and purchases are eliminatedfrom the total.

ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL3.


2010 2009

(Number of Shares)

2010 2009

Ordinary shares of Rupees 10 eachfully paid in cash

Ordinary shares of Rupees 10 eachissued as fully paid bonus shares

19 781 136

49 209 923

19 781 136

49 209 923

197,811

492,099

197,811

29 428 787 29 428 787 294,288 294,288

492,099

3.1 Ordinary shares of the Company held by related parties as at year end are as follows:

2010 2009

(Number of Shares)

Crescent Sugar Mills and Distillery LimitedCrescent FoundationCrescent Steel and Allied Products LimitedThe Crescent Textile Mills Limited-Employees Provident Fund-TrusteePremier Insurance LimitedShakarganj Mills LimitedAhsan Associates (Private) LimitedJubilee Spinning and Weaving Mills Limited

2 681 8751 030 861 452 379 313 122 262 000

5 898 1 563 827

2 681 8751 030 861 452 379 313 122 264 000

5 898 1 563 827

4 748 525 4 750 525

46


RESERVES4.


2010 2009

Composition of reserves is as follows:CapitalFair value reserve (Note 4.1)

RevenueDividend equalizationGeneralUnappropriated profit / (accumulated loss)

75,789

30,000 1,773,643

300,908

2,104,551

21,131

30,000 1,773,643

(55,036)

1,748,607

2,180,340 1,769,738

4.1 This represents the unrealized gain on remeasurement of investments at fair value and is not available for distribution. This will be transferred to profit and loss accounton realization. Reconciliation of fair value reserve is as under:

Balance as at July 01,

Add / (less): Fair value adjustment during the year

Balance as at June 30,

21,131

54,658

75,789

350,507

(329,376)

21,131

SURPLUS ON REVALUATION OF OPERATINGFIXED ASSETS - NET OF DEFERRED TAX

5.

Less: Transferred to unappropriated profit Net of deferred tax Related deferred tax liability

12 1 13

1,640,526

8 5 13

1,640,539

Surplus on revaluation of operating fixed assets as at July 01, 1,640,539 1,640,552

Less:Deferred tax liability as at July 01, Adjustment of deferred tax liability due to re-assessment at year endIncremental depreciation charged during the yeartransferred to profit and loss account

146 (26)

(1) 119

151 -

(5) 146

1,640,407 1,640,393

5.1 This represents surplus resulting from revaluation of freehold land and leasehold land carried out on June 30, 2007 by Messrs Hamid Mukhtar and Company (Private) Limited, an independent valuer enrolled on panel of the State Bank of Pakistan (SBP)as per the basis stated in Note 12.1.1 to the financial statements.

47


LONG TERM FINANCING - SECURED6.

Financing from banking companies (Note 6.1)Term finance certificates (Note 6.2)

1,008,034 99,985 1,108,019

1,264,894 199,970 1,464,864

Less: Current portion shown under current liabilities 451,668

656,351

356,845

1,108,019


2010 2009

Lender 2010 2009 Rate of interest

per annum Number of

installmentsDate of repaymentOf first installment

InterestPayable

Security


National Bank of

Pakistan

99,955 62,576 162,531

166,591 75,091 241,682

6 months KIBOR

plus 2% without

any floor or cap

SBP refinance rate

for LTF-EOP plus

2%

12 equal half

yearly

installments

January 03, 2006 Half yearly First pari passu charge over fixed

assets of the Company.

National Bank of

Pakistan

125,000 145,833 SBP refinance rate

for LTF-EOP plus

2%

12 equal half

yearly

installments

September 22, 2006 Quarterly First pari passu charge amounting to

Rupees 335 million over fixed assets

(plant and machinery) of thecompany.

Allied Bank

Limited

150,000 250,000 6 months KIBOR

plus 1.90% without

any floor or cap

10 equal half

yearly

installments

March 29, 2007 Half yearly Joint pari passu charge over fixed


Allied Bank

Limited


for LTF-EOP plus

2%

12 equal half

yearly

installments

December 29, 2007 Quarterly Joint pari passu charge over fixed

assets of the Company and lien overimport documents.

Habib Bank

Limited


for LTF-EOP plus

2%

10 equal half

yearly

installments

January 23, 2010 Quarterly Joint pari passu charge over fixed


Allied Bank

Limited


for LTF-EOP plus

2%

12 equal half

yearly

installments

February 23, 2010 Quarterly Ranking charge over fixed assets of

the Company and lien over importdocuments.

Habib Bank

Limited


for LTF-EOP plus

3%

12 equal half

yearly

installments

March 03, 2010 Quarterly Ranking charge over fixed assets of

the Company.

Habib Bank

Limited


for LTF-EOP plus

3%

12 equal half

yearly

installments

June 08, 2011 Quarterly Ranking charge over fixed assets of

the Company.

1,008,034 1,264,894

Lender 2010 2009 Rate of interest

per annum Number of

installmentsDate of repaymentOf first installment

InterestPayable

Security


United BankLimited

99,985 199,970 6 months KIBOR

plus 1.45% without

any floor or cap

11 equal

half

yearly installments

December 17, 2006 Half yearly First pari passu charge over fixed


6.1

6.2

48


6.2.1 Syndicated loan facility of Rupees 550 million (2009: Rupees 550 million) obtained from United Bank Limited for Balancing, Modernization and Replacement (BMR) of existing facilities of the Company was converted in financial year 2004 to privately placed term finance certificates having face value of Rupees 5,000 each. United Bank Limited has been appointed to act as trustee for the issue. The trust deed, dated March 27, 2004 between the Company and United Bank Limited, specifies the rights and obligations of the trustees. The deed requires that the trustees will ensure adherence to terms andconditions of the security documents.

DEFERRED TAX LIABILITY7.

Taxable temporary differencesTax depreciation allowanceTax on investment in associateSurplus on revaluation of operating fixed assets

Deductible temporary differencesUnused tax losses

118,107 34,861

119 153,087

(144,274) 8,813


2010 2009

- - - -

- -

TRADE AND OTHER PAYABLES8.

Creditors (Note 8.1)Accrued liabilitiesAdvances from customersRetention money due to contractorsIncome tax deducted at sourceUnclaimed dividend Payable to Employees Provident Fund TrustWorkers' profit participation fund (Note 8.2)Other payablesWorkers' welfare fund

286,972 169,293 26,204

455 2,472 5,956

943 17,380 3,222 8,496 521,393

123,393 150,597 20,729

403 6,097 5,963

354 3,932 2,103 1,494

315,065

8.1 This includes amounts in aggregate of Rupees 5.619 million (2009: Rupees 6.530million) due to related parties.

Workers' profit participation fund8.2

Balance as on July 01,Interest for the year (Note 32)Add: Provision for the year (Note 30)

Less: Payments during the year

3,932 206 17,380

21,518 4,138 17,380

- -

3,932 3,932

- 3,932

49


8.2.1 The Company retains workers' profit participation fund for its business operations till the date of allocation to workers. Interest is paid at prescribed rate under the Companies Profit (Workers' Participation) Act, 1968 on funds utilized by the Company till the date ofallocation to workers.

ACCRUED MARK-UP9.

Long term financingShort term borrowings

22,938 83,781 106,719


2010 2009

64,654 112,553 177,207

SHORT TERM BORROWINGS10.

From banking companies - secured

Short term finances (Note 10.1 and Note 10.4)State Bank of Pakistan (SBP) refinance (Note 10.2 and Note 10.4)Short term foreign currency finances (Note 10.3 and Note 10.4)

1,243,802 1,847,600

1,748,616

4,840,018

2,025,772 1,409,600 1,447,835

4,883,207

10.1 The finances aggregating to Rupees 2,209 million (2009: Rupees 2,438 million) are obtained from banking companies under mark-up agreements and carry mark-up ranging from KIBOR plus 1.50 to 2.90 percent (2009: KIBOR plus 1.00 to 4.00percent) per annum.

10.2 Export refinances have been obtained from banking companies under SBP’s refinance scheme on which service charges at the rate of 7.50 to 9.00 percent (2009: 7.20 to 7.50 percent) per annum are payable. These form part of aggregate borrowing limitsof Rupees 1,856 million (2009: Rupees 1,460 million).

10.3 Short term foreign currency finances amounting to Rupees 1,748 million (2009: Rupees 1,462 million) are available at mark-up ranging from LIBOR plus 2.75 to 5.00percent (2009: LIBOR plus 2.40 to 5.00 percent) per annum.

10.4 The aggregate short term finances are secured by way of hypothecation on all present and future current assets of the Company, pledge on finished stocks and lien on exportletters of credit or firm contracts.

50


11.

Letters of guarantee of Rupees 115.143 million (2009: Rupees 120.848 million) are given by the banks of the Company to Sui Northern Gas Pipeline Limited against gasconnection and Collector of Customs against import of raw material and supplies.

PROPERTY, PLANT AND EQUIPMENT12.

Operating fixed assets (Note 12.1)Capital work in progress (Note 12.2)

3,948,372 32,809 3,981,181


2010 2009

4,180,127 2,260

4,182,387

Post dated cheques of Rupees 9.807 million (2009: Rupees 19.176 million) are issued to Custom Authorities in respect of duties on imported material availed on the basis of consumption and export plans. If documents of exports are not provided on duedates, cheques issued as security shall be encashable.

CONTINGENCIES AND COMMITMENTS

Contingencies

The Company is contingently liable to the extent of Rupees 84.385 million (2009:Rupees 117.240 million) as its share of contingent liabilities of its associate.

Contracts for capital expenditure amounting to Rupees 59.273 million (2009: Rupees 8.985 million).

Commitments

Letters of credit other than for capital expenditure amounting to Rupees 190.297million (2009: Rupees 51.872 million).

51


12.1 Operating fixed assets

Land -Freehold

Land -Leasehold

Buildings on freehold land

Buildings on leasehold

land

Plant andmachinery

Factory toolsand

equipment

Gas andelectric

InstallationsVehicles

Furnitureand

fixtures

Officeequipment

Total

------------------------------------------------------------------------- (RUPEES IN THOUSAND) --------------------------------------------------------------------------------

At July 01, 2008Cost / revalued amountAccumulated depreciationNet book value

6,000 (813)

5,187

299,581 (172,260) 127,321

49,431 (28,483) 20,948

4,117,353 (1,761,544)

2,355,809

64,979 (58,705) 6,274

50,906 (43,538) 7,368

61,050 (25,644) 35,406

5,371 (3,759)

1,612

33,305 (29,830) 3,475

6,340,676 (2,124,576) 4,216,100

Year ended June 30, 2009Opening net book value AdditionsDisposals:CostAccumulated depreciation

Depreciation chargeClosing net book value

5,187 -

- - -

(61) 5,126

127,321 7,324

- - -

(10,958) 123,687

20,948 -

- - - (2,095) 18,853

2,355,809 222,074

(86,051) 65,103 (20,948) (246,566) 2,310,369

6,274 458

- - - (1,283) 5,449

7,368 4,479

- - - (1,833) 10,014

35,406 23,354

(9,705) 6,295

(3,410) (9,680) 45,670

1,612 2,326

- - - (574)

3,364

3,475 4,234

- - - (2,814) 4,895

4,216,100 264,249

(95,756) 71,398 (24,358) (275,864) 4,180,127

At June 30, 2009Cost / revalued amountAccumulated depreciationNet book value

6,000 (874) 5,126

306,905 (183,218) 123,687

49,431 (30,578) 18,853

4,253,376 (1,943,007) 2,310,369

65,437 (59,988) 5,449

55,385 (45,371) 10,014

74,699 (29,029) 45,670

7,697 (4,333) 3,364

37,539 (32,644) 4,895

6,509,169 (2,329,042) 4,180,127

Year ended June 30, 2010Opening net book value AdditionsDisposals:CostAccumulated depreciation

Depreciation chargeClosing net book value

5,126 -

- - -

(61) 5,065

123,687 -

(626) 489

(137) (10,505) 113,045

18,853 -

- - - (1,850) 17,003

2,310,369 17,213

(1,907) 1,788

(119) (232,200)

2,095,263

5,449 1,918

(15) 13 (2)

(1,350) 6,015

10,014 712

(2,602) 2,394

(208) (2,147) 8,371

45,670 11,464

(6,242) 4,435

(1,807) (10,542) 44,785

3,364 -

(431) 390

(41) (672) 2,651

4,895 1,527

(3,934) 3,911

(23) (2,925) 3,474

4,180,127 32,834

(15,757) 13,420 (2,337)

(262,252) 3,948,372

At June 30, 2010Cost / revalued amountAccumulated depreciationNet book value

1,652,700 -

1,652,700

1,652,700 -

- - - -

1,652,700

1,652,700 -

1,652,700

1,652,700 -

- - - -

1,652,700

1,652,700 -

1,652,700

6,000 (935)

5,065

306,279 (193,234) 113,045

49,431 (32,428) 17,003

4,268,682 (2,173,419)

2,095,263

67,340 (61,325) 6,015

53,495 (45,124) 8,371

79,921 (35,136) 44,785

7,266 (4,615) 2,651

35,132 (31,658) 3,474

6,526,246 (2,577,874) 3,948,372

Annual rate of depreciation (%) - 1.01 5-10 5-10 10 20 20 20 20 50

52


12.1.1 The land of the Company, except the land situated at Faisalabad, had been revalued as on June 30, 2007 using the present market value at Rupees 62 million. Whereas the land situated at Faisalabad granted to the Company by the Government of Punjab in 1958 under Land Acquisition Act, 1894 for the specific purpose of using it as an industrial undertaking had been revalued at Rupees 1,597 million taking into account conditions specified under various directives of the Government by an independent valuer, Messrs Hamid Mukhtar and Company (Private) Limited. The Company hadrevalued this land based on the advice from its legal counsel.

Land - FreeholdLand - Leasehold

12.1.2 Fixed assets of the Company with carrying amount Rupees 3,904 million (2009: Rupees 3,280 million) are subject to first pari passu charge to secured bankborrowings.

12.1.3 If the freehold and leasehold land were measured using the cost model, thecarrying amount would be as follows:

2010

Cost Accumulateddepreciation

Net bookvalue


13,403 4,719

18,122

- 883

883

13,403 3,836

17,239

2009

Cost Accumulateddepreciation

Net bookvalue

13,403 4,719

18,122

- 834

834

13,403 3,885

17,288

12.1.4 Depreciation charge for the year has been allocated as follows:

Cost of sales (Note 27)Administrative expenses (Note 29)

246,078 16,174

262,252


2010 2009

260,834 15,030

275,864

53


12.1.5

Description

Plant and MachineryCone winder

Comber, step cleaner

1

5

Detail of operating fixed assets, exceeding the book value of Rupees 50,000 disposed of during the year is as follows:

Qty. CostAccumulateddepreciation

Net bookvalue

Saleproceeds

Mode ofdisposal

Particulars of purchasers

178

206

384

125

146

271

53

60

113

1,535

630

2,165

Negotiation

Negotiation

H.A. Haq Spinning Mills,Montgomery Bazar, Faisalabad.Mr. Azam Javaid, House No. 332-A,Canal Road, Faisalabad.

VehiclesHonda Civic

Suzuki MehranToyota Corolla

Suzuki CultusToyota Corolla

Honda City

Suzuki MehranSuzuki Mehran

1

11

11

1

11

1,195

458 1,189

609 1,113

851

359 359

6,133

989

238 823

311 778

609

294 294

4,336

206

220 366

298 335

242

65 65

1,797

500

337 500

475 800

720

215 247

3,794

Negotiation

Insurance claimNegotiation

Insurance claimNegotiation

Negotiation

NegotiationNegotiation

Mr. Muhammad Raees-Ud-Din,House No. 14/7-A-5, Nazim Abad, Karachi.Premier Insurance Limited.Mr. Muhammad Rizwan, House No. 205,Fatima Jinnah Road, New Town, Karachi.Premier Insurance Limited.Mr. Muhammad Idrees Ch., House No.P-298, Tariq Chowk, Samanabad, Faisalabad.Mr. Sakhi Hussain Shah, House No. P-5857,Street No. 5, Mansoorabad, Faisalabad.Mr. Abid Iqbal, Company Employee.Mr. Asmat Ali Javed, P-1013/12-C,Shahabad, Noor Pur Road, Faisalabad.

Aggregate of other items of property,plant and equipment with individualbook values not exceedingRupees 50,000 9,240

15,757

8,813

13,420

427

2,337

336

6,295


2010 2009

Capital work in progress12.2

BuildingPlant and machineryAdvances for vehicles

3,762 27,232

1,815 32,809

- 2,260

- 2,260


INVESTMENT IN AN ASSOCIATE13.

26 926 433 (2009: 26 926 433) ordinary shares ofRupees 10 each (Note 13.1)Share of post acquisition profit:As at July 01,For the yearRealised surplus on revaluation of property,plant and equipmentAs at June 30,

269,264

216,071 120,022

12,513

348,606


2010 2009

269,264

50,764 165,307

- 216,071

54


Crescent Bahuman Limited - unquoted

617,870 485,335

13.1 The Company holds 32.99% (2009: 32.99%) interest in Crescent Bahuman Limited (CBL), an unquoted public limited company involved in manufacturing of textileproducts. The summarized financial information of CBL is as follows:

Associate's balance sheet:Current assetsNon-current assetsCurrent liabilitiesNon-current liabilities

Net assets

4,087,826 3,610,875 (4,052,726) (2,544,459)

1,101,516

3,591,010 3,165,973 (3,635,768)

(2,941,088)

180,127

Associate's revenue and profit:

Revenue

Profit before taxation for the year

Profit after taxation for the year

7,172,726

434,514

363,813

6,031,587

560,238

501,080

LONG TERM INVESTMENTS14.

Crescent Jute Products Limited2 738 637 (2009: 2 738 637) fully paid ordinary shares ofRupees 10 each. Equity held 11.52% (2009: 11.52%)

Crescent Sugar Mills and Distillery Limited 975 944 (2009: 975 944) fully paid ordinary shares of Rupees 10 each. Equity held 4.56% (2009: 4.56%)

Shams Textile Mills Limited812 160 (2009: 812 160) fully paid ordinary shares of Rupees 10 each. Equity held 9.40% (2009: 9.40%)

Shakarganj Mills Limited5 427 488 (2009: 5 427 488) fully paid ordinary shares of Rupees 10 each. Equity held 7.81% (2009: 7.81%) 2 746 050 (2009: 2 746 050) fully paid preference shares of Rupees 10 each. Equity held 7.94% (2009: 7.94%) (Note 14.1)

Premier Insurance Limited 169 573 (2009: 147 455) fully paid ordinary shares of Rupees 5 each. Equity held 0.31% (2009: 0.31%)

Jubilee Spinning and Weaving Mills Limited 182 629 (2009: 182 629) fully paid ordinary shares of Rupees 10 each. Equity held 0.56% (2009: 0.56%)

Crescent Steel and Allied Products Limited 6 209 676 (2009: 6 209 676) fully paid ordinary shares of Rupees 10 each. Equity held 11% (2009: 11%)

Unquoted

Renfro Crescent (Private) Limited 4 317 252 (2009: 4 317 252) fully paid ordinary shares of Rupees 10 each. Equity held 11.98% (2009: 11.98%)

Others

Quoted

Crescent Fibres Limited351 657 (2009: 351 657) fully paid ordinary shares of Rupees 10 each. Equity held 2.83% (2009: 2.83%)

Crescent Spinning Mills Limited466 800 (2009: 466 800) fully paid ordinary shares of Rupees 10 each. Equity held 3.08% (2009: 3.08%)

Crescent Knitwear Limited1 200 000 (2009: 1 200 000) fully paid ordinary shares of Rupees 10 each. Equity held 12.50% (2009: 12.50%)

4,105

5,124

4,629

27,680

27,186

35

546

91,625

43,159

2,162

-

-


2010 2009

20,359

5,854

15,181

46,160

27,461

35

702

91,625

43,159

3,130

4,668

12,000

55


Available for sale

Related parties

Quoted

Unquoted

Premier Financial Services (Private) Limited500 (2009: 500) fully paid ordinary shares ofRupees 1,000 each. Equity held 2.22% (2009: 2.22%)

Less: Impairment loss charged to profitand loss account (Note 30.2)

Add: Fair value adjustment

500

206,751

(27,343)

75,789

255,197


2010 2009

56


500

270,834

(64,082)

21,131

227,883

14.1 The Company has the right to convert these shares into ordinary shares at end of every financial year in whole or in part through a tender offer by the Issuing Company. The conversion is set in the ratio of 167 ordinary shares for every 1,000preference shares at a face value of Rupees 10 each.

LONG TERM LOANS AND ADVANCES

Considered good:

Loan and advances to Crescent Bahuman Limited - associate (Note 15.1)

Secured:Executives (Note 15.3)Other employees

Less: Current portion shown under current assets (Note 21)ExecutivesOther employees

1,927,188

2,050 1,930 3,980 1,931,168

1,800 648 2,448

1,928,720

1,809,317

3,650 1,195

4,845 1,814,162

1,800 266 2,066

1,812,096

15.

15.1 This represents balance transferred from current account of Crescent Bahuman Limited (CBL) as at September 30, 2000 and further long term loan contributed under the Restructuring of CBL, Memorandum of Understanding (MOU) signed on January 25, 2001 amongst The Crescent Textile Mills Limited (CTML), CBL, Investment Finance Corporation (IFC) and other senior lenders for revival of the project. Theprincipal figures and carrying amount of such balances are:

Principal amount

a) Principal (short term converted advance)b) Accrued mark-up on short term converted advance upto September 30, 2000c) Long term convertible subordinated loan

428,400

504,000 342,000 1,274,400


2010 2009

57


428,400

504,000 342,000 1,274,400

15.2 Board of Directors and shareholders of the Company have resolved the conversion of all the sums due from Crescent Bahuman Limited on account of long term loan and interest receivable thereon till date of conversion into Preference Shares of the investee company subject to regulatory approvals to be obtained by the saidcompany.

Carrying amount

a) Principal (short term converted advance) b) Accrued mark-up on short term converted advance upto September 30, 2000c) Long term convertible subordinated loand) Effect of amortization and mark-up on principal portion of short term converted advance and long term convertible subordinated loan

428,400

504,000 342,000

652,788 1,927,188

428,400

504,000 342,000

534,917 1,809,317

The loan including accrued mark-up are unsecured and subordinated to all loans owed by CBL or to be obtained by CBL under the Restructuring Plan for repayment. The principal portion of short term converted advance and long term convertible loan, amounting to Rupees 770.400 million (2009: Rupees 770.400 million), carries mark- up at the rate of 15.30 percent per annum (2009: 15.30 percent). During the year, maximum aggregate amount at the end of any month was Rupees 1,927 million (2009: Rupees 1,809 million).

The terms of Preference Shares as approved by the shareholders are 5%, unlisted, non-voting, cumulative, participatory and convertible preference shares of Rupees 10each.

Reconciliation of carrying amount of loans to executives:

Opening balance as at July 01, Less: RepaymentsClosing balance as at June 30,

3,650 1,600 2,050

5,390 1,740 3,650

15.3


2010 2009

58


15.3.1 Maximum aggregate balance due from executives at the end of any month duringthe year was Rupees 3.650 million (2009: Rupees 5.390 million).

LONG TERM DEPOSITS AND PREPAYMENTS

Security depositsPrepayments

Less: Current portion shown under current assets (Note 22)

2,138 1,492 3,630 803 2,827

2,138 252 2,390

173 2,217

16.

15.3.2 These represent Qarz-e-Hasna given to executives and employees and are secured against balance to the credit of employee in the provident fund trust. These arerecoverable in equal monthly installments.

15.3.3 The fair value adjustment in accordance with the requirements of IAS 39 'Financial Instruments: Recognition and Measurement' arising in respect of staff loans is notconsidered material and hence not recognized.

DEFERRED TAX ASSET

Taxable temporary differencesTax depreciation allowanceTax on investment in associateSurplus on revaluation of operating fixed assets

Deductible temporary differencesUnused tax losses

- - - -

- -

(138,605) (21,607)

(146) (160,358)

180,702 20,344

17.

STORES, SPARE PARTS AND LOOSE TOOLS

Stores (Note 18.1)Spare partsLoose tools

18.

155,146 14,516 107 169,769

150,699 23,376

41 174,116

18.1 This includes stores in transit amounting to Rupees 16.103 million (2009: Rupees 8.778 million).

Stores and spare parts include items which may result in fixed capital expenditurebut are not distinguishable at this stage.

18.2


2010 2009

59


STOCK IN TRADE

Raw materials Work in processFinished goods Waste

178,672 84,732

781,145 2,601

1,047,150

179,013 76,838 680,142 4,428 940,421

19.

20.1 As at June 30, 2010, trade debts of Rupees 1,295.647 million (2009: Rupees 105.136 million) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. The ageing analysis of these trade debts is as follows:

TRADE DEBTS

Considered good:Secured (against letters of credit)Unsecured (Note 20.2)

189,715 2,390,186 2,579,901

215,565 2,346,783 2,562,348

20.

Considered doubtful:Others - unsecuredLess: Provision for doubtful debtsAs at July 01, Add: Provision for the yearAs at June 30,

33,747

33,747 -

33,747 -

33,747

- 33,747 33,747

-

Upto 1 month1 to 6 monthsMore than 6 months

570,201 703,756

21,690 1,295,647

15,263 287 89,586 105,136

20.2 It includes amount receivable from the associate, Crescent Bahuman Limited,amounting to Rupees 4.610 million (2009: Rupees 128.258 million).


2010 2009

60


LOANS AND ADVANCES

Considered good:Employees - interest freeCurrent portion of long term loans (Note 15)Advances to suppliers (Note 21.1)Letters of creditIncome tax

67 2,448 38,181

1,195 182,665 224,556

142 2,066 73,050

2,818 161,115 239,191

21.

21.1 These include advances to related parties amounting to Rupees 4.824 million (2009: Rupees 23.767 million)

SHORT TERM DEPOSITS AND PREPAYMENTS

Margin depositShort term prepaymentsCurrent portion of long term prepayments (Note 16)

5,001 152 803 5,956

701 548 173 1,422

22.

OTHER RECEIVABLES

Considered good:Due from related partiesExport rebate and claimsSales tax and special excise duty refundableMiscellaneous

330 15,239 89,645

4,232 109,446

25 22,656 37,865

1,363 61,909

23.

Considered doubtful:Export rebate and sales tax refundableLess: Provision for doubtful debts As at June 30,

12,952 12,952

- 109,446

12,744 12,744

- 61,909

20.3 As at June 30, 2010, trade debts of Rupees 33.747 million (2009: 33.747) were impaired and provided for. The ageing of these trade debts was more than six months.


2010 2009

61


SHORT TERM INVESTMENTS

Available for sale

Others - quotedSamba Bank Limited 21 897 007 (2009: 21 897 007) fully paid ordinary sharesof Rupees 10 each. Equity held 2.50% (2009: 2.50%)

Less: Impairment loss charged to profit and loss account (Note 30.2)

65,253

(15,547)

49,706

179,747

(114,494)

65,253

24.

CASH AND BANK BALANCES

With banks:

On current accounts Including US$ 70,975 (2009: US$ 164,445)

Cash in hand

15,402

1,017

16,419

17,638

1,293

18,931

25.

SALES

Export Local (Note 26.1)Cold storage Export rebateDuty drawback

7,555,046 3,241,217

11,928 51,037 4,158

10,863,386

7,986,149 2,707,685

10,123 46,555

-

10,750,512

26.

Local

SalesWasteEnergy

Less: Sales tax

Processing income

2,946,019 166,061 102,036

3,214,116 14,074

3,200,042

41,175

3,241,217

2,403,059 135,890 147,789 2,686,738

20,385

2,666,353

41,332

2,707,685

26.1


2010 2009

62


COST OF SALES

Raw material consumed (Note 27.1)Cloth and yarn purchasedStores, spare parts and loose toolsPacking materials consumedProcessing and weaving chargesSalaries, wages and other benefits (Note 27.2)Fuel and powerRepair and maintenanceInsuranceDepreciation (Note 12.1.4)Other factory overheads

2,848,255 1,204,721 564,983 369,779 376,885 623,514 976,607

50,328 15,716

246,078 9,022

7,285,888

2,619,331 816,290 533,471 325,025 286,817 557,345 859,546

55,981 17,211

260,834 7,096

6,338,947

27.

26.2 Exchange gain due to currency rate fluctuations relating to export sales amounting to Rupees 115.525 million (2009: Rupees 194.292 million) has been included in export sales.

Work-in-processOpening stockClosing stock

Cost of goods manufacturedFinished goodsOpening stockClosing stock

Cost of sales - purchased for resale

76,838 (84,732) (7,894)

7,277,994

684,570 (783,746)

(99,176) 7,178,818 2,227,826

9,406,644

75,605 (76,838)

(1,233) 6,337,714

755,309 (684,570) 70,739 6,408,453 2,766,814

9,175,267

Raw material consumed

Opening stockAdd: Purchased during the year

Less: Closing stock

179,013 2,847,914 3,026,927

(178,672)

2,848,255

392,449 2,405,895 2,798,344

(179,013)

2,619,331

27.1

27.2 Salaries, wages and other benefits include provident fund contribution of Rupees10.996 million (2009: Rupees 11.557 million) by the Company.


2010 2009

63


DISTRIBUTION COST

Salaries, wages and other benefits (Note 28.1)Freight and shipmentDistributionCommission to selling agentsAdvertisement

16,071 182,877

70,162 201,101 202

470,413

18,740 150,425 48,973 174,530

217

392,885

28.

29.1 Salaries, wages and other benefits include provident fund contribution ofRupees 3.684 million (2009: Rupees 3.294 million) by the Company.

28.1 Salaries, wages and other benefits include provident fund contribution ofRupees 0.258 million (2009: Rupees 0.359 million) by the Company.

ADMINISTRATIVE EXPENSES

Salaries, wages and other benefits (Note 29.1)Meeting fee to non-executive directorsTraveling, conveyance and entertainmentRent, rates and taxesRepair and maintenanceInsurancePrinting and stationeryCommunicationSubscriptionLegal and professional Auditors' remuneration (Note 29.2)Software maintenance Depreciation (Note 12.1.4)Other charges

97,367 105 11,219 1,797 6,831 3,207 18,643 4,521 2,325 4,213 1,285 8,568

16,174 5,763

182,018

92,766 115

9,248 1,543 7,629 2,222 15,845 3,892 3,145 2,591 1,285 4,920 15,030

8,119

168,350

29.

Auditors' remuneration:

Riaz Ahmad and CompanyAudit feeHalf yearly reviewReimbursable expenses

1,000 160 125

1,285

1,000 160 125

1,285

29.2


2010 2009

64


OTHER OPERATING EXPENSES

Donations (Note 30.1)Impairment loss on investments (Note 30.2)Exchange lossProvision for doubtful debtsDebit balances written off Workers' profit participation fundWorkers' welfare fund

4,394 42,890 58,056

7,115 35 17,380 7,002

136,872

5,690 178,576 139,854

46,491 247 3,932 1,494

376,284

30.

30.1 The directors and their spouses have no interest in donations made by Companyduring the year.

Impairment loss on investments

Long term investments (Note 14)Short term investments (Note 24)

27,343 15,547 42,890

64,082 114,494 178,576

30.2

OTHER OPERATING INCOME

Income from financial assetsDividend Income (Note 31.1)Mark-up on loans and advances (Note 31.2)Gain on fair value of derivative financial instrument

12,567 131,358 27,533 171,458

134 202,721

- 202,855

31.

Income from non-financial assetsSale of empties and scrapRental incomeGain on sale of property, plant and equipmentCredit balances added backResearch and development refundSundry receipts

15,212 227 3,958

197 20,458

790 40,842

212,300

16,155 214 2,791 29,418 - - 48,578

251,433


2010 2009

65


Dividend Income

From related parties:Premier Insurance LimitedCrescent Steel and Allied Products Limited

148 12,419 12,567

134 -

134

31.1

FINANCE COST

Mark-up on:Long term financingShort term borrowingsWorkers' profit participation fund (Note 8.2)Loss on fair value of derivative financial instrument Bank charges and commission

125,111 404,280

206 - 6,673

536,270

172,184 542,109

- 87,421 14,234

815,948

32.

Mark-up on loans and advances

AssociateCrescent Bahuman LimitedMark-up on principal portion of short term converted advance and long term convertible subordinated loanAmortization of accrued mark up on short term converted advance upto September 30, 2000 Amortization of long term convertible subordinated loan Mark-up on overdue receivables

117,871

- - 13,487 131,358

117,709

56,000 6,931 22,081 202,721

31.2

PROVISION FOR TAXATION

Charge for the year:Current (Note 33.1)Deferred (Note 33.2)

90,890 27,931

118,821

73,361 (13,863)

59,498

33.

33.1 Provision for current taxation represents the tax deducted against export sales, minimum tax on local sales and tax on other operating income under the relevant provisions of the Income Tax Ordinance, 2001. Tax losses available as at June 30, 2010 are Rupees 412.212 million (2009: Rupees 516.292 million). Reconciliation of tax expenses and product of accounting profit multiplied by the applicable tax rateis not presented, being impracticable.


2010 2009

66


Deferred tax effect due to :

Tax depreciation allowanceUnused tax lossesTax on investment in associateSurplus on revaluation of operating fixed assets

Opening balance as at July 01Related to surplus on revaluation ofoperating fixed assets

118,107 (144,274) 34,861

119 8,813 20,344

(1,226)

27,931

138,605 (180,702) 21,607

146 (20,344) 6,642

(161)

(13,863)

33.2

EARNINGS PER SHARE - BASIC AND DILUTED (RUPEES)

Profit for the year (Rupees in thousand) 344,670 179,020

34.

(NUMBER OF SHARES)

Weighted average number of ordinary shares 49 209 923 49 209 923

(RUPEES)

Earnings per share 7.00 3.64

No figure for diluted earnings per share has been presented as the Company has not issued any instrument carrying options which would have an impact onearnings per share when exercised.

CASH GENERATED FROM OPERATIONS

Profit before taxation

Adjustments for non-cash charges and other items:

Depreciation Gain on disposal of property, plant and equipmentDebit balances written offImpairment loss on investmentsCredit balances added backProvision for workers' profit participation fundProvision of workers' welfare fundShare in profit of associateIncome from loans and advancesFinance costWorking capital changes (Note 35.1)

463,491

262,252 (3,958)

35 42,890

(197) 17,380 7,002 (120,022)

(117,871) 536,270

72,513 1,159,785

238,518

275,864 (2,791) 247 178,576

(29,418) 3,932 1,494 (165,307) (180,640) 815,948 (126,780) 1,009,643

35.


2010 2009

67


Working capital changes

Decrease / (increase) in current assets:

- Stores, spare parts and loose tools- Stock in trade- Trade debts- Loans and advances- Short term deposits and prepayments- Interest accrued- Other receivables

Increase / (decrease) in current liabilities:

- Trade and other payables

4,347 (106,729)

(17,588) 36,185 (4,534) 22,081 (47,537) (113,775)

186,288 72,513

41,114 300,233 (456,289)

(6,423) 133 (11,925)

53,365 (79,792)

(46,988) (126,780)

35.1

REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTOR AND EXECUTIVES36.

The aggregate amount charged in the financial statements for the year for remuneration including all benefits to Chief Executive Officer, Director andExecutives of the Company is as follows:

Chief Executive Officer

2010 2009

Director

20092010

Executives

20092010

------------------------ (RUPEES IN THOUSAND) ---------------------------

Managerial remuneration AllowancesHouse rentUtilitiesServantMedicalSpecial allowanceReimbursable expensesCost of living allowanceContribution to provident fund

4,800

2,160 480 240

- - 624

- 300 8,604

4,800

2,160 480 240

- - 609

- 300 8,589

1,980

891 198 240

- - - - 124 3,433

1,980

891 198 240

- - - - 124 3,433

39,498

8,883 3,860

444 3,272 3,505

628 165

2,343 62,598

40,557

9,084 3,972

393 3,378

3,611 663 155 2,157 63,970

Number of persons 1 1 1 1 38 36


2010 2009

68


EMPLOYEES’ RETIREMENT BENEFITS

Contribution to Employees’ Provident Fund TrustContribution to Employees’ Old Age Benefit Institution

14,938 18,640 33,578

15,210 17,974 33,184

37.

TRANSACTIONS WITH RELATED PARTIES38.

The related parties comprise associated companies, staff retirement fund and key management personnel. The Company in the normal course of business carries out transactions with various related parties. Detail of transactions with related parties, other than those which have been specifically disclosed elsewhere in thesefinancial statements are as follows:

36.1 Certain Executives are provided with rent free furnished accommodation and free use of Company maintained vehicles. The Chief Executive Officer is provided withfree use of the Company maintained vehicles and residential telephone.

36.2 Meeting fee amounting to Rupees 105,000 (2009: Rupees 115,000) has been paid to non-executive directors.

ASSOCIATED COMPANIES

Purchase of goods and servicesSale of goods and servicesProcessing incomeDividend income Insurance premium paidInterest income

189,437 207,538

1,827 12,567 23,212 131,358

403,604 248,593

2,477 134

20,988 202,721

(Number)

Bonus shares received 22 118 577 921


2010 2009

69


PLANT CAPACITY AND ACTUAL PRODUCTION

Spinning

100 % plant capacity converted to 20s count based on 3 shifts per day for 1 095 shifts (2009: 1 095 shifts)

Actual production converted to 20s count based on 3 shifts per day for 1 095 shifts (2009: 1 095 shifts)

Weaving

100 % plant capacity at 50 picks based on 3 shiftsper day for 1 095 shifts (2009: 1 095 shifts)

Actual production converted to 50 picks based on 3 shifts per day for 1 089 shifts (2009: 1 095 shifts)

Dyeing, Finishing and Home Textile

The plant capacity of these divisions are indeterminable due to multi product plantsinvolving varying processes of manufacturing.

38 562

36 281

97 078

75 527

38 562

36 091

97 078

78 220

39.

(Kgs.)

(Kgs.)

(Sq.Mt.)

(Sq.Mt.)

Company’s contribution to Employees' Provident Fund Trust 14,938 15,210

(Figures in thousand)

(Figures)

Power Plant

Generation capacity

Actual generation

257 544

138 413

257 544

143 713

(MWH)

(MWH)

Reason for low production39.1

Under utilization of available capacity of textile facilities is mainly due to normal maintenance. Power plant is operated according to the requirement of electricity.

SEGMENT INFORMATION 40.

SalesCost of salesGross profit

Distribution costAdministrative expenses

Processing & HomeTextile

WeavingSpinning

2010 2009 2009 20092010 2010

Trading

20092010

5,043,738 4,081,199 962,539

64,296 72,254 136,550

3,895,528 3,855,542

39,986

42,973 71,737 114,710

4,264,873 4,204,279

60,594

41,479 14,256 55,735

2,761,084 2,577,643

183,441

43,925 16,975 60,900

7,830,717 7,566,793

263,924

363,506 84,331 447,837

6,376,593 5,565,435

811,158

287,487 71,975

359,462

2,336,566 2,229,209

107,357

- - -

3,294,243 2,937,487 356,756

17,436 - 17,436

Profit / (loss) before taxation andunallocated income and expenses

Unallocated income and expenses

Other operating expensesOther operating incomeFinance cost Share of profit of associate Provision for taxation


825,989 (74,724) 4,859 122,541 (183,913) 451,696 107,357 339,320

Total assets for reportablesegments

Unallocated assets

All segment assets are allocated to reportable segments other than those directly relating to corporate and tax assets.

Total liabilities for reportablesegments

Unallocated liabilities

All segment liabilities are allocated to reportable segments other than trade and other payables, corporate borrowings and current and deferred tax liabilities.


WeavingSpinning

2010 2009 2009 20092010 2010

Trading

20092010

1,036,633

1,298,593

1,135,097

1,438,065

1,097,170

909,862

1,102,707

1,033,833

1,426,442

855,461

1,439,956

935,162

1,688,574

-

1,482,735

-

Power Generation

20092010

Cold Storage

20092010

Elimination of Inter-segment transactions

20092010

Total - Company

20092010

941,059 884,107 56,952

1,132 10,572 11,704

981,503 802,161 179,342

1,064 7,065

8,129

11,928 6,552 5,376

- 605 605

10,123 5,561 4,562

- 598 598

9,565,495 9,565,495

-

- - -

6,568,562 6,568,562

-

- - -

10,863,386 9,406,644 1,456,742

470,413 182,018 652,431

10,750,512 9,175,267 1,575,245

392,885 168,350 561,235

45,248 171,213 4,771 3,964 -

- 804,311

(136,872) 212,300 (536,270) 120,022

(118,821)

344,670

1,014,010

(376,284) 251,433 (815,948) 165,307 (59,498)

179,020

Power Generation

20092010

Cold Storage

20092010

502,164

321,658

550,921

397,570

11,471

1,183

9,917

888

Total - Company

20092010

5,762,454

5,226,244 10,988,698

3,386,757

3,289,095 6,675,852

5,721,333

5,094,601 10,815,934

3,805,518

3,108,186 6,913,704

---------------------------- (RUPEES IN THOUSAND) -----------------------------

Reconciliation of reportable segment assets and liabilities:

---------------------------- (RUPEES IN THOUSAND) ----------------------------- ------------------------------------------------------- (RUPEES IN THOUSAND) -------------------------------------------------------------


40.1

40.2

70


SalesCost of salesGross profit

Distribution costAdministrative expenses


WeavingSpinning

2010 2009 2009 20092010 2010

Trading

20092010

5,043,738 4,081,199 962,539

64,296 72,254 136,550

3,895,528 3,855,542

39,986

42,973 71,737 114,710

4,264,873 4,204,279

60,594

41,479 14,256 55,735

2,761,084 2,577,643

183,441

43,925 16,975 60,900

7,830,717 7,566,793

263,924

363,506 84,331 447,837

6,376,593 5,565,435

811,158

287,487 71,975

359,462

2,336,566 2,229,209

107,357

- - -

3,294,243 2,937,487 356,756

17,436 - 17,436

Profit / (loss) before taxation andunallocated income and expenses

Unallocated income and expenses

Other operating expensesOther operating incomeFinance cost Share of profit of associate Provision for taxation


825,989 (74,724) 4,859 122,541 (183,913) 451,696 107,357 339,320

Total assets for reportablesegments

Unallocated assets

All segment assets are allocated to reportable segments other than those directly relating to corporate and tax assets.

Total liabilities for reportablesegments

Unallocated liabilities

All segment liabilities are allocated to reportable segments other than trade and other payables, corporate borrowings and current and deferred tax liabilities.


WeavingSpinning

2010 2009 2009 20092010 2010

Trading

20092010

1,036,633

1,298,593

1,135,097

1,438,065

1,097,170

909,862

1,102,707

1,033,833

1,426,442

855,461

1,439,956

935,162

1,688,574

-

1,482,735

-

Power Generation

20092010

Cold Storage

20092010

Elimination of Inter-segment transactions

20092010

Total - Company

20092010

941,059 884,107 56,952

1,132 10,572 11,704

981,503 802,161 179,342

1,064 7,065

8,129

11,928 6,552 5,376

- 605 605

10,123 5,561 4,562

- 598 598

9,565,495 9,565,495

-

- - -

6,568,562 6,568,562

-

- - -

10,863,386 9,406,644 1,456,742

470,413 182,018 652,431

10,750,512 9,175,267 1,575,245

392,885 168,350 561,235

45,248 171,213 4,771 3,964 -

- 804,311

(136,872) 212,300 (536,270) 120,022

(118,821)

344,670

1,014,010

(376,284) 251,433 (815,948) 165,307 (59,498)

179,020

Power Generation

20092010

Cold Storage

20092010

502,164

321,658

550,921

397,570

11,471

1,183

9,917

888

Total - Company

20092010

5,762,454

5,226,244 10,988,698

3,386,757

3,289,095 6,675,852

5,721,333

5,094,601 10,815,934

3,805,518

3,108,186 6,913,704

---------------------------- (RUPEES IN THOUSAND) -----------------------------

Reconciliation of reportable segment assets and liabilities:

---------------------------- (RUPEES IN THOUSAND) ----------------------------- ------------------------------------------------------- (RUPEES IN THOUSAND) -------------------------------------------------------------

71


2010 2009

72


Geographical Information

EuropeAmerica Asia, Africa, AustraliaPakistan

2,662,267 1,640,087 3,307,887

3,253,145 10,863,386

3,761,7641,696,0032,574,9372,717,808

10,750,512

40.3

The Company's revenue from external customers by geographical location is detailed below:40.3.1

All non-current assets of the Company as at reporting dates are located and operating in Pakistan.

40.3.2

Revenue from major customers40.4

Revenue from major customers of Company's trading segment represent Rupees 2,294 million (2009: Rupees 3,040 million). Revenue from other segments of theCompany does not include any major customer.

FINANCIAL RISK MANAGEMENT41.

Financial risk factors41.1

The Company's activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedgecertain risk exposures.

Risk management is carried out by the Company's finance department under policies approved by the Board of Directors. The Company's finance department evaluates and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, other price risk, interest rate risk, credit risk, liquidity risk, use of derivative financial instruments and non derivative financial instruments and investment of excessliquidity.

73


Market risk(a)

Currency risk(i)

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivablesand payables that exist due to transactions in foreign currencies.

The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD). Currently, the Company's foreign exchange risk exposure is restricted to bank balances, the amounts receivable / payable from / to the foreign entities. The Company uses forward exchange contracts to hedge its foreign currency risk, when considered appropriate. The Company's exposure to currency risk was asfollows:

2010 2009

Cash at banks - USDTrade debts - USDTrade and other payable - USDDerivative financial instruments -USD

Net exposure - USD

70,975 28,094,676

(350,161) (9,929,196)

17,886,294

164,445 27,451,487

(3,230) (7,706,770)

19,905,932

The following significant exchange rates were applied during the year:

Average rate Reporting date rate

83.8485.40

79.0181.10

Rupees per US Dollar

Sensitivity analysis

If the functional currency, at reporting date, had weakened / strengthened by 5% against the USD with all other variables held constant, the impact on profit after taxation for the year would have been Rupees 71.104 million (2009: Rupees 75.149 million) higher / lower, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetricbasis.

74


Currency risk management

The Company manages its exposure to currency risk through continuous monitoring of expected / forecast committed and non-committed foreign currency payments and receipts. Reports on forecast foreign currency transactions, receipts and payments are prepared on monthly basis, exposure to currency risk is measured and appropriate steps are taken to ensure that such exposure is minimized while optimizing return. This includes matching of foreign currency liabilities / payments to assets / receipts, using source inputs in foreign currency and arranging cross currency swaps. The Company maintains foreign currency working capital lines in order to finance production of exportable goods. Proceeds from exports are used to repay / settle / rollover the Company's obligations under these working capital lines which substantially reduces exposure to currency risk in respect of such liabilities. Balances in foreign currency are also maintained in current accounts with bankingcompanies.

Other price risk(ii)

Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instrument traded in themarket. The Company is not exposed to commodity price risk.

Sensitivity analysis

The table below summarises the impact of increase / decrease in the Karachi Stock Exchange (KSE) Index on the Company's profit after taxation for the year and on other comprehensive income (fair value reserve). The analysis is based on the assumption that the equity index had increased / decreased by 5% with all other variables held constant and all the Company's equity instruments moved according to thehistorical correlation with the index.

Index

2010

Impact on profit aftertaxation

Impact on other comprehensiveincome (fair value reserve)

2009 2010 2009

----------------------- (Rupees in thousand) -------------------

KSE 100 (5% increase)

KSE 100 (5% decrease)

3,659

(3,738)

5,353

(6,594)

9,132

(9,047)

6,723

(5,640)

Fair value reserve would increase / decrease as a result of gains / losseson equity investments classified as available for sale.

75


Interest rate risk(iii)

This represents the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in market interest rates.

The Company's interest rate risk arises from long term loans and advances, long term financing and short term borrowings. Borrowings obtained at variable rates expose the Company to cash flow interest rate risk. Borrowings obtained at fixed rate expose the Company to fair value interest raterisk.

At the balance sheet date the interest rate profile of the Company’s interest bearingfinancial instruments was:


2010 2009

Fixed rate instruments

Financial assets

Long term loans and advances



Floating rate instruments



Fair value sensitivity analysis for fixed rate instruments

770,400

758,0791,847,600

349,9402,992,418

770,400

848,3031,409,600

616,5613,473,607

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of theCompany.

76


Cash flow sensitivity analysis for variable rate instruments

If interest rates, at the year end date, fluctuates by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rupees 31.117 million (2009: Rupees 38.079 million) lower / higher, as a result of higher / lower interest expense on floating rate borrowings. This analysis is prepared assuming that amounts of liabilities outstanding atbalance sheet dates were outstanding for whole year.

Interest rate risk management

The Company manages interest rate risk by analyzing its interest rate exposure on dynamic basis. Cash flow interest rate risk is managed by simulating various scenarios taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Company calculates impact on profit after taxation and equity of defined interest rate shift, mostly 100 basis points. Cross currency swaps are alsoarranged to transfer exposure to more stable markets.

Credit risk(b)

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximumexposure to credit risk at the reporting date was as follows:


2010 2009

InvestmentsLoans and advances DepositsTrade debtsInterest accruedOther receivablesBank balances

304,903 1,931,235 7,139 2,579,901

- 4,562 15,402

4,843,142

293,136 1,814,304 2,839 2,562,348

22,081 1,388 17,638

4,713,734

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (If available) or to historicalinformation about counterparty default rate:

77


Banks

National Bank of PakistanAllied Bank LimitedBank Alfalah LimitedFaysal Bank LimitedHabib Bank LimitedHabib Metropolitan Bank LimitedMCB Bank LimitedNIB Bank LimitedSamba Bank LimitedSilkbank LimitedStandard Chartered Bank(Pakistan) LimitedUnited Bank LimitedAl-Baraka Islamic BankMeezan Bank Limited

Rating

Shortterm

Longterm

Agency (Rupees in thousand)

2010 2009

A-1+A1+A1+A1+A-1+A1+A1+A1+A-1A-3

A1+A-1+A-1A-1

AAAAAAAAA

AA+AA+AA+AA -

AA -

AAAAA+

AA+

JCR-VISPACRAPACRAPACRAJCR-VISPACRAPACRAPACRAJCR-VISJCR-VIS

PACRAJCR-VISJCR-VISJCR-VIS

884 2,797

15 100 273 1,601

7,755 646

11 104

240 794 36 146 15,402

5,433 1,298

14 527 297

11 2,664 1,003

11 99

330 64 2,295 3,592 17,638

The Company's exposure to credit risk and impairment losses related to trade debts is disclosedin Note 20.

Credit risk management

The Company's financial assets do not carry significant credit risk, with the exception of trade debts, which are exposed to losses arising from any non-performance by counterparties. In respect of trade debts, the Company manages credit risk by limiting significant exposure to any single customer. Formal policies and procedures of credit management and administration of receivables are established and executed. In monitoring customer credit risk, the ageing profile of total receivables and individually significant balances, along with collection activities are reviewed on a regular basis. High risk customers are identified and restrictions are placed on future trading, including suspending future shipments and administering dispatches on a prepaymentbasis or confirmed letters of credit.

Due to the Company's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counterparties on their obligations to the Company. Accordingly the credit riskis minimal.

78


Liquidity risk(c)

Long term financingTrade and other payablesAccrued mark-upShort term borrowings

The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest rates / mark up rates effective as at June 30. The rates of interest / mark up have been disclosed in Note 6 and Note 10 tothese financial statements.

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associatedwith financial liabilities.

Contractual maturities of financial liabilities including interest payments as at June 30, 2010:

--------------------------------- (Rupees in thousand) ---------------------------------

CarryingAmount

ContractualCash Flows

6 month orless

6-12 month 1-2 YearMore than 2

Years

1,108,019 466,841 106,719

4,840,018

6,521,597

1,289,789 466,841 106,719

5,070,692

6,934,041

274,894 466,841 106,719 3,419,791

4,268,245

268,151 - -

1,650,901

1,919,052

317,910 - - -

317,910

428,834 - - -

428,834

The following are the contractual maturities of financial liabilities as at June 30, 2009:

Long term financingTrade and other payablesAccrued mark-upShort term borrowings

1,464,864 282,459 177,207

4,883,207

6,807,737

1,612,964 282,459 177,207 5,245,647

7,318,277

212,316 282,459 177,207 2,571,717

3,243,699

239,741 5,325

- 2,673,930

2,918,996

488,681 - - -

488,681

672,226 - - -

672,226

The amounts disclosed in the table are undiscounted cash flows.

Liquidity risk Management

The Company manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. At June 30, 2010, the Company had Rupees 2,069 million (2009: Rupees 1,989 million) available borrowing limits from financial institutions and Rupees 16.419 million (2009: Rupees 18.931 million) cash and bank balances.Management believes the liquidity risk to be low.

79


Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,grouped in to levels 1 to 3 based on the degree to which fair value is observable:

41.2

Level 1 Level 2 Level 3 Total

As at June 30, 2010Assets Available for sale financial assets

As at June 30, 2009Assets Available for sale financial assets

261,244

249,477

261,244

249,477

-

-

-

-

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial instruments held by the Company is the current bid price. These financial instrumentsare classified under level 1 in above referred table.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value a financial instrument are observable, those financial instruments are classified under level 2 in above referred table. The Company has no such type of financial instruments as onJune 30, 2010.

If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3. The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. The Company has nosuch type of financial instruments as on June 30, 2010.

--------------------------- (Rupees in thousand) ---------------------------

80


Financial instruments by categories41.3

Loans andreceivables

Availablefor sale

Total

As at June 30, 2010Assets as per balance sheetInvestmentsLoans and advances DepositsTrade debtsOther receivablesCash and bank balances

304,903 1,931,235 7,139 2,579,901 4,562

16,419 4,844,159


304,903 - - - - -

304,903

- 1,931,235 7,139 2,579,901 4,562

16,419 4,539,256


Financial liabilities atamortized cost

Liabilities as per balance sheetLong term financingAccrued mark-upShort term borrowingsTrade and other payables

1,108,019 106,719 4,840,018 466,841 6,521,597

Loans andreceivables

Availablefor sale

Total

As at June 30, 2009Assets as per balance sheetInvestmentsLoans and advances DepositsTrade debtsInterest accruedOther receivablesCash and bank balances

293,136 1,814,304 2,839 2,562,348

22,081 1,388 18,931

4,715,027


293,136 - - - - - -

293,136

- 1,814,304 2,839 2,562,348

22,081 1,388 18,931 4,421,891

81


Capital risk management41.4


Financial liabilitiesat amortized cost

Liabilities as per balance sheetLong term financingAccrued mark-upShort term borrowingsTrade and other payables

1,464,864 177,207 4,883,207 282,459 6,807,737

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry and the requirements of the lenders, the Company monitors the capital structure on the basis of gearing ratio. This ratio is calculated as borrowings divided by total capital employed. Borrowings represent long term financing and short term borrowings obtained by the Company as referred to in note 6 and 10 respectively. Total capital employed includes 'total equity' as shown in the balance sheet plus 'borrowings'. The Company's strategy, which was unchanged from last year, was to maintain a gearing ratio of 60% debt and40% equity.


2010 2009

BorrowingsTotal equity

Total capital employed

Gearing ratio

5,948,037 2,672,439

8,620,476

69.00

6,348,071 2,261,837

8,609,908

73.73

The decrease in the gearing ratio resulted primarily from decrease in borrowings from the banks, current year profits and increase in fair value reserves due to increase inmarket value of shares.

Percentage

82


NON ADJUSTING EVENT AFTER THE REPORTING PERIOD

DATE OF AUTHORIZATION FOR ISSUE

42.

43.

These financial statements were authorized for issue on October 04, 2010 by theBoard of Directors of the Company.

CORRESPONDING FIGURES44.

Comparative figures of balance sheet, profit and loss account, cash flow statement and statement of changes in equity and related notes have been re-arranged, wherever necessary for the purpose of comparison. However, no significantreclassifications have been made during the year except:

Share of profit in associate has been shown net of taxation instead ofshowing share of profit of associate before taxation and related taxationseparately.

-

Figures of Cold Storage Unit in the notes of the profit and loss account have been aggregated instead of showing them separately because segment information isgiven in Note 40.

-

GENERAL45.

Figures have been rounded off to the nearest thousand of Rupees unless otherwisestated.



The Board of Directors in their meeting held on October 04, 2010 have proposed cash dividend of Rupees 1.50 per share for the year ended June 30, 2010 (2009: Nil) for approval of the members of the Company at the Annual General Meeting to be held on October 30, 2010. However, this event has been considered as non adjusting under IAS 10 and has not been recognized in these financial statement.

61st Annual General Meeting

I/We______________________________________of______________________________________

a member/ members of The Crescent Textile Mills Limited and holder of _______________________

shares as per Registered Folio # / CDC Participant ID # / Sub A/C # / Investor A/C # ___________

__________________________________________________________________ do hereby appoint

___________________________________ of_________________________________ or failing him

_____________________________________ of_________________________________ who is also

member of the Company vide Registered Folio # / CDC Participant ID # / Sub A/C # / Investor

A/C # _______________________ as my/ our Proxy to attend, speak and vote for me/ us and on

my/ our behalf at the 61st Annual General Meeting of the Company to be held on Saturday the

October 30, 2010 at 09:30 a.m. at registered office, 40-A, off: Zafar Ali Road, Gulberg-V, Lahore and

PROXY FORM

The Corporate Secretary,The Crescent Textile Mills Limited,40-A, Off: Zafar Ali Road, Gulberg-V,Lahore.

As witness my hand this _______________ day of ________________2010.

Member's:____________________

Witness's:____________________ Signature on Rs. 5/-Date:________________________ Revenue Stamp

Place:________________________

A member eligible to attend and vote at this meeting may appoint another member as his/her proxy to attend and vote instead of him/her. Proxies in order to be effective must be received by the Company at the Registered Office not less than 48 hours before the time for holding the meeting.

Proxies of the member(s) through CDC shall be accompanied with attested copies of the CNIC(s). The shareholders through CDC are requested to bring original CNIC, Account Number and participant Account Number to be produced at the time of attending the meeting.

Note:

at any adjournment thereof.

83

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