Ktm Annual Report 2015 525c64

Kohat Textile Mills Limited

Annual Report 2015

CONTENTS

COMPANY INFORMATION

2

VISION AND MISSION STATEMENT

3

NOTICE OF ANNUAL GENERAL MEETING

4

DIRECTORS’ REPORT TO THE

6

PATTERN OF SHAREHOLDING

9

STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF   CORPORATE GOVERNANCE

12

REVIEW REPORT TO THE ON STATEMENT OF COMPLIANCE   WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE

14

AUDITORS’ REPORT TO THE

15

BALANCE SHEET

16

PROFIT AND LOSS

18

CASH FLOW STATEMENT

19

STATEMENT OF CHANGES IN EQUITY

20

NOTES TO THE FINANCIAL STATEMENTS

21

PROXY FORM

1

Kohat Textile Mills Limited

Annual Report 2015

COMPANY INFORMATION BOARD OF DIRECTORS Anwar Saifullah Khan Salim Saifullah Khan Osman Saifullah Khan Jehangir Saifullah Khan Ms. Hoor Yousafzai Assad Saifullah Khan Asif Saifullah Khan

- Chairman

AUDIT COMMITTEE HR & REMUNERATION COMMITTEE

Ms. Hoor Yousafzai Jehangir Saifullah Khan Assad Saifullah Khan

- Chairpreson - Member - Member

Anwar Saifullah Khan Salim Saifullah Khan Ms. Hoor Yousafzai

- Chairman - Member - Member

CHIEF FINANCIAL OFFICER

Nouman Ahmad

COMPANY SECRETARY

Sabir Khan

HEAD OF INTERNAL AUDIT

Salman Shafiq

AUDITORS

Hameed Chaudhri & Co., Chartered ants

LEGAL ADVISORS

Dr. Pervez Hassan Hassan & Hassan, Advocates



Salahuddin Saif & Aslam (Attorney’s at Law)

BANKERS

Albaraka Bank (Pakistan) Limited Askari Bank Limited Dubai Islamic Bank Meezan Bank Limited National Bank of Pakistan Soneri Bank Limited The Bank of Punjab United Bank Limited

HEAD OFFICE

Kulsum Plaza, 4th Floor, 2020 – Blue Area, Islamabad Phone : (051) 2342155-60 Fax : (051) 2342176 Email : [email protected]

ED OFFICE

APTMA House, Tehkal Payan, Jamrud Road, Peshawar Phone : (091) 5843870, 5702941 Fax : (091) 5840273 Email : [email protected]

SHARES REGISTRAR

M/s Hameed Majeed Associates (Pvt.) Ltd., HM House, 7-Bank Square, Lahore Phone : +92-42-37235081-37235082 Fax : +92-42-37358817 E-mail : [email protected]

MILLS

Saifabad, Kohat Phone : (0922) 862065, 862091 Fax : (0922) 862057-58 Email : [email protected]

WEB SITE www.kohattextile.com

2

- Chief Executive

Kohat Textile Mills Limited

Annual Report 2015

VISION AND MISSION STATEMENT VISION v To attain market leadership through unmatched quality, a diverse and unique product mix, empowered employees, world class systems, and the highest ethical and professional standards.

MISSION v Give our shareholders a competitive return on their investment through market leadership, sustainable business growth and sound financial management. v

Earn and sustain the trust of our stakeholders through efficient resource management.

v

Provide the highest quality products and services consistent with customer needs and continue to earn the respect, confidence and goodwill of our customers and suppliers.

v Foster a culture of trust and openness in order to make professional life at the Kohat Textile Mills Limited a stimulating and challenging experience for all our people. v

Strive for the continuous development of Pakistan while adding value to the textile sector.

3

Kohat Textile Mills Limited

Annual Report 2015

NOTICE OF ANNUAL GENERAL MEETING NOTICE is hereby given that 49th Annual General Meeting of the of M/s. Kohat Textile Mills Limited will Insha Allah be held at ed office of the Company, APTMA House, Tehkal Payan, Jamrud Road, Peshawar on Friday, October 30, 2015 at 11:00 A.M. to transact the following business: 1) 2) 3) 4) 5)

To confirm the minutes of the last Annual General Meeting dated October 24, 2014. To receive, consider and adopt Annual Audited Financial Statements for the year ended June 30, 2015 together with the Directors’ and Auditors’ Reports thereon. To approve Cash Dividend @ 7.5% as recommended by the Board of Directors. To appoint Auditors for the year 2015-2016 and fix their remuneration. The retiring auditors M/s. Hameed Chaudhri & Co., Chartered ants, being eligible offered themselves for re-appointment. To transact any other business with the permission of the Chair.





Place : Peshawar Dated : October 09, 2015

BY ORDER OF THE BOARD SABIR KHAN Company Secretary

NOTES: BOOK CLOSURE NOTICE Share Transfer Books of the Company will remain closed from October 24, 2015 to October 30, 2015 (Both Days Inclusive). Transfers received in order at the office of our Share Registrar M/s.Hameed Majeed Associates (Pvt) Limited, HM House, 7-Bank Square, Lahore, by the close of business on Friday, October 23, 2015, will be considered in time for the determination of the entitlement of the shareholders to final cash dividend and to attend and vote at the meeting. PARTICIPATION IN THE ANNUAL GENERAL MEETING: A member entitled to attend and vote at the meeting is entitled to appoint any other member as his/her proxy to attend and vote. Proxies in order to be effective must be received at the ed Office of the Company, APTMA House, Tehkal Payan, Jamrud Road, Peshawar, Pakistan duly stamped and signed not less than 48 hours before the time of the meeting. CDC Holders will further have to follow the under mentioned guidelines as laid down by the Securities & Exchange Commission of Pakistan. A. FOR ATTENDING THE MEETING: i.

In case of individuals, the holders or sub- holders and/or the persons whose securities are in group and their registration details are ed as per the Regulations, shall authenticate identity by showing their original Computerized National Identity Card (CNIC), or original port at the time of attending the meeting.

ii.

In case of corporate entities, the Board of Directors’ resolution/power of attorney with specimen signature of the nominees shall be produced (unless it has been provided earlier) at the time of attending the meeting.

B. FOR APPOINTING PROXIES i.

In case of individuals, the holders or sub- holders and/or the persons whose securities are in group and their registration details are ed as per the Regulations, shall submit the proxy form as per the above requirements.

ii.

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

iii. The proxy shall produce his/her original CNIC or port at the time of the meeting. iv. In case of corporate entities, the Board of Directors’ resolution/power of attorney with specimen signature of the person nominated to present and vote on behalf of the corporate entity, shall be submitted (unless it has been provided earlier) along with proxy form to the Company. 4

Kohat Textile Mills Limited

Annual Report 2015

CONFIRMATION FOR FILING STATUS OF INCOME TAX RETURN FOR APPLICATION OF REVISED RATES PURSUANT TO THE PROVISIONS OF FINANCE ACT, 2015. Pursuant to the provisions of Finance Act, 2015, Effective July 01, 2015, reforms have been made with regards to deduction of income tax. For cash dividend, the rates of deduction of income tax, under section 150 of the Income Tax Ordinance, 2001 have been revised as follows:

1

Rate of tax deduction for filer of income tax returns

12.50%

2

Rate of tax deduction for non-filer of income tax returns

17.50%

In case of t , each holder is to be treated individually as either a filer or non-filer and tax will be deducted on the basis of shareholding of each t holder as may be notified by the shareholder, in writing as follows, to the Company by sending following detail on the ed address of the Company and the who have deposited their shares into Central Depository Company of Pakistan Limited (CDC) are requested to send a copy of detail regarding tax payment status also to the relevant member stock exchange and CDC if maintaining CDC investor , or if no notification, each t holder shall be assumed to have an equal number of shares.

Company Name

Folio/ CDS ID/ AC#

Principal Shareholder Total Shares

Name and CNIC No.

Shareholding proportion (No. of Shares)

t Shareholder Name and CNIC No.

Shareholding proportion (No. of Shares)

The CNIC number / NTN detail is now mandatory and is required for checking the tax status as per the Active Taxpayers List (ATL) issued by the Federal Board of Revenue (FBR) from time to time. SUBMISSION OF COMPUTERISED NATIONAL IDENTITY CARD (CNIC) FOR PAYMENT OF FINAL CASH DIVIDEND In order to comply with the requirements of Securities & Exchange Commission of Pakistan (SE) SRO 19(I)/2014 dated January 10, 2014 those shareholders who have not yet submitted attested copy of their valid CNICs are once again requested to provide the same with their folio numbers to the Company’s Share Registrar, M/s Hameed Majeed Associates (Pvt) Limited. holding shares in CDC/Participants s are also requested to provide the attested copy of their CNIC to their CDC Participant/Investor Services. CIRCULATION OF ANNUAL AUDITED FINANCIAL STATEMENTS TO SHAREHOLDERS THROUGH EMAIL The directive of SE contained in SRO 787(1)/2014 dated September 8, 2014, whereby Securities and Exchange Commission of Pakistan (SE) has allowed companies to circulate annual balance sheet, profit and loss , auditor’s report and directors’ report etc. (Audited Financial Statements) along with notice of annual general meeting(Notice) to its through e-mail. are requested to provide their email addresses on ed address of the Company. CDC holders are requested to provide their email addresses to the relevant member stock exchange and CDC if maintaining CDC investor . CHANGE IN ADDRESS: are requested to promptly notify any change of address to the Company’s Share Registrar. AVAILABILITY OF AUDITED FINANCIAL STATEMENTS ON COMPANY’S WEBSITE: The audited financial statements of the Company for the year ended June 30, 2015 have been made available on the Company’s website www.kohattextile.com in addition to annual and quarterly financial statements for the prior year.

5

Kohat Textile Mills Limited

Annual Report 2015

DIRECTORS’ REPORT TO THE Dear Shareholders, On behalf of Board of Directors, it gives me pleasure to present the 49th Annual Audited financial statements for the year ended June 30, 2015. GENERAL MARKET CONDITIONS During the year under review yarn market remained stagnant and sharp declined was witnessed during 2nd and 3rd quarter of the year. However, the yarn market managed to recover during last quarter of the year as a result company has posted pre-tax profit of Rs 39.432 million as compared to last year Rs. 114.891 million. OPERATING RESULTS Although the results are not similar to last year but the performance of the company have been pleasing during the year under review despite of various challenges faced by the textile sector including the imposition of increase GIDC (Gas Infra Structure Development Cess). The major highlights of your Company as compared to the corresponding period of the preceding Financial Year are as follows: Turnover There is an increase by 4% as compared to last year because of increase in capacities. Profitability Gross profit margin has reduced to 8.7% from 11% as compared to last financial year.

Profit before Tax of Rs. 39.43 Million as compared with Rs. 114.89 Million in the previous year.



During the year under review, we invested in increasing our capacity, reduction in operating expenses; this expansion was funded through additional long-term debt. However better working capital management has resulted slight increase in finance cost.

FUTURE OUTLOOK Overall textile industry is under crises which have also affected the synthetic fiber yarns market. Many new mills have shifted towards synthetic fiber yarns because of low investment in working capital, in addition to this Indian yarn spinners continue to be very competitive in the medium to finer counts and there is a need for a from Government to safeguard the interest of the Textile Industry. Your company’s strategy is to focus on improving operational efficiency. This means investment in automated and energy efficient plant and equipment. This also means extracting as much production from our existing infrastructure as possible. No report to our shareholders would be complete without the mandatory reference to the uncertain political situation, the energy crisis, and the struggles of doing business in the Khyber Pakthunkhwa province. These seem to be perennial challenges. EARNINGS PER SHARE Earnings per share of the Company were Rs. 1.00 as compared to Rs. 3.53 last year. PROFIT APPROPRIATION The Board in its meeting held of 06 October, 2015 decided to recommend 7.5% (2014: 12.50%) cash dividend. 6

Kohat Textile Mills Limited

Annual Report 2015

CONTRIBUTION TO THE NATIONAL ECONOMY Besides payment to the financial institutions against long and short-term debt, your Company contributed Rs. 179.09 Million (2014: Rs. 188.34 Million) to the National Exchequer during the year under review in sales tax, surcharges and various other levies. CORPORATE GOVERNANCE We are pleased to report that your Company has taken necessary steps to comply with the provisions of the Code of Corporate Governance, as incorporated in the listing rules of the Stock Exchanges. The statement on Corporate Governance and Financial Reporting Frame Work is given below: •

The financial statements prepared by the management of the company present fairly its true state of affairs, the results of its operations, cash flows and changes in equity.

•

Proper books of s have been maintained by the company.

•

Appropriate ing policies have been consistently applied in preparation of financial statements and ing estimates are based on reasonable and prudent judgment.

•

International ing Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

•

The system of internal controls is sound in design and has been effectively implemented and monitored.

•

There are no doubts upon the Company’s ability to continue as a going concern.

•

There has been no trading of shares by CEO, Directors, CFO, Company Secretary, their spouses and minor children, during the year other than that disclosed in pattern of shareholding.

•

There has been no material departure from the best practices of code of corporate governance, as detailed in the listing regulations.

•

The key operating and financial data of the Company for last six years is given below :-

Year ended

30 June 2013

2012

2011

2010

1,060,402

852,211

812,383

727,438

759,674

362,676

364,501

313,407

202,526

27,043

12,744

7,274

6,838

6,105

6,419

6,568

6,585

2,405,277

2,298,760

2,355,043

2,418,912

2,133,636

1,686,696

Gross Profit (Rs 000)

209,505

260,336

346,768

270,049

134,065

172,036

Profit/(loss) from operations (Rs 000)

119,207

188,980

269,233

208,513

106,533

115,993

20,851

73,509

118,802

166,778

6,433

16,459

1.00

3.53

5.71

8.02

0.31

0.79

35,280

35,280

29,520

29,520

29,520

30,000

Property, plant & equipment (RS 000) Net worth (Rs 000) Production (Kgs 000) Sales (Rs 000)

Profit/(loss) after taxation (Rs 000) Earnings/(Loss) per share (Rs) No. of Spindles installed

2015

2014

1,121,135

7

Kohat Textile Mills Limited

Annual Report 2015

•

During the Year 04 meetings of the Board of Directors were held. Attendance by each director is as follows:



Name of Director

No. of meetings attended

Anwar Saifullah Khan 03 Salim Saifullah Khan 04 Osman Saifullah Khan 04 Jehangir Saifullah Khan 04 Hoor Yousafzai 03 Assad Saifullah Khan 04 Asif Saifullah Khan 03

Leave of absence was granted to Directors who could not attend any of the Board meetings.

•

The Board of Directors has adopted a Mission Statement and a Statement of Overall Corporate Strategy.

•

Regarding outstanding taxes and levies, please refer note 16 to the annexed audited statements.

PATTERN OF SHAREHOLDING The pattern of shareholding of the Company under section 236(2) (d) of the Companies Ordinance, 1984 and additional information as required by the Code of Corporate Governance is annexed. EXTERNAL AUDITORS The present auditors M/s Hameed Chaudhri & Co., Chartered ants, retire and being eligible, offer themselves for re-appointment. As suggested by the Audit Committee, the Board recommends their appointment as auditors of the Company to hold office from the conclusion of the Annual General Meeting to be held on 30 October, 2015 until the conclusion of the next Annual General Meeting. ACKNOWLEDGEMENT The Board places on record its appreciation for the of our bankers and our valued customers. I would also like to highlight the hard work put in by the of our corporate family. We are confident they will continue to show the same dedication in the days ahead.

Dated: 06 October, 2015

8





for and on behalf of the Board



ASSAD SAIFULLAH KHAN Chief Executive Officer



Kohat Textile Mills Limited

Annual Report 2015

PATTERN OF SHAREHOLDINGS AS AT 30TH JUNE, 2015

Number of Share Holders



460 170 87 115 41 12 7 5 3 1 2 1 1 1 1 1 1 3 1 1 1 1 1



917

Categories of Share Holders

Share Holding From

Share Holding To

Total Shares Held

100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 50,000 55,000 60,000 65,000 90,000 95,000 110,000 120,000 200,000 2,080,000 6,345,000 9,880,000

26,066 56,823 82,300 336,578 349,324 158,373 132,000 119,000 83,431 31,500 76,000 50,000 52,500 60,000 62,500 90,000 94,450 323,887 116,704 200,000 2,078,554 6,340,010 9,880,000

T O T A L

20,800,000

1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 45001 50001 55001 60001 85001 90001 105001 115001 195001 2075001 6340001 9875001

Number of Shareholders

Shares Held

% Age of Capital

Directors and Chief Executive Officer 7 187,692 0.90 Associated Companies, Undertakings and Related Partie 14 16,438,460 79.03 NIT & I 1 750 0.00 Financial Institutions 3 2,078,976 10.00 t Stock Companies 7 293,059 1.41 Banks, Development Financial Instituations, Non Banking Financial Instituations 3 2,150 0.01 Insurance Companies 1 200 0.00 Funds 2 3,650 0.02 General Public 876 1,792,413 8.62 Others 3 2,650 0.01 Total

917

20,800,000

100.00 9

Kohat Textile Mills Limited

Annual Report 2015

DETAIL OF CATEGORY OF SHARE HOLDERS AS AT 30 JUNE, 2015 Sr. No. Name of Shareholders

Shares Held Percentage

Directors, Chief Executive, and their Spouse and Minor Children 1 Jehangir Saifullah Khan 116,704 0.56 2 Hoor Yousafzai 500 0.00 3 Salim Saifullah Khan 3,089 0.01 4 Asif Saifullah Khan 500 0.00 5 Osman Saifullah Khan 62,500 0.30 6 Assad Saifullah Khan 500 0.00 7 Anwar Saifullah Khan 3,899 0.02 ------------------------ -------------------- Total 187,692 0.90 ------------------------ --------------------Associated Companies, Undertakings and Related Parties 1 Globecomm (Pvt.) Limited 2 Gulshan Javed Saifullah Khan 3 Zafar Qureshi 4 Begum Shirin Saifullah Khan 5 Javed Saifullah Khan 6 Shehernaz Saifullah Khan 7 Yasmin Saifullah Khan 8 Iqbal Saifullah Khan 9 Begum Samina Anwar S. Khan 10 Humayun Saifullah Khan 11 Shereen Saifullah Khan 12 Omar Saifullah Khan 13 Saif Holdings Limited 14 Begum Zeb Saifullah Khan Total

6,340,010 30.48 600 0.00 4,335 0.02 500 0.00 107,887 0.52 14,000 0.07 5,000 0.02 6,824 0.03 15,000 0.07 12,373 0.06 5,000 0.02 26,931 0.13 9,880,000 47.50 20,000 0.10 ------------------------ --------------------16,438,460 79.03 ------------------------ ---------------------

NIT & I ------------------------ --------------------1 National Bank of Pakistan Total 750 0.00 ------------------------ --------------------Financial Institutions 1 IDBL (I Unit) 400 0.00 2 National Bank Of Pakistan 22 0.00 3 National Bank Of Pakistan 2,078,554 9.99 ------------------------ -------------------- Total 2,078,976 10.00 ------------------------ ---------------------

10

Kohat Textile Mills Limited

Sr. No. Name of Shareholders

Annual Report 2015

Shares Held Percentage

t Stock Companies 1 Adeel Zafar Securities (Pvt) Ltd. 200,000 0.96 2 Seven Star Securities (Pvt.) Ltd. 1,000 0.00 3 Cooper & Co.(Private) Limited 90,000 0.43 4 NCC - Pre Settlement Delivery 2,000 0.01 5 Fateh Textile Mills Ltd. 50 0.00 6 Maple Leaf Capital Limited 1 0.00 7 Sultan Textile Mills (Karachi) Limited 8 0.00 ------------------------ -------------------- Total 293,059 1.41 ------------------------ --------------------Banks, Development Financial Instituations, Non Banking Financial Instituations 1 Murree Brewery Co. Ltd. 50 0.00 2 Mollasses Export Co. Ltd. 100 0.00 3 Muslim Commercial Bank Ltd. 2,000 0.01 ------------------------ -------------------- Total 2,150 0.01 ------------------------ --------------------Insurance Companies ------------------------ --------------------1 E.F.U. Ins. Co. Ltd. Total 200 0.00 ------------------------ --------------------Funds 1 Trustee National Bank of Pakistan Employees Pension Fund 3,526 0.02 2 Trustee National Bank of Pakistan Employees Benevolent Fund 124 0.00 ------------------------ -------------------- Total 3,650 0.02 ------------------------ -------------------- ------------------------ --------------------General Public (Local) Total 1,792,413 8.62 ------------------------ --------------------OTHERS 1 The Pak Ismailia Cooperative 350 0.00 2 United Executors & Trustee 2,200 0.01 3 Azeem Services (Pvt) Ltd, 100 0.00 ------------------------ -------------------- Total 2,650 0.01 ------------------------ -------------------- 20,800,000 100.00

11

Kohat Textile Mills Limited

Annual Report 2015

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE This statement is being presented to comply with the Code of Corporate Governance contained in Regulation of Listing Regulations of Karachi and Islamabad Stock Exchanges Limited for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The company has applied the principles contained in the CCG in the following manner: 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: Category Executive Directors Non-Executive Directors

Independent Directors

Names Assad Saifullah Khan Anwar Saifullah Khan Salim Saifullah Khan Osman Saifullah Khan Jehangir Saifullah Khan Hoor Yousafzai Asif Saifullah Khan NIL

2. The elections of the directors were held in February, 2014. Company completed all the statutory formalities relating to election of directors but no independent shareholder came forward to contest the election as a director hence shareholders of the company were unable to elect independent director. 3.

The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this company.

4. All the resident directors of the company are ed 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. 5. The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its ing policies and procedures. 6. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and and conditions of employment of the CEO, other executive and non-executive directors, have been taken by the board. 8. The meetings of the board were presided over by the Chairman and, in his absence, by a director elected by the board for this purpose 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. 12

The board arranged in-house training program for its directors during the year.

Kohat Textile Mills Limited

Annual Report 2015

10. The directors’ report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed. 11. The financial statements of the company were duly endorsed by CEO and CFO before approval of the board. 12. 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. 13. The company has complied with all the corporate and financial reporting requirements of the CCG. 14. The board has formed an Audit Committee. It comprises 03 , who are 02 non-executive directors and 01 is executive director. 15. In compliance with the CCG, BOD has put a mechanism for the annual evaluation of board performance. The following major areas in evaluation: i. Board composition ii. Board function iii. Professional development iv. Monitor of company performance 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the company and as required by the CCG. The of reference of the committee have been formed and advised to the committee for compliance. 17. The board has formed an HR and Remuneration Committee. It comprises 03 , of whom 02 are non-executive directors while one is Executive director. 18. The board has set up an effective internal audit function and the persons involved are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the company. 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 ICAP, 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 ants (IFAC) guidelines on code of ethics as adopted by the ICAP. 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 ‘closed period’, prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of company’s securities, was determined and intimated to directors, employees and stock exchange(s). 22. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s). 23. We confirm that all other material principles enshrined in the CCG have been complied with except certification of a director under Directors’ Training Programme (DTP) by the end of financial year; however efforts would be made to attain certification by the end of next ing year. For and behalf of the Board Place: Islamabad Dated: 06 October, 2015

Anwar Saifullah Khan Chairman 13

Kohat Textile Mills Limited

Annual Report 2015

REVIEW REPORT TO THE ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF THE CODE OF CORPORATE GOVERNANCE We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of Corporate Governance (the Code) prepared by the Board of Directors of Kohat Textile Mills Limited for the year ended June 30, 2015 to comply with the requirements of Listing Regulation No. 35 of the Karachi and Islamabad Stock Exchanges where the Company is listed. The responsibility for compliance with the Code 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 and report if it does not and to highlight any non-compliance with the requirements of the Code. A review is limited primarily to inquiries of the Company’s personnel and review of various documents prepared by the Company to comply with the Code. As a part of our audit of the financial statements we are required to obtain an understanding of the ing and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors’ 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 procedures and risks. The Code requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval its related party transactions distinguishing between transactions carried out on equivalent to those that prevail in arm’s length transactions and transactions which are not executed at arm’s length price and recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of 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. Following instances of non-compliance with the requirements of the Code were observed: i.

the Company has not appointed an independent director on its Board of Directors as required by sub-clause (b) of clause (i) of the Code;

ii. the composition of Audit Committee, at reporting date, is not incompliance with the requirements of clause (xxiv) of the Code. Based on our review, except for the above instances of non-compliance, 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 as applicable to the Company for the year ended June 30, 2015. Place: Lahore Dated: 06 October, 2015 14

HAMEED CHAUDHRI & CO., CHARTERED ANTS Engagement Partner: Osman Hameed Chaudhri

Kohat Textile Mills Limited

Annual Report 2015

AUDITORS’ REPORT TO THE We have audited the annexed balance sheet of Kohat Textile Mills Limited (the Company) as at June 30, 2015 and the related profit and loss , cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved ing 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 ing the amounts and disclosures in the above said statements. An audit also includes assessing the ing policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of have been kept by the Company as required by the Companies Ordinance, 1984; (b) in our opinion: (i) the balance sheet and profit and loss together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of and are further in accordance with ing policies consistently applied; (ii) the expenditure incurred during the year was for the purpose of the Company’s business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; (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 , cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved ing 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, 2015 and of the profit, its cash flows and changes in equity for the year then ended; and (d) in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of the Ordinance. HAMEED CHAUDHRI & CO., Place: Lahore CHARTERED ANTS Dated: 06 October, 2015 Engagement Partner: Osman Hameed Chaudhri 15

Kohat Textile Mills Limited

Annual Report 2015

BALANCE SHEET

2015 2014 Note (Rupees in thousand) EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorised capital 22,000,000 ordinary shares of Rs.10 each 220,000 220,000 ========== ========== Issued, subscribed and paid-up capital 5 208,000 208,000 UNAPPROPRIATED PROFIT 154,676 156,501 —————— —————— 362,676 364,501 SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT 6 302,147 309,899 NON-CURRENT LIABILITIES Loan from an Associated Company

7 100,000

100,000

Long term financing

8 245,146

202,088

Long term deposits

9 1,280

965

Deferred liability - staff retirement benefits

10 80,290

62,137

Deferred taxation - net

11 66,371

63,028

CURRENT LIABILITIES

493,087 428,218

Trade and other payables

12 150,662

234,946

Accrued mark-up

13 13,185

27,837

Short term borrowings

14 260,235

354,561

Current portion of long term financing

8 78,558

87,146



502,640

704,490



995,727

1,132,708

Contingencies and Commitments 15 —————— —————— 1,660,550 1,807,108 ========== ========== The annexed notes form an integral part of these financial statements.

ASSAD SAIFULLAH KHAN CHIEF EXECUTIVE 16

Kohat Textile Mills Limited

Annual Report 2015

AS AT 30 JUNE, 2015

2015 2014 Note (Rupees in thousand) ASSETS NON-CURRENT ASSETS Property, plant and equipment

16 1,121,135 1,060,402

Intangible assets

17

Long term loans

18 1,893



225 342 1,466

Long term deposits 1,137 1,137 —————— —————— 1,124,390 1,063,347 CURRENT ASSETS Stores, spare parts and loose tools

19 31,850

26,087

Stock-in-trade

20 188,954

432,863

Trade debts

141,019 157,724

Loans and advances

21 46,186

Deposits and short term prepayments

22 2,244 2,365

Other receivables

23 1,258

1,924

Taxation - net

24 81,923

76,674

Sales tax refundable

32,868

36,171

Bank balances

9,858

4,528

536,160

743,761



5,425





—————— —————— 1,660,550 1,807,108 ========== ========== The annexed notes form an integral part of these financial statements. OSMAN SAIFULLAH KHAN DIRECTOR 17

Kohat Textile Mills Limited

Annual Report 2015

PROFIT AND LOSS FOR THE YEAR ENDED 30 JUNE, 2015 2015 2014 Note (Rupees in thousand) SALES - NET

25 2,405,277 2,298,760

COST OF SALES 26 (2,195,772) (2,038,424) —————— —————— GROSS PROFIT 209,505 260,336 DISTRIBUTION COST

27

(14,952)

ISTRATIVE EXPENSES

28

(67,637) (59,827)

OTHER INCOME

29

(10,669)

961 13,833

OTHER EXPENSES 30 PROFIT FROM OPERATIONS

(8,670) (14,693) —————— —————— 119,207 188,980

FINANCE COST 31 PROFIT BEFORE TAXATION

(79,775) (74,089) —————— —————— 39,432 114,891

TAXATION 32 (18,581) (41,382) —————— —————— PROFIT AFTER TAXATION 20,851 73,509 OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequent to profit and loss: - loss on remeasurement of staff retirement benefit obligation (6,763) (7,544) —————— —————— TOTAL COMPREHENSIVE INCOME 14,088 65,965 ========== ========== EARNINGS PER SHARE - basic and diluted 33

------- Rupees ------1.00 3.53 ========== ==========

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

ASSAD SAIFULLAH KHAN CHIEF EXECUTIVE 18

OSMAN SAIFULLAH KHAN DIRECTOR

Kohat Textile Mills Limited

Annual Report 2015

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE, 2015 2015 2014 (Rupees in thousand) Note CASH FLOW FROM OPERATING ACTIVITIES Profit for the year - before taxation 39,432 114,891 Adjustments for non-cash and other charges: Depreciation 68,997 58,091 Amortisation 117 117 Staff retirement benefits - gratuity (net) 11,390 11,002 Unclaimed payable balances written-back (107) (23) (Gain) / loss on sale of operating fixed assets (415) 3,378 Finance cost 78,737 71,144 —————— —————— PROFIT BEFORE WORKING CAPITAL CHANGES 198,151 258,600 EFFECT ON CASH FLOW DUE TO WORKING CAPITAL CHANGES (Increase) / decrease in current assets: Stores, spare parts and loose tools (5,763) (2,949) Stock-in-trade 243,909 23,098 Trade debts 16,705 (4,699) Loans and advances (40,761) (1,568) Deposits and short term prepayments 121 1,998 Other receivables 666 (1,770) Sales tax refundable 3,303 (17,249) (Decrease) / increase in trade and other payables (84,446) 24,016 133,734 20,877 —————— —————— CASH GENERATED FROM OPERATING ACTIVITIES 331,885 279,477 Income tax paid (18,151) (23,611) Long term loans - net (427) (434) —————— —————— NET CASH GENERATED FROM OPERATING ACTIVITIES 313,307 255,432 CASH FLOW FROM INVESTING ACTIVITIES Additions to property, plant and equipment (130,206) (271,758) Sale proceeds of operating fixed assets 891 2,098 NET CASH USED IN INVESTING ACTIVITIES (129,315) (269,660) CASH FLOW FROM FINANCING ACTIVITIES Long term loan from an Associated Company - net 0 (30,178) Long term financing - obtained 120,000 239,234         - repaid (85,530) (62,500) Long term deposits 315 (163) Short term borrowings - net (94,326) (49,833) Finance cost paid - net (93,390) (57,891) Dividend paid (25,731) (25,742) NET CASH (USED IN) / GENERATED FROM FINANCING ACTIVITIES (178,662) 12,927 —————— —————— NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 5,330 (1,301) CASH AND CASH EQUIVALENTS - at beginning of the year 4,528 5,829 —————— —————— CASH AND CASH EQUIVALENTS - at end of the year 9,858 4,528 ========== ========== The annexed notes form an integral part of these financial statements. ASSAD SAIFULLAH KHAN CHIEF EXECUTIVE

OSMAN SAIFULLAH KHAN DIRECTOR 19

Kohat Textile Mills Limited

Annual Report 2015

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE, 2015 Share Capital



UnAppropriated Profit

Total

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

Balance as at July 01, 2013 208,000 105,407 313,407 Transactions with owners Cash dividend for the year ended June 30, 2013 at the rate of Rs.1.25 per share 0 (26,000) (26,000) Total Comprehensive Income for the year ended June 30, 2014 Profit for the year 0 73,509 73,509 Other comprehensive loss 0 (7,544) (7,544) 0 65,965 65,965 Surplus on revaluation of property, plant and equipment realised during the year (net of deferred taxation): - on of incremental depreciation for the year 0 10,675 10,675 - upon sale of revalued assets 0 454 454 ----------------------------------------------------------------------------------------------Balance as at June 30, 2014 208,000 156,501 364,501 Transactions with owners Cash dividend for the year ended June 30, 2014 at the rate of Rs.1.25 per share 0 (26,000) (26,000) Total Comprehensive Income for the year ended June 30, 2015 Profit for the year 0 20,851 20,851 Other comprehensive loss 0 (6,763) (6,763) 0 14,088 14,088 Surplus on revaluation of property, plant and equipment realised during the year - on of incremental depreciation for the year - net of deferred taxation 0 10,087 10,087 Balance as at June 30, 2015

----------------------------------------------------------------------------------------------208,000 154,676 362,676 ======================================

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

ASSAD SAIFULLAH KHAN CHIEF EXECUTIVE 20

OSMAN SAIFULLAH KHAN DIRECTOR

Kohat Textile Mills Limited

Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2015 1.

LEGAL STATUS AND NATURE OF BUSINESS

Kohat Textile Mills Limited (the Company) is a public limited Company incorporated in Pakistan during the year 1967 and its shares are quoted on Karachi and Islamabad Stock Exchanges. The Company’s Mills are located in Saifabad, Kohat and the ed Office of the Company is located at APTMA House, Tehkal Payan, Jamrud Road, Peshawar. 2. BASIS OF PREPARATION 2.1 Statement of compliance These financial statements have been prepared in accordance with approved ing standards as applicable in Pakistan. Approved ing standards comprise of such International Financial Reporting Standards (IFRS) issued by the International ing Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 have been followed. 2.2 Basis of measurement These financial statements have been prepared under the historical cost convention except for certain operating fixed assets which have been included at their revalued amounts and staff retirement benefits (gratuity) stated at their present value. 2.3 Functional and presentation currency These financial statements are presented in Pakistan Rupees, which is the Company’s functional and presentation currency. All financial information presented in Pakistan Rupees has been rounded to the nearest thousand unless otherwise specified. 2.4 New and amended standards and interpretations 2.4.1 Standards and amendments to approved ing standards and interpretations effective in the current year and are relevant to the Company’s financial reporting

New and amended standards and interpretations mandatory for the first time for the financial year beginning July 01, 2014: (a) IAS 32 (Amendments), ‘Financial instruments: presentation’. These amendments update the application guidance in IAS 32, ‘Financial instruments: presentations’, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet date. The application of these amendments has no material impact on the Company’s financial statements. 21

Kohat Textile Mills Limited

Annual Report 2015

(b) IAS 36 (Amendment), ‘Impairment of assets’. This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The application of these amendments has no material impact on the Company’s financial statements. 2.4.2 Standards, interpretations and amendments to approved ing standards that are effective but not relevant The other new standards, amendments to approved ing standards and interpretations that are mandatory for the ing periods beginning on July 1, 2014 are considered not to be relevant or to have any significant effect on the Company’s financial reporting and are, therefore, not detailed in these financial statements. 2.4.3 Standards, amendments to approved ing standards that are not yet effective and have not been early adopted by the Company

The following new standards and amendments to approved ing standards are not effective for the financial year beginning on or after July 01, 2014 and have not been early adopted by the Company:

(a)

IFRS 9, ‘Financial instruments’ (effective for periods beginning on or after January 01, 2018). IFRS 9 replaces the parts of IAS 39, ‘Financial instruments: recognition and measurement’ that relate to classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories; those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. For financial liabilities, the standard retains most of the requirements of IAS 39. The Company is yet to assess the full impact of IFRS 9; however, initial indications are that it may not significantly affect the Company’s financial assets.

(b)

IFRS 13 ‘Fair value measurement’ (effective for annual periods beginning on or after January 01, 2015). The standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value ing but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The standard will not effect the determination of fair value and its related disclosures in the financial statements of the Company.

(c)

Annual improvements 2014 applicable for annual periods beginning on or after July 1, 2016. These amendments include changes from the 2012-2014 cycle of annual improvements project that affect four standards: IFRS 5 ‘Non current assets held for sale and discontinued operations’, IFRS 7 ’Financial instruments: disclosures’, IAS 19 ‘Employee benefits’, and IAS 34, ‘Interim financial reporting’. The Company does not expect to have a material impact on its financial statements due to application of these amendments.



22

There are number of other standards, amendments and interpretations to the published standards that are not yet effective and are also not relevant to the Company and therefore, have not been presented here.

Kohat Textile Mills Limited

Annual Report 2015

3.

USE OF ESTIMATES AND JUDGMENTS



Estimates and judgements 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 Company makes estimates and assumptions concerning the future. The resulting ing estimates will, by definition, seldom equal the related actual results. However, such differences are estimated to be insignificant and hence will not affect the true and fair presentation of the financial statements. The assumptions are reviewed on an ongoing basis. Revisions to ing estimates are recognised in the period in which the estimates are revised and in any future periods affected. Judgements made by management in application of the approved ing standards that have significant effect on the financial statements and estimates with a significant risk of material adjustments in the next year are discussed in respective policy note. The areas where various assumptions and estimates are significant to the Company’s financial statements or where judgements were exercised in application of ing policies are as follows:

The preparation of financial statements in conformity with approved ing standards requires management to make judgments, estimates and assumptions that affect the application of ing policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

a)

Staff retirement benefits - gratuity (note 4.2) The present value of this obligation depends on a number of factors that is determined on actuarial basis using a number of assumptions. Any change in these assumptions will impact carrying amount of this obligation. The present value of the obligation and underlying assumptions are stated in note 10. b) Provision for taxation (note 4.4) In making the estimate for income taxes payable by the Company, the management looks at the applicable law and decisions of appellate authorities on certain issues in the past. c)

Property, plant and equipment (note 4.6) The Company reviews appropriateness of the rates of depreciation, useful lives and residual values for calculation of depreciation on an on-going basis. Further, where applicable, an estimate of recoverable amount of asset is made if indicators of impairment are identified.

d)

Stores & spares and stock-in-trade (note 4.8 and 4.9) The Company estimates the net realisable value of stores & spares and stock-in-trade to assess any diminution in the respective carrying values. Net realisable value is determined with reference to estimated selling price less estimated expenditure to make sale. Provision for impairment of trade debts (note 4.10) The Company assesses the recoverability of its trade debts and if there is objective evidence that the Company will not be able to collect all the amount due according to the original . Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy and default or delinquency in payments are considered indications that the trade debt is impaired.

e)

23

Kohat Textile Mills Limited

Annual Report 2015

4. SIGNIFICANT ING POLICIES The principal ing policies applied in the preparation of these financial statements are set out below. These polices have been consistently applied to all the years presented, unless otherwise stated. 4.1 Borrowings and borrowing cost Borrowings are recognised initially at fair value.

Borrowing costs are recognised as an expense in the period in which these are incurred except to the extent of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs, if any, are capitalised as part of the cost of that asset. 4.2 Staff retirement benefits (gratuity) The Company operates an un-funded retirement gratuity scheme for its eligible employees. Provision for gratuity is made annually to cover obligation under the scheme in accordance with the actuarial recommendations. Latest actuarial valuation was conducted on June 30, 2015 on the basis of the projected unit credit method by an independent Actuary. The liability recognised in the balance sheet in respect of retirement gratuity scheme is the present value of defined benefit obligation at the end of reporting period. The amount arising as a result of remeasurements are recognised in the balance sheet immediately, with a charge or credit to other comprehensive income in the periods in which they occur. 4.3

Trade and other payables Trade and other payables are carried at cost, which is the fair value of consideration to be paid in the future for goods and services received, whether or not billed to the Company.

4.4 Taxation (a) Current year Provision for current taxation is based on taxable income / turnover at the enacted or substantively enacted rates of taxation after taking into available tax credits and rebates, if any. The charge for current tax includes adjustments, where necessary, relating to prior years, which arise from assessments framed / finalised during the year. (b) Deferred The Company s for deferred taxation using the balance sheet liability method on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liability is recognised for taxable temporary differences and deferred tax asset is recognised to the extent that it is probable that taxable profits will be available against which the deductable temporary differences, unused tax losses and tax credits can be utilised. Deferred tax is charged or credited to the profit and loss except for deferred tax arising on surplus on revaluation of property, plant and equipment, which is charged to revaluation surplus. 24

Kohat Textile Mills Limited

Annual Report 2015



Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.



Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

4.5

Dividend distribution Dividend distribution to the Company’s shareholders are recognised in the period in which these are approved.

4.6

Property, plant and equipment Operating fixed assets, other than fire extinguishing equipment, furniture & fixtures, vehicles and live stock, are stated at fair value, based on valuations carried-out with sufficient regularity by external independent Valuers less subsequent depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of asset and the net amount is restated to the revalued amount of asset. Fire extinguishing equipment, furniture & fixtures, vehicles and live stock are stated at historical cost less accumulated depreciation. Cost of some items of plant and machinery consists of historical cost and exchange fluctuation effects on foreign currency loans capitalised during prior years. Borrowing costs are also capitalised for the period upto the date of commencement of commercial production of the respective plant and machinery, acquired out of the proceeds of such borrowings. Historical cost includes expenditure that is directly attributable to the acquisition of items. Capital work-in-progress is stated at cost.



Surplus arisen on revaluation of these assets has been credited to surplus on revaluation of property, plant and equipment in accordance with the requirements of section 235 of the Companies Ordinance, 1984 and shall be held on the balance sheet till realisation. Revaluation is carried-out with sufficient regularity to ensure that the carrying amount of assets does not differ materially from the fair value. To the extent of incremental depreciation charged on the revalued assets, the related surplus on revaluation of these assets (net of deferred taxation) is transferred directly to equity.



Subsequent costs are included in the asset’s carrying amount or recognised 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 item can be measured reliably. All other repairs and maintenance are charged to income during the financial year in which these are incurred.



Depreciation is taken to profit and loss applying reducing balance method, except for overhauling of gas fired power plant, so as to write-off the depreciable amount of an asset over its remaining useful life. Depreciation on overhauling of gas fired power plant is charged to the profit and loss using straight line method. The assets’ residual values and useful lives are reviewed at each financial year-end and adjusted if impact on depreciation is significant. Rates of depreciation are stated in note 16.1. 25

Kohat Textile Mills Limited

Annual Report 2015



Depreciation on additions to operating fixed assets is charged from the month in which an asset is acquired or capitalised while no depreciation is charged for the month in which the asset is disposed-off.



Gain / loss on disposal of property, plant and equipment, if any, is taken to profit and loss .

4.7

4.8

Intangible assets - computer software Computer software is stated at cost less accumulated amortisation. Software cost is only capitalised when it is probable that future economic benefits attributable to the software will flow to the Company and the same is amortised applying the straight-line method at the rate stated in note 17. Stores, spare parts and loose tools Stores, spare parts and loose tools are stated at cost. The cost of inventory is based on moving average cost. Items in transit are stated at cost accumulated upto the balance sheet date. The Company reviews the carrying amount of stores, spare parts and loose tools on a regular basis and provision is made for identified obsolete and slow moving items.

4.9 Stock-in-trade Basis of valuation are as follows: Particulars Raw materials:   At mills   In transit Work-in-process Finished goods Waste - - -

Mode of valuation -At lower of moving average cost and market value. - At cost accumulated to the balance sheet date. -At manufacturing cost. - At lower of cost and net realisable value. -At contracted rates.

Cost in relation to work-in-process and finished goods consists of prime cost and appropriate production overheads. Prime cost is allocated on the basis of moving average cost. Provision for obsolete and slow moving stock-in-trade is determined based on the management’s assessment regarding their future usability. Net realisable value signifies the selling price in the ordinary course of business less cost of completion and cost necessary to be incurred to effect such sale.

4.10 Trade debts and other receivables Trade debts are initially recognised at original invoice amount, which is the fair value of consideration to be received in future and subsequently measured at cost less provision for doubtful debts, if any. Carrying amounts of trade debts and other receivables are assessed at each reporting date and a provision is made for doubtful debts and receivables when collection of the amount is no longer probable. Debts and receivables considered irrecoverable are written-off. 4.11 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents consist of balances with banks. 26

Kohat Textile Mills Limited

Annual Report 2015

4.12 Impairment loss The carrying amounts of the Company’s assets are reviewed at each balance sheet date to identify circumstances indicating occurrence of impairment loss or reversal of provisions for impairment losses. If any indications exist, the recoverable amounts of such assets are estimated and impairment losses or reversals of impairment losses are recognised in the profit and loss . Reversal of impairment loss is restricted to the original cost of the asset. 4.13 Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 4.14 Foreign currency translations Transactions in foreign currencies are ed for in Pak Rupees at the exchange rates prevailing on the date of transactions. Assets and liabilities in foreign currencies are translated into Pak Rupees at the exchange rates prevailing on the balance sheet date except where forward exchange rates are booked, which are translated at the contracted rates. Exchange differences, if any, are taken to profit and loss . 4.15 Financial instruments Financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument and derecognised when the Company loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss for the year.

Financial instruments carried on the balance sheet include deposits, trade debts, other receivables, bank balances, loan from an Associated Company, long term financing, trade & other payables, accrued mark-up / profit and short term borrowings. All financial assets and liabilities are initially measured at cost, which is the fair value of consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value or cost as the case may be. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

4.16 Off-setting of financial assets and liabilities Financial assets and liabilities are off-set and the net amount is reported in the financial statements only when there is a legally enforceable right to set-off the recognised amounts and the Company intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. 4.17 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable on the following basis: 27

Kohat Textile Mills Limited

Annual Report 2015

- Local sales through agents are recorded on intimation from agents whereas direct sales are recorded when goods are dispatched to customers. - Export sales are booked on shipment of goods. - Return on bank deposits is ed for on ‘accrual basis’. 4.18 Segment reporting Segment information is presented on the same basis as that used for internal reporting purposes by the Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments. On the basis of its internal reporting structure, the Company considers itself to be a single reportable segment; however, certain information about the Company’s products, as required by the approved ing standards, is presented in note 39 to these financial statements. 5.

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 2015 2014 --- (No. of shares) --14,525,400 14,525,400 6,274,600

6,274,600

2015 2014 --- (Rupees in thousand) --ordinary shares of Rs.10 each   fully paid in cash ordinary shares of Rs.10 each issued   as fully paid-up by conversion   of loans and debentures

20,800,000 20,800,000 5.1

145,254

145,254

62,746

62,746

208,000

208,000

9,880,000 6,340,010

9,880,000 6,340,010

16,220,010

16,220,010

Ordinary shares held by the Associated Companies   at the year-end were as follows:   - Saif Holdings Ltd.   - GlobeComm (Pvt.) Ltd.

6. SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT - net This represents surplus over book values resulted from the revaluations of freehold land, buildings on freehold land, plant & machinery, diesel generators & fuel reservoir, gas fired power plant and electric installations during the financial years 1984, 1995, 2004, 2005, 2008 and 2012 adjusted only by surplus realised on disposal of revalued assets, incremental depreciation arising out of revaluation and deferred taxation.

28

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) Opening balance 391,943 408,805 Less: transferred to unappropriated profit: - on of incremental depreciation for the year (15,056) (16,175) - upon sale of revalued assets 0 (687) —————— —————— 376,887 391,943 Less: deferred tax on: - opening balance of surplus 82,044 90,263 - incremental depreciation for the year (4,969) (5,500) - sale of revalued assets 0 (233) 77,075 84,530 adjustment resulting from reduction in tax rate (2,335) (2,486) 74,740 82,044 —————— —————— Closing balance 302,147 309,899 ========== ========== 7.

LOANS FROM AN ASSOCIATED COMPANY - Unsecured

Sub-ordinated loan 7.1 100,000 100,000 ========== ========== 7.1

The Company and Saif Holdings Ltd. (SHL) have entered into a loan agreement on October 21, 2009; the of loan agreement are effective from April 09, 2009. Salient of the agreement are as follows: (a) SHL has lent an unsecured loan amounting Rs.100 million to the Company on April 09, 2009 to meet its financial obligations; (b) as per the original agreement , loan carried mark-up at the rate of 3-months KIBOR + 2% payable quarterly; however, from January, 2013 the rate of mark-up has been revised to average borrowing cost of SHL + 0.1% per annum; and (c) originally the maturity period of the loan was five years and the loan become payable in April, 2014. However, as the loan is sub-ordinated to all other finance facilities availed / to be availed by the Company from any of the financial institution and cannot be repaid till their final settlement; therefore, the Company and SHL mutually agreed to renew the loan agreement for further period of five years. The effective mark-up rate charged by SHL, during the current financial year, ranged from 9.60% to 12.11% (2014: 9.44% to 12.27%) per annum.



29

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 8.

LONG TERM FINANCING - Secured The Bank of Punjab (BoP) Term finance - I 8.1 0 50,000 Term finance - II 8.2 112,500 135,000 United Bank Limited (UBL) Demand finance 8.3 91,204 104,234 Askari Bank Limited (ABL) Diminishing Musharakah 8.4 120,000 0 —————— —————— 323,704 289,234 Less: current portion grouped under current liabilities 78,558 87,146 —————— —————— 245,146 202,088 ========== ========== 8.1

The Company, during the financial year ended June 30, 2007, arranged a term finance facility of Rs.250 million (Term finance - I) from BoP. Originally, the principal balance of this finance facility was repayable in 20 equal quarterly installments of Rs.12.500 million with effect from August, 2009. However BoP, vide its letter Ref # BOP/CBU(N)/2009/420 dated September 08, 2009, approved extension in repayment of this finance facility; accordingly, repayment of principal balance commenced from August, 2010 and has been fully repaid during the current financial year. This term finance facility carried mark-up at the rate of 3-months KIBOR + 325 basis points per annum payable quarterly; effective mark-up rate charged, during the current financial year, ranged from 11.25% to 13.46% (2014: 12.28% to 13.42%) per annum. This finance facility was secured against first pari u charge on fixed assets of the Company for Rs.333.334 million.

8.2 The Company, during the financial year ended June 30, 2014, arranged a term finance facility of Rs.135 million (Term finance - II) from BoP. This finance facility is repayable in 6 equal half-yearly installments of Rs. 22.500 million each commenced from June, 2015. This term finance facility carries mark-up at the rate of 6-months average KIBOR + 130 basis points per annum payable semi-annually; effective mark-up rate charged, during the current financial year, ranged from 8.16% to 11.48% (2014: 11.41% to 11.45%) per annum. This finance facility is secured against first pari u charge on fixed assets of the Company for Rs.333.334 million. 8.3

30

The Company, during the financial year ended June 30, 2014, arranged a demand finance facility of Rs.110 million from UBL. The bank against the said facility has disbursed Rs.104.234 million in three tranches of different amounts and each tranche is repayable in 16 equal quarterly installments commenced from February, 2015. This demand finance facility carries mark-up at the rate of 3-months KIBOR + 175 basis points per annum payable quarterly; effective mark-up rate charged, during the current financial year, ranged from 8.95% to 11.83% (2014: 11.11% to 11.45%) per annum. This finance facility is secured against first pari u hypothecation charge on all fixed assets of the Company for Rs.146.670 million.

Kohat Textile Mills Limited

Annual Report 2015

8.4

9.

The Company, during the current financial year, has arranged a diminishing musharakah finance facility of Rs.120 million from ABL. This finance facility is repayable in 48 equal monthly installments of Rs. 2.500 million each commencing April, 2016. This finance facility carries profit at the rate of 6-months KIBOR + 100 basis points per annum payable monthly; effective profit rate charged, during the current financial year, was 8.98% per annum. This finance facility is secured against first pari u charge on fixed assets of the Company for Rs.150 million. LONG TERM DEPOSITS These deposits have been received in accordance with the Company’s Car Incentive Scheme and against these deposits vehicles have been provided to the employees. These are adjustable after specified periods by transfer of title of vehicles to the respective employees.

10. DEFERRED LIABILITY - STAFF RETIREMENT BENEFITS (Gratuity) 10.1 Projected unit credit method, as allowed under IAS 19 (Employee Benefits), has been used for actuarial valuation based on the following significant assumptions: 2015 2014 - discount rate 9.75% 13.25% - expected rate of increase in salary 8.75% 12.25% - average expected remaining working life of employees 9 years 9 years 2015 2014 (Rupees in thousand) 10.2 Amount recognised in the balance sheet Net liability at the beginning of the year 62,137 43,591 Charge to profit and loss 21,879 17,716 Remeasurement recognised in other comprehensive income 6,763 7,544 Payments made during the year (10,489) (6,714) —————— —————— Net liability at the end of the year 80,290 62,137 ========== ==========

31

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 (Rupees in thousand) 10.3 The movement in the present value of defined benefit obligation is as follows: Balance at beginning of the year 62,137 43,591 Current service cost 13,646 12,050 Interest cost 8,233 5,666 Benefits paid (10,489) (6,714) Remeasurement of obligation 6,763 7,544 —————— —————— Balance at end of the year 80,290 62,137 ========== ========== 10.4 Charge to profit and loss : Current service cost 13,646 12,050 Interest cost 8,233 5,666 —————— —————— 21,879 17,716 ========== ========== 10.5 Remeasurements recognised in other comprehensive income Experience loss 6,763 7,544 ========== ========== 10.6 Sensitivity analysis for actuarial assumptions: The sensitivity of the defined benefit obligation to changes in principal assumptions is: “Change in “Increase in “Decrease in assumptions” assumptions” assumptions” ------ Rupees in ‘000 ----- Discount rate (73,638) 88,120 ======== ======== Increase in salaries 88,280 (73,381) ======== ========

32



The sensitivity analysis are based on a change in an assumption while holding all other assumptions constants. In practice, this is unlikely to occur, and change in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the projected unit credit method at the end of reporting period) has been applied as when calculating the gratuity liability recognised within the balance sheet.



The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

Kohat Textile Mills Limited

Annual Report 2015

10.7 Comparison of present value of defined benefit obligation and experience adjustment on obligation for five years is as follows: 2015 2014 2013 2012 2011 ------------------ Rupees in ‘000 -----------------Present value of defined benefit obligation 80,290 62,137 43,591 30,030 30,239 ======= ======= ======= ======= ======= Experience adjustment on obligation 6,763 7,544 0 2,442 0 ======= ======= ======= ======= ======= 10.8 Based on actuary’s advice, the expected charge for the year ending June 30, 2016 amounts to Rs.23.337 million. 2015 2014 11. DEFERRED TAXATION - net Note (Rupees in thousand)

The balance of deferred tax is in respect of following major temporary differences Taxable temporary difference: - accelerated tax depreciation allowances 126,467 126,715 - surplus on revaluation of property, plant and equipment 6 74,740 82,044 —————— —————— 201,207 208,759 Deductible temporary difference: - unused tax losses (115,987) (139,784) - minimum tax recoverable against normal tax charge in future years (18,849) (5,947) (134,836) (145,731) —————— —————— 66,371 63,028 ========== ========== 12. TRADE AND OTHER PAYABLES Creditors 20,899 18,091 Advances from customers 2,277 2,314 Bills payable 12.1 35,936 141,328 Accrued expenses 74,568 52,570 Workers’ (profit) participation fund 2,116 6,310 Workers’ welfare fund 10,099 9,295 Unclaimed dividends 3,625 3,356 Others 1,142 1,682 —————— —————— 150,662 234,946 ========== ========== 12.1 These are secured against import documents.

33

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 13. ACCRUED MARK-UP Mark-up / profit accrued on: - loans from an Associated Company 2,394 7,453 - long term financing 2,418 9,549 - short term borrowings 8,373 10,835 —————— —————— 13,185 27,837 ========== ========== 14. SHORT TERM BORROWINGS Short term finance facilities available from various commercial banks aggregate to Rs.750.000 million (2014: Rs.550.000 million). These facilities, during the current financial year, carried markup / profit at the rates ranging from 4.33% to 12.68% (2014: 4.33% to 12.68%) per annum payable on quarterly basis. Facilities available for opening letters of credit / guarantee from various commercial banks aggregate to Rs.668.000 million (2014: Rs.324.000 million) of which the amounts aggregating Rs.282.830 million (2014: Rs.133.110 million) remained unutilised at the balance sheet date. The aggregate facilities are secured against pledge of raw materials & finished goods, charge on fixed and current assets of the Company, lien on documents of title to imported goods. These facilities are expiring on various dates by December, 2015. 15. CONTINGENCIES AND COMMITMENTS Contingencies 15.1 Guarantees aggregating Rs.41.562 million (2014: Rs.49.562 million) has been issued by the banks of the Company to Sui Northern Gas Pipeline Limited. These guarantees are secured against pari u charge over the Company’s fixed and current assets. 15.2 RThe Company, during the current financial year, has challenged the levy of Gas Infrastructure Development Cess (GIDC) by filing a petition before the Peshawar High Court, Peshawar (PHC). The PHC has stayed the levy / cess charged through GIDC Act, 2015 and the Respondents were directed to submit their comments. Earlier, the Supreme Court of Pakistan had dismissed the appeal of Federation on the same matter in August 2014, wherein it was held that the levy under the GIDC Act, 2011 was not covered under any entry relating to the imposition or levy of a tax as envisaged in the Constitution. Sui Northern Gas Pipelines Ltd., along with gas bill for the month of June, 2015, has raised GIDC demands aggregating Rs.105.716 million, which are payable in case of an adverse judgement by the PHC. The petition before the PHC is pending adjudication. 15.3 Refer contents of note 24.3. Commitments 15.4 Commitments against irrevocable letters of credit outstanding at the year-end were for Rs.307.681 million (2014: Rs.Nil ). 15.5 Commitments against capital expenditure, other than letters of credit, outstanding at the year-end aggregate to Rs.21.694 million (2014: Rs.Nil ). 16. PROPERTY, PLANT AND EQUIPMENT



Operating fixed assets - tangible 16.1 1,056,830 1,048,788 Capital work-in-progress 16.6 28,888 458 Stores held for capital expenditure 35,417 11,156 —————— —————— 1,121,135 1,060,402 ========== ========== 34

Annual Report 2015

16.1 Operating fixed assets - tangible

Kohat Textile Mills Limited

35

Kohat Textile Mills Limited

Annual Report 2015

16.2  Disposal of operating fixed assets

16.3 Had the operating fixed assets been recognised under the cost model, the carrying amounts of each revalued class of operating fixed assets would have been as follows: 2015 2014 (Rupees in thousand) Owned Freehold land 474 474 Buildings on freehold land: - Factory 45,366 45,687 - Non-factory 12,717 12,907 Residential: - Officers 3,971 4,180 - Workers 4,667 3,674 Plant & machinery 450,151 420,324 Diesel generators & fuel reservoirs 850 919 Gas fired power plant 117,572 121,075 Electric installations 12,110 12,605 Equipment & appliances 15,297 15,690 —————— —————— 663,175 637,535 ========== ========== 16.4 Depreciation for the year has been apportioned as under: Cost of sales istrative expenses

62,129 50,486 6,868 7,605 —————— —————— 68,997 58,091 ========== ==========

16.5 Borrowing cost at the rate of 8.98% (2014: 11.37% and 11.41%) per annum amounting Rs.0.776 million (2014: Rs. 3.564 million) has been included in the cost of plant and machinery.

36

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 16.6 Capital work-in-progress Buildings on freehold land         - factory 18,384 0         - non - factory 674 458 Advance payments         - freehold land 2,000 0         - plant and machinery 4,641 0         - computer software 3,189 0 —————— —————— 28,888 458 ========== ========== 17. INTANGIBLE ASSETS - Computer software Cost 586 586 Less: amortisation - at beginning of the year 244 127 - charge for the year 117 117 - at end of the year 361 244 —————— —————— Book value as at June 30, 225 342 ========== ========== Amortisation rate - 20% per annum 18. LONG TERM LOANS - Secured Loans to employees 2,519 1,899 Less: current portion grouped under current assets 626 433 —————— —————— 1,893 1,466 ========== ========== 18.1 These interest-free loans have been advanced for various purposes and are secured against employees’ gratuity benefits. These loans, except for twenty one (2014: nine) loans are recoverable in lump sum at the time of retirement by way of adjustment against gratuity benefits of the respective employees. 19. STORES, SPARE PARTS AND LOOSE TOOLS Stores 19.1 14,960 5,137 Spare parts 15,306 19,535 Loose tools 1,584 1,415 —————— —————— 31,850 26,087 ========== ========== 19.1 It includes in transit inventory valuing Rs.2,707 thousand (2014: Rs.88 thousand).

37

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 20. STOCK-IN-TRADE Raw materials: - at mills 62,270 208,628 - in-transit 70,790 123,144 —————— —————— 133,060 331,772 Work-in-process 21,869 30,070 Finished goods 34,025 71,021 —————— —————— 188,954 432,863 ========== ========== 20.1 Raw materials and finished goods inventories are pledged with commercial banks as security for short term finance facilities (note 14). 21. LOANS AND ADVANCES Current portion of long term loans 626 433 Advances - considered good - employees 1,167 1,203 - suppliers 44,393 3,789 —————— —————— 46,186 5,425 ========== ========== 22. DEPOSITS AND SHORT TERM PREPAYMENTS Security deposits Short term prepayments

600 1,805 1,644 560 —————— —————— 2,244 2,365 ========== ==========

23. OTHER RECEIVABLES Associated Companies 0 915 Letters of credit 1,215 970 Others 43 39 —————— —————— 1,258 1,924 ========== ========== 24. TAXATION - net Balance of advance tax at beginning of the year Add: income tax deducted / paid during the year

76,674 53,063 18,151 23,611 —————— —————— 94,825 76,674

Less: provision made during the year 24.2 Balance of advance tax at end of the year

(12,902) 0 —————— —————— 81,923 76,674 ========== ==========

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Kohat Textile Mills Limited

Annual Report 2015

24.1 Income tax assessments of the Company have been finalised by the Income Tax Department (the Department) or deemed to be assessed under section 120 of the Income Tax Ordinance, 2001 (the Ordinance) upto Tax Year 2014. 24.2 No numeric tax rate reconciliation has been given in these financial statements as provisions made for the current financial years represent minimum tax payable under section 113 after adjusting tax credit under section 65B of the Ordinance. 24.3 Due to location of the mills in the most affected area, the income of the Company was exempt from tax under clause 126F of the second schedule to the Ordinance starting from the tax year 2010. Exemption available under clause 126F was a specific exemption granted by the Federal Board of Revenue (FBR) to the specific areas of Khyber Pakhtunkhwa. The Company had filed a writ petition before the Peshawar High Court, Peshawar, praying exemption from levy of minimum tax under section 113 of the Ordinance, who vide its judgment dated July 18, 2012 itted and allowed the Company’s writ petition and directed the concerned authorities to extend the benefit of clause 126F to the Company in the light of clarification given by the FBR. Accordingly, no provision for minimum tax for the financial year ended June 30, 2012 amounted Rs.23.681 million was made in the books of as well as provision for minimum tax made during the financial years ended June 30, 2010 and 2011 aggregated Rs.29.770 million were written-back. The Department, against the said order, has filed an appeal with the Honourable Supreme Court of Pakistan, which is pending adjudication. An adverse judgment by the Honourable Supreme Court of Pakistan will create a tax liability amounting Rs.53.451 million.

2015 2014 (Rupees in thousand) 25. SALES - Net Own manufactured goods: - yarn 2,453,839 2,362,717 - waste 9,457 0 Trading activities: - raw materials 13,971 4,773 —————— —————— 2,477,267 2,367,490 Less: sales tax 71,990 68,730 —————— —————— 2,405,277 2,298,760 ========== ==========

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Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 26. COST OF SALES Raw materials consumed 26.1 1,566,771 1,571,954 Packing materials consumed 39,644 36,335 Salaries, wages and benefits 26.2 248,433 214,334 Power and fuel 192,203 192,788 Repair and maintenance 31,227 29,712 Depreciation 62,129 50,486 Insurance 3,771 3,066 Vehicle running and maintenance 1,388 2,046 Traveling and conveyance 988 964 Guest house and entertainment 881 978 Textile cess 29 29 Others 3,111 1,336 —————— —————— 2,150,575 2,104,028 Adjustment of work-in-process Opening 30,070 24,578 Closing (21,869) (30,070) 8,201 (5,492) —————— —————— Cost of goods manufactured 2,158,776 2,098,536 Adjustment of finished goods Opening stock 71,021 10,909 Closing stock (34,025) (71,021) 36,996 (60,112) —————— —————— 2,195,772 2,038,424 ========== ========== 26.1 Raw materials consumed Opening stock Add: Purchases Cost of raw materials sold Insurance Less: closing stock

331,772

420,474

1,353,805 1,477,328 13,428 4,583 826 1,341 1,368,059 1,483,252 —————— —————— 1,699,831 1,903,726 133,060 331,772 —————— —————— 1,566,771 1,571,954 ========== ==========

26.2 These include Rs.14.479 million (2014: Rs.11.724 million) in respect of staff retirement benefits - gratuity.

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Kohat Textile Mills Limited

Annual Report 2015

2015 2014 Note (Rupees in thousand) 27. DISTRIBUTION COST Freight and forwarding 2,934 569 Travelling and conveyance 22 22 Salaries and benefits 27.1 10,935 9,526 Rent, rates and utilities 264 239 Communication 163 146 Insurance 625 165 Others 9 2 —————— —————— 14,952 10,669 ========== ========== 27.1 These include Rs.3.080 million (2014: Rs.2.494 million) in respect of staff retirement benefits - gratuity. 28. ISTRATIVE EXPENSES Directors’ remuneration and fees 6,428 4,237 Salaries and benefits 28.1 26,072 23,965 Travelling and conveyance 755 581 Rent, rates and taxes 5,903 5,646 Entertainment 1,391 1,302 Communication 1,058 1,233 Printing and stationery 904 772 Utilities 3,509 3,836 Insurance 4,863 3,689 Vehicles’ running and maintenance 3,328 3,581 Repair and maintenance 2,821 879 ment 127 135 Subscription 317 315 Newspapers & periodicals 34 34 Depreciation 6,868 7,605 Amortisation 117 117 Auditors’ remuneration: 28.2 942 822 Legal and professional (other than Auditors) 1,630 438 Others 570 640 —————— —————— 67,637 59,827 ========== ========== 28.1 These include Rs.4.320 million (2014: Rs.3.498 million) in respect of staff retirement benefits - gratuity. 28.2 Auditors’ remuneration Statutory audit 625 500 Half yearly review 110 110 Certification charges 72 77 Consultancy services 120 120 Out-of-pocket expenses 15 15 —————— —————— 942 822 ========== ==========

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Kohat Textile Mills Limited

Annual Report 2015

28.3 The Company, during the current financial year, has shared istrative expenses aggregating Rs.15.267 million (2014: Rs.7.195 million) with its Associates on of proportionate expenses of the combined offices at Karachi and Lahore. These expenses have been booked in the respective heads of . 2015 2014 Note (Rupees in thousand) 29. OTHER INCOME Sale of scrap 439 563 Unclaimed payable balances written-back 107 23 Reversal of provision for Gas infrastructure Development Cess (GIDC) 0 11,529 Exchange fluctuation gain 0 1,718 Gain on sale of operating fixed assets 16.2 415 0 —————— —————— 961 13,833 ========== ========== 30. OTHER EXPENSES Loss on sale of operating fixed assets 0 3,378 Workers’ (profit) participation fund 2,116 6,170 Workers’ welfare fund 804 2,345 Donations 30.1 5,750 2,800 —————— —————— 8,670 14,693 ========== ========== 30.1 These include an amount of Rs.3.750 million (2014: Rs.1.800 million) donated to Saifullah Foundation for Sustainable Development (a social welfare society) istered by the following directors of the Company: - Mr. Anwar Saifullah Khan - Mr. Jehangir Saifullah Khan - Mr. Osman Saifullah Khan 31. FINANCE COST - Net Mark-up on loans from an Associated Company - sub-ordinated loan 11,252 11,175 - other loan 0 3,372 —————— —————— 11,252 14,547 Mark-up on long term financing 31,217 20,065 Mark-up on short term borrowings 24,639 36,392 Interest on workers’ (profit) participation fund 51 140 Exchange fluctuation loss 1,578 0 Bank and other charges 1,038 2,945 —————— —————— 79,775 74,089 ========== ==========

42

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 (Rupees in thousand) 32. TAXATION Current tax 12,902 0 Deferred - relating to temporary differences 5,433 38,011 - resulting from reduction in tax rate 246 3,371 5,679 41,382 ——————— ——————— 18,581 41,382 ============ ============ 33. EARNINGS PER SHARE 33.1 Basic earnings per share Profit after taxation attributable to ordinary shareholders 20,851 73,509 ============ ============ (No. of shares) Weighted average number of shares outstanding during the year 20,800,000 20,800,000 ============ ============ Earnings per share 1.00 3.53 ============ ============ 33.2 Diluted earnings per share A diluted earnings per share has not been presented as the Company does not have any convertible instruments in issue as at June 30, 2015 and June 30, 2014 which would have any effect on the earnings per share if the option to convert is exercised. 34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 34.1 Financial Risk Factors The Company has exposure to the following risks from its use of financial instruments: - market risk - credit risk; and - liquidity risk. The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board is also responsible for developing and monitoring the Company’s risk management policies. 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. Risk management is carried out by a treasury department under policies approved by the Board of Directors. The treasury department identifies, evaluates and hedges financial risks. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as currency risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

43

Kohat Textile Mills Limited

Annual Report 2015

34.1.1 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Market risk comprises of three types of risks: currency risk, interest rate risk and price risk. (a) Currency risk Foreign currency risk arises mainly where receivables and payables exist due to transactions entered into in foreign currencies. The Company is exposed to currency risk on import of raw materials, plant & machinery and stores & spares denominated in U.S. Dollar. The Company’s exposure to foreign currency risk for U.S. Dollar is as follows: As at June 30, 2015

As at June 30, 2014



The following significant exchange rates have been applied: Average rate Balance sheet date rate 2015 2014 2015 2014 U.S. $ to Rupee 101.50 103.29 101.70 98.75

44

Sensitivity analysis At June 30, 2015, if Rupee had strengthened by 10% against U.S.$ with all other variables held constant, profit after taxation for the year would have been higher by the amount shown below mainly as a result of net foreign exchange gains on translation of foreign currency financial liabilities.

Kohat Textile Mills Limited

Annual Report 2015

2015 2014 (Rupees in thousand) Effect on profit for the year U.S. $ to Rupee 3,590 18,891 ========== ==========

The weakening of Rupee against U.S. $ would have had an equal but opposite impact on profit after taxation.



The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and liabilities of the Company.



(b) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. At the reporting date, the interest rate profile of the Company’s interest bearing financial instruments is as follows: 2015 2014 2015 2014 Effective rate Carrying amount % % (Rupees in thousand) Financial liabilities Variable rate instruments Long term loans from an Associated Company 9.60 to 12.11 9.44 to 12.27 100,000 100,000 ========= ========= Long term financing 8.16 to 13.46 11.11 to 13.42 323,704 289,234 ========= ========= Short term borrowings 4.33 to 12.68 4.33 to 12.68 260,235 354,561 ========= =========

Fair value sensitivity analysis for fixed rate instruments The Company does not for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the reporting date would not affect profit or loss of the Company.



Cash flow sensitivity analysis for variable rate instruments At June 30, 2015, if interest rate on variable rate financial liabilities had been 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs.6.839 million (2014: Rs.7.438 million) lower / higher, mainly as a result of higher / lower interest expense on variable rate financial liabilities.



(c) Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result 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 instruments or its issuer or factors affecting all similar financial instruments traded in the market. The Company is not exposed to any significant price risk.

45

Kohat Textile Mills Limited

Annual Report 2015

34.1.2 Credit risk exposure and concentration of credit risk Credit risk represents the risk of a loss to the Company if the counter party fails to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties and continually assessing the credit worthiness of counterparties.

Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry. Credit risk primarily arises from long term deposits, trade debts, security deposits and balances with banks. To manage exposure to credit risk in respect of trade debts, management performs credit reviews taking into the customer’s financial position, past experience and other relevant factors. Where considered necessary, advance payments are obtained from certain parties. The management has set a maximum credit period of 30 days to reduce the credit risk. Credit risk on bank balances is limited as the counter parties are banks with reasonably high crediting ratings. Exposure to credit risk The maximum exposure to credit risk as at June 30, 2015 along with comparative is tabulated below: 2015 2014 (Rupees in thousand) Long term deposits Trade debts Security deposits Bank balances

1,137 1,137 141,019 157,724 600 1,805 9,858 4,528 —————— —————— 152,614 165,194 ========== ==========

All the trade debts at the balance sheet date represent domestic parties.

The aging of trade debts at the balance sheet date was as follows: Not yet due 121,924 139,166 Past due - more than 30 days 19,095 18,558 —————— —————— 141,019 157,724 ========== ==========

46

Based on past experience, the Company’s management believes that no impairment loss allowance is necessary in respect of trade debts as debts aggregating Rs.77.577 million have been realised subsequent to the year-end and for other trade debts there are reasonable grounds to believe that the amounts will be realised in short course of time.

Kohat Textile Mills Limited

Annual Report 2015

34.1.3 Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach for managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows:



The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest / mark-up rates effective at the respective year-ends. The rates of interest / mark-up have been disclosed in the respective notes to these financial statements.

34.2 Fair value of financial instruments Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable willing parties in an arm’s length transaction. Consequently, differences may arise between carrying values and the fair value estimates. At June 30, 2015, the carrying values of all financial assets and liabilities reflected in the financial statements approximate to their fair values.

47

Kohat Textile Mills Limited

Annual Report 2015

34.3 Financial instruments by category

35. CAPITAL RISK MANAGEMENT The Company’s prime objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders, benefits for other stakeholders and to maintain a strong capital base to the sustained development of its business.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders and / or issue new shares.



There was no change to the Company’s approach to capital management during the year and the Company is not subject to externally imposed capital requirements except for the maintenance of debt to equity ratio under the financing agreements.

36. TRANSACTIONS WITH RELATED PARTIES The related parties comprise of Associated Companies, directors and key management personnel of the Company. The Company in the normal course of business carries out transactions with various related parties.

48

Kohat Textile Mills Limited





Annual Report 2015

Material transactions with associated undertakings during the year were as follows:

2015 2014 (Rupees in thousand) 0 30,178 20,275 20,275

Loans repaid - long term Dividend paid Sale of: - goods, store items and services - fixed assets Purchase of: - goods and services - fixed assets Mark-up paid on loans

15,736 5,737 500 0 68,147 21,224 0 70 16,312 14,547

37. REMUNERATION OF CHIEF EXECUTIVE, D IRECTOR AND EXECUTIVES

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

37.1 In addition to the above, meeting fees amounting Rs.28 thousand (2014: Rs.20 thousand) were paid to six (2014: six) directors during the current financial year. 38. CAPACITY AND PRODUCTION No. of spindles installed No. of spindles shifts worked Rated capacity at 20’s count Kgs Actual production 1,095 shifts (2014: 1,095 shifts) Kgs Actual production converted into 20’s count Kgs

35 35 37,946 34,044 14,587 13,159 7,274 6,838 16,826 14,428

It is difficult to describe precisely the production capacity in textile spinning industry since it fluctuates widely depending on various factors, such as count of yarn spun, spindles speed, twist per inch and raw materials used, etc. It also varies according to the pattern of production adopted in a particular year.

49

Kohat Textile Mills Limited

Annual Report 2015

39. OPERATING SEGMENT These financial statements have been prepared on the basis of single reportable segment. 39.1 Yarn sales represent 99.05% (2014: 99.80%) of the total sales of the Company. 39.2 Whole of the Company’s sales relate to customers in Pakistan. 39.3 All non-current assets of the Company as at June 30, 2015 are located in Pakistan. 39.4 Two (2014: two) of the Company’s customers having sales aggregating Rs.1,078 million (2014: Rs.1,034 million) contributed towards 44% (2014: 45%) of the Company’s sales. Each customer individually exceeded 10% of total sales. 40. NUMBER OF EMPLOYEES 2015 2014 Number of employees as at June 30, - Permanent 997 1106 - Contractual 4 4 Average number of employees during the year - Permanent 1091 1044 - Contractual 5 5 41. EVENTS AFTER THE BALANCE SHEET DATE The Board of Directors, in their meeting held on October 06, 2015 has proposed a final cash dividend of Re. 0.75 (2014: Rs.1.25) per share amounting to Rs. 15.60 million (2014: Rs.26.000 million) for the year ended June 30, 2015. This appropriation will be approved by the in the forthcoming Annual General Meeting to be held on October 30, 2015. These financial statements do not reflect the proposed appropriations, which will be ed for in the statement of changes in equity as appropriations from unappropriated profit in year ending June 30, 2016. 42. GENERAL These financial statements were authorised for issue on October 06, 2015 by the Board of Directors of the Company.

ASSAD SAIFULLAH KHAN CHIEF EXECUTIVE 50

OSMAN SAIFULLAH KHAN DIRECTOR

Kohat Textile Mills Limited

Annual Report 2015

PROXY FORM I/we______________________________________________________________________________ of________________________________________________________________________________ a Member(s) of KOHAT TEXTILE MILLS LIMITED and holder of __________________________ Ordinary Shares, do hereby appoint_____________________________________________________ of________________________________________________________________________________ or failing him_______________________________________________________________________ of________________________________________________________________________________ a member of KOHAT TEXTILE MILLS LIMITED, vide ed Folio No._____________and/or CDC participant I.D. No._____________________ and Sub No.______________________ as my/our proxy to act on my/our behalf at the 49th Annual General Meeting of the Company to be held on October 30, 2015. Signed this ____________________________________________ day of ___________________2015

Signature

Affix Revenue Stamp

(Signature should agree with the Specimen Signature ed with the Company). NOTES: 1. No proxy shall be valid unless it is duly stamped with a revenue stamp. 2. In the case of Bank or Company, the proxy form must be executed under its Common seal and signed by its authorised person. 3. If this proxy form is signed under a power of attorney or other authority then a notarially certified copy of that power of attorney/authority must be deposited alongwith this proxy form. 4. This form of proxy duly completed must be deposited at the ed office of Company at least 48 hours before the meeting. 5. Individual CDC holders shall produce his/her original National Identity Card or port, and participant’s ID # to prove his/her identity. A corporate member from CDC must submit the board of directors’ resolution or power of attorney and the specimen signature of the nominee, attending meeting.