2011

Fazal Textile Mills Limited

CONTENTS
Corporate Information .....................................................................................03 Mission Statement.............................................................................................04 Notice of Annual General Meeting ...................................................................05 Directors Report ........................................................................................06-08 Key Financial and Operational Data..................................................................09 Pattern of Shareholding ...............................................................................10-11 Statement of Compliance with Best Practices of Corporate Governance....................................................12-13 Review Report to the Members .......................................................................14 Auditors Report .............................................................................................. 15 Balance Sheet....................................................................................................16 Profit and Loss Account ....................................................................................17 Statment of Comprehensive Income ................................................................18 Cash Flow Statement........................................................................................19 Statement of Changes in Equity ........................................................................20 Notes to the Account..................................................................................21-42 Form of Proxy.......................................................................................................

49th Annual Report 2011

Annual Report 2011

Fazal Textile Mills Limited

CORPORATE INFORMATION
BOARD OF DIRECTORS Mr. Muhammad Younus Tabba Mr. Muhammad Sohail Tabba Mr. Muhammad Ali Tabba Mr. Imran Yunus Tabba Mr. Javed Yunus Tabba Mrs. Mariam Tabba Khan Mrs. Raheela Aleem Mr. Ilyas Ismail (Chairman) (Chief Executive)

CHIEF FINANCIAL OFFICER & COMPANY SECRETARY Toufique Yusuf FCA FICS AUDIT COMMITTEE Mr. Muhammad Sohail Tabba Mr. Muhammad Ali Tabba Mr. Imran Yunus Tabba AUDITORS Hyder Bhimji & Co. Chartered Accountants LEGAL ADVISOR Mr. Mohammad Aleem (Advocate) BANKERS Bank Al-Habib Limited Bank Al-Falah Limited (Islamic Division) Habib Bank Limited Habib Metropolitan Bank Limited Meezan Bank Limited REGISTERED OFFICE AND MILLS LA-2/B Block # 21, Rashid Minhas Road, Federal B Area, Karachi - 75950. Phones : 36321311-36322048 Fax : 92-21-36313372 E-mail : finance@[Link] Website : [Link] Chairman Member Member

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Fazal Textile Mills Limited

MISSION STATEMENT
Fazal Textile Mills Limited through its innovative technology and effective resource management has maintained high ethical and professional standards. The core values are its commitment, integrity, excellence, teamwork, transparency and creativity.

Fazal Textile is committed to:-

produce quality and fault free products for its valued customers by continual improvements by providing proper training and development programmes, upgrading of resources, setting quality objectives by analyzing customer's feedback.

provides good returns and security to its shareholders

fulfill obligation towards creditors, employees and the society.

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Fazal Textile Mills Limited

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 49th Annual General Meeting of the Members of the Fazal Textile Mills Limited will be held at Registered office of the Company located at L-A, 2/B, Block 21, Rashid Minhas Road, Federal "B" Area, Karachi on Tuesday the 25th October 2011 at 11.00 a.m to transact the following business. 1. 2. 3. 4. 5. To confirm the minutes of the Annual General Meeting held on 26th October 2010. To receive consider and adopt the Audited accounts for the year ended June 30, 2011 together with the Directors and Auditors report thereon. To approve cash dividend of Rs 6.00 per share of Rs 10/- each for the year ended 30th June 2011 as recommended by the Board. To appoint Auditors for the year ending 30th June 2012 and to fix their remuneration. To transact any other business with the permission of the Chairman By order of the Board M. Toufique Yusuf Company Secretary

Karachi : September 22, 2011 Notes : 1. 2.

The share transfer books of the Company will remain closed from October 21, 2011 to October 27, 2011 (both days inclusive) A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote for him/her. Proxy forms must be deposited at the registered office of the Company not later than 48 hours before the time of holding the meeting. An individual beneficial owner of shares from CDC must bring his/her original NIC or Passport, Account and Participant's I.D numbers to prove his/her identity. A representative of Corporate member of the Company or CDC must bring the Board of Directors' Resolution and/or Power of Attorney and the specimen signature of the nominee. Members are requested to notify the Company of any change in their addresses immediately.

3.

4.

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Fazal Textile Mills Limited

DIRECTORS REPORT TO THE MEMBERS

We are pleased to welcome the Members at the 49th Annual General Meeting and have pleasure in presenting the Annual Report together with the Company's audited accounts for the year ended June 30, 2011. Financial and operational results The financial results for the year under review are as follows: (Rs in 000) Year Ended Year Ended 30 June 2011 30 June 2010 5,607,201 530,306 393,626 39,530 354,096 7,512 361,608 37,125 300,000 337,125 Unappropriated profit carried forward Overview By the Grace of Almighty God, your Company achieved another milestone by outstripping all its past turnover records. The Company recorded an incredible growth in turnover, scaling an all time high of Rs 5.607 billion ( 2010 : Rs 4.075 billion) an increase of 37.60%. However the gross margin decrease to Rs 530.306 million as compared to Rs 839.111 million in the corresponding year. Your Company earned a profit after tax of Rs 354,096 million as compared to Rs 624.583 million in the corresponding year. The main reason for decrease in gross & operating profit is due the decrease in market prices of raw material towards the end of the financial year. The accounting policies adopted by the company to values its stock is "at lower of cost or market value on FIFO basis", hence we were forced to value our stock at market value which was lower than the actual costs. The net negative impact on this valuation is about 286.366 million. Earning per share The profit per share after tax was Rs. 57.23 for the year ended June 30, 2011 as compared to Rs 100.94 for the year ended June 30, 2010. Dividend The Board of Directors have recomended a dividend of Rs 6.00 per shares (i.e. 60%) for the year ended June 30, 2011. 24,483 4,075,778 839,111 675,792 51,209 624,583 4,804 629,387 61,875 560,000 621,875 7,512

Sales Gross Profit Profit before taxation Provision for taxation Profit after taxation Unappropriated profit brought forward Un-appropriated Profit available for appropriation Appropriation: Proposed Cash Dividend Transfer from general reserve

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Fazal Textile Mills Limited

Future Prospects Following the nose dive of the cotton market locally and internationally, the yarn and value added prices also fell out of proportions in the last quarter of fiscal year under review. The falling trend is still continuing and at one point in time the sale price were even not covering the raw material cost, due to carry over of inventory at higher prices. Owing to uncertain and volatile cotton market, the overseas customers are holding back their orders in anticipation of further decline in prices. The market must stabilize failing which margins of spinning sector will come under pressure. There is already pressure on cost of production because of rising fuel prices coupled with double digit inflation. The domestic cotton crop has been partially damaged due to torrential rains which will have its impact on the price of the cotton. Your directors are striving hard to minimize the negative effect of the foregoing factors. Shifting of production facilities Your Company has started to relocating its manufacturing Nooriabad (Super Highway) and the demolition of the vacant mill building at the existing facilities has also begun, the whole process will be completed in 6 to 8 months. Statement of Compliance with Code of Corporate Governance The management is fully aware of the Company's obligation for compliance with the Code of Corporate Governance as incorporated in the Listing Regulations of all Stock Exchanges in Pakistan and step are being taken for its effective implementation within the allowed time frame. The various statements, as required by the Code, are given below: " Presentation of financial statements. The financial statements under review have been prepared by the management and are in accordance with the provisions of the Companies Ordinance 1984. These financial statements present fairly the Company's state of affairs, the results of its operation, cash flow and changes in equity. Books of account. The Company has maintained proper books of account. Accounting policies. Appropriate accounting policies have been applied in preparation of financial statements. Compliance of International Accounting Standards (IAS). International Accounting Standards (IAS) as applicable in Pakistan have been followed in preparation of financial statements. Internal Control System. The system of internal control of the company is in place and is sound in design and is being effectively monitored. Going Concern. There are no significant doubts upon the Company's ability to continue as a going concern. Best practices of Corporate Governance. There has been no material departure from the Best Practices of Corporate Governance, as detailed in the listing regulations wherever applicable to the Company for the period ended June 30, 2005. Outstanding statutory dues. The Company has paid all the statutory dues due, there are no unpaid disputed balances payable. The amount payable if any but not due are disclosed in note no 18 to the annexed audited financial statements. BOD meetings. During the period under review the Board convened 5 times and the attendance of the respective Directors was as under :-

" " " " " "

"

"

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Fazal Textile Mills Limited

S. No Name of Directors 1 2 3 4 5 6 7 8 Mr. Muhammad Younus Tabba Mr. Muhammad Sohail Tabba Mr. Muhammad Ali Tabba Mr. Imran Yunus Tabba Mr. Javed Yunus Tabba Mrs. Mariam Tabba Khan Mrs. Raheela Aleem Mr. Ilyas Ismail

Meetings attended 2 4 3 3 4 3 3 2

Leaves of absence in accordance to the law were granted to the Directors who could not attend the Board Meeting. Pattern of shareholding. The pattern of shareholding and the additional information as required by the Code of Corporate Governance is enclosed. Auditors. The present auditors Hyder Bhimji & Co., Chartered Accountants, retire and have offered themselves for reappointment. As suggested by the audit committee, the Board recommends their appointment as Auditors for of the Company for the year ended June 30, 2012. Thanks and appreciation We would like to place on record our deep appreciation for the efforts of the executives, officers and other staff members and workers for their hard work, co-operation and sincerity to the company in achieving best possible results. The Board also wishes to place in record the appreciation to all banks for continued support to the company with zeal and dedications. The management is quite confident that these relation and cooperation will continue in the years to

Dated : September 22, 2011

Chairman

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Fazal Textile Mills Limited

KEY FINANCIAL AND OPERATIONAL DATA

Rupees 000
PARTICULARS
Export Sales Local Sales

Y E A R S 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000
3,700,027 2,078,269 2,890,868 1,381,290 1,815,119 1,130,386 1,910,247 672,118 1,805,767 575,401 1,328,054 801,791 1,001,278 801,963 1,565,173 936,049 1,360,729 916,739 1,127,193 1,021,300 1,486,691 826,276 1,614,582 631,732

Gross Sales Net Sales

5,778,296 5,607,201

4,272,158 4,075,778

2,945,505 2,819,019

2,582,365 2,444,146

2,381,168 2,263,195

2,129,845 2,027,303

1,803,241 1,642,382

2,501,222 2,265,602

2,277,468 2,060,705

2,148,493 1,915,960

2,312,967 2,090,444

2,246,314 2,051,484

Gross Profit Gross Profit Ratio

530,306 9.46

839,111 20.59

220,351 7.82

139,904 5.72

121,177 5.35

175,570 8.66

162,291 9.88

91,857 4.05

172,892 8.39

146,329 7.64

225,159 10.77

509,142 24.82

Profit Before Tax Profit Before Tax Ratio

393,626 7.02

675,792 16.58

48,219 1.71

26,361 1.08

1,236 0.05

51,459 2.54

78,167 4.76

21,743 0.96

104,111 5.05

63,317 3.30

107,768 5.16

391,196 19.07

Profit/(Loss) After Tax Profit/(Loss) After Tax Ratio

354,096 6.32

624,583 15.32

25,293 0.90

10,040 0.41

(20,461) (0.90)

48,619 2.40

40,882 2.49

29,828 1.32

86,967 4.22

43,838 2.29

63,905 3.06

282,955 13.79

Cost of Fixed Assets Book Value of Fixed Assets

1,609,644 575,075

1,636,775 629,583

1,625,504 672,849

1,597,122 719,115

1,550,952 741,516

1,407,892 652,327

1,395,754 666,272

1,284,882 602,889

1,141,310 514,066

1,126,429 535,231

998,738 445,411

887,793 364,500

Total Assets Employed Shareholders Equity

4,270,909 1,643,483

3,679,757 1,351,262

2,884,682 735,960

3,328,731 719,948

1,824,287 709,908

1,868,796 745,838

1,699,360 712,688

1,387,082 681,087

1,087,737 657,447

1,019,702 585,663

1,209,972 530,397

1,156,566 497,429

Breakup Value Per Share Earning Per Share Before Tax Earning/(Loss) Per Share After Tax

265.61 63.62 57.23

218.39 109.22 100.94

119.10 7.79 4.09

116.35 4.42 1.62

114.73 0.20 (3.31)

120.54 8.31 7.86

115.18 12.63 6.61

110.07 3.51 4.82

106.25 16.82 14.06

94.65 10.23 7.08

85.72 17.41 10.33

80.39 63.22 45.73

Production Capacity (20/s) (lbs)

48,990,026

48,990,026 48,990,026 48,990,026 47,879,424 48,341,510 34,725,150 45,397,909 43,970,027 41,869,613 41,414,443 41,414,443

Production converted into 20/s (lbs) 48,798,460 48,858,410 48,739,567 48,607,000 47,425,336 48,032,726 34,454,142 45,380,876 43,811,943 41,758,683 41,412,415 41,189,365 Capacity Utilization 99.61 99.73 99.49 99.22 99.05 99.36 99.22 99.96 99.64 99.74 100.00 99.46

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Fazal Textile Mills Limited

PATTERN OF SHAREHOLDING FORM "34" SHAREHOLDERS STATISTICS AS AT JUNE 30, 2011

NUMBER OF SHARE HOLDERS SHARE HOLDING FROM TO TOTAL SHARES HELD

427 142 27 42 9 3 2 1 3 2 1 3 3 1 2 1 1 2 3 1 2 2 1 1 1 683

1 101 501 1001 5001 10001 15001 20001 30001 35001 65001 70001 135001 160001 165001 170001 200001 215001 225001 240001 250001 260001 270001 350001 1090001

to to to to to to to to to to to to to to to to to to to to to to to to to

100 500 1000 5000 10000 15000 20000 25000 35000 40000 70000 75000 140000 165000 170000 175000 205000 220000 230000 245000 255000 265000 275000 355000 1095000

23,055 47,636 20,782 104,823 60,145 39,278 37,115 20,882 97,589 74,168 67,755 219,118 407,806 160,174 333,504 172,996 201,346 430,444 683,912 241,395 504,611 524,534 272,250 351,656 1,090,529 6,187,503

[Link].

CATAGORIES OF SHAREHOLDERS

NUMBER OF SHARE HOLDERS

TOTAL SHARES HELD

PERCENTAGE

1 2 3 4 5 6

FINANCIAL INSTITUTIONS INDIVIDUALS INVESTMENT COMPANIES JOINT STOCK COMPANIES Mutul Funds OTHERS Totals

8 655 1 12 1 6 683

68,744 4,885,279 300 1,143,856 67755 21,569 6,187,503

1.11 78.95 0.00 18.49 1.10 0.35 100.00

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Fazal Textile Mills Limited

DETAIL OF PATTERN OF SHAREHOLDING AS PER REQUIREMENT OF CODE OF CORPORATE GOVERNANCE

CATEGORIES OF SHAREHOLDER NOS SHARES HELD % Directors, Chief Executive Officers and their Spouses and minor children Mr. MUHAMMED YOUNUS TABBA Mr. MUHAMMED SOHAIL TABBA Mr. MUHAMMED ALI TABBA Mr. IMRAN YUNUS TABBA Mr. JAVEED YUNUS TABBA Mrs. MARIAM TABBA KHAN Mr. ILYAS ISMAIL Mrs. RAHELA ALEEM Mr. ABDUL RAHMAN YAQOOB Mr. KULSUM [Link] Mr. AMINA A. RAZAK Mr. ZULEKHA RAZZAK Mr. KHAIROON YUNUS Mr. MAIMOONA SIDDIQUI Mr. NASREEN ABDUL RAUF Mr. YASMEEN ISMAIL Mr. ARIF ISMAIL. Mr. ASLAM ISMAIL. Associated Companies, Undertakings and Related Parties LUCKY ENERGY (PVT) LTD. YUNUS TEXTILE MILLS LIMITED NIT and ICP NIT ICP Public Sector Companies and Corporations Banks, Development Financial Institutions, Non Banking Financial Institutions General Public a. Local Others Total Shareholders holding 10% or More Voting Interest LUCKY ENERGY (PVT) LTD. 1 2 2 2 2 2 1 2 1 1 2 2 1 1 1 1 1 1 272,250 336,434 425,822 514,573 493,700 210,080 228,242 382,537 2,500 160,174 381,411 238,430 70,785 136,050 136,050 135,706 228,242 227,428 4.40 5.44 6.88 8.32 7.98 3.40 3.69 6.18 0.04 2.59 6.16 3.85 1.14 2.20 2.20 2.19 3.69 3.68

2 1 2 1 5 2

1,111,411 31,300 67,836 300 43,144 25,519

17.96 0.51 1.10 0.00 0.70 0.41

629 15 683 2

304,865 22,714 6,187,503 1,111,411

4.93 0.37 100.00 17.96

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Fazal Textile Mills Limited

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in the listing regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner : 1. 2. 3. The board comprises eight directors, including the CEO. The number of executive director on the board is one. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or being a member of a stock exchange, has been declared as a defaulter by that stock exchange. No casual vacancy occurred in the Board during the year. The Company has prepared a "Statement of Ethics and Business Practices", which has been adopted by the board of directors and signed by all the directors and employees of the Company. The Board has developed a vision/mission statement. Overall corporate strategy and significant policies of the Company are under process of approval. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive director, have been taken by the Board. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for the 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. The Chief Executive recommends that members of the Board should approach him, should they feel any necessity to conduct other orientation courses in this regard.

4. 5. 6. 7.

8.

9.

10. The appointment of head of internal audit and his remuneration and terms and conditions have been approved by the Board. 11. The directors' report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board.

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Fazal Textile Mills Limited

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed on the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The Audit Committee comprises of three members including the Chairman. 16. The meeting of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. 17. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan, 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 partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan. 18. 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. 19. We confirmed that all other material principles contained in the Code have been complied with.

Mohammad Sohail Tabba Cheif Executive Officer

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Fazal Textile Mills Limited

REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of FAZAL TEXTILE MILLS LIMITED to comply with the Listing Regulation No. 35 (previously No. 37) of the Karachi and Lahore Stock Exchanges where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls. Further, Sub - Regulation (xiii a) of Listing Regulations 35 notified by the Karachi and Lahore Stock Exchanges vide circular No. KSE/N-269 dated January 19, 2009 requires the Company to place before the Board of Directors for their consideration and approval of related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the Audit Committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, 2011. HYDER BHIMJI & CO. CHARTERED ACCOUNTANTS

Karachi: September. 22, 2011

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Fazal Textile Mills Limited

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of FAZAL TEXTILE MILLS LIMITED as at June 30, 2011 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant statements 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 verification, we report that: a. b. i. in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; in our opinion : the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; the expenditure incurred during the year was for the purpose of the Company's business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984 in the manner so required, and respectively give a true and fair view of the state of the company's affairs as at June 30, 2011 and of the profit, total comprehensive income, its cash flows and changes in equity for the year then ended; and in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) was deducted by the Company and deposited in the central zakat fund established under section 7 of that Ordinance..

ii. iii. c.

d.

Karachi: September. 22, 2011

HYDER BHIMJI & CO Chartered Accountants Engagment Partner Hyder Ali Bhimji

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Fazal Textile Mills Limited

BALANCE SHEET
AS AT JUNE 30, 2011
Note
ASSETS NON-CURRENT ASSETS Property, plant and equipment Long term loans and advances Long term deposits - Security deposits CURRENT ASSETS Stores, spares and loose tools Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Taxation- Net Cash and bank balances TOTAL ASSETS EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorized share capital Issued, subscribed and paid-up share capital Reserves 13 14 15 150,000 61,875 1,581,608 1,643,483 LIABILITIES NON-CURRENT LIABILITIES Deferred gratuity Deferred taxation CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowings Current maturity of long term loan Contingencies and Commitment TOTAL EQUITY AND LIABILITIES The annexed notes from 1 to 40 form an integral part of these financial statements. 16 17 18 19 46,090 42,933 89,023 805,827 21,585 1,710,991 2,538,403 4,270,909 40,802 62,633 103,435 622,182 38,114 564,764 1,000,000 2,225,060 3,679,757 150,000 61,875 1,289,387 1,351,262 3 4 2,565,027 7,707 1,259 2,573,993 57,244 842,611 673,665 66,712 33,966 3,194 9,770 9,754 1,696,916 4,270,909 2,315,376 9,456 532 2,325,364 50,677 408,158 458,638 102,111 27,519 592 7,563 299,135 1,354,393 3,679,757

June 2011 Rs in 000

June 2010

5 6 7 8 9 10 11 12

20

Karachi : September 22, 2011

Chairman

Director

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Fazal Textile Mills Limited

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30, 2011
June June 2011 2010 Rupees 000 5,607,201 5,076,895 530,306 23 24 25 30,240 53,938 21,189 105,367 424,939 Other operating income Operating profit Finance cost Profit before taxation Taxation Profit after taxation Earning per share-basic and diluted (Rupees) 28 27 26 12,018 436,957 43,331 393,626 39,530 354,096 57.23 4,075,778 3,236,667 839,111 48,251 51,064 33,598 132,913 706,198 6,979 713,177 37,385 675,792 51,209 624,583 100.94

Note Sales - net Cost of sales Gross profit Selling and distribution expenses Administrative expenses Other operating expenses 21 22

29

The annexed notes from 1 to 40 form an integral part of these financial statements.

Karachi : September 22, 2011

Chairman

Director

Annual Report 2011

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Fazal Textile Mills Limited

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED JUNE 30, 2011
June June 2011 2010 Rupees 000 Profit after taxation Other comprehensive income Total comprehensive income 354,096 354,096 624,583 624,583

The annexed notes from 1 to 40 form an integral part of these financial statements.

Karachi : September 22, 2011

Chairman

Director

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Fazal Textile Mills Limited

CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2011

June June 2011 2010 Rupees 000

Note CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operation Gratuity paid Finance cost paid Taxes paid Net cash In/(Outflow) from operating activities CASH FLOW FROM INVESTING ACTIVITIES Fixed capital expenditure Capital Work in progress Sale proceeds from fixed assets Repayment of long term loan Net cash In/(Outflow) from investing activities CASH FLOW FROM FINANCIAL ACTIVITIES Payment of dividend Net cash In/(Outflow) from financial activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 31 30

59,351 (9,563) (59,860) (61,437) (71,509)

558,725 (8,882) (41,705) (39,347) 468,791

(10,555) (304,159) 12,140 (1,000,000) (1,302,574)

(14,268) (359,963) 2,190 (372,041)

(61,525) (61,525) (1,435,608) (265,629) (1,701,237)

(9,236) (9,236) 87,514 (353,143) (265,629)

The annexed notes from 1 to 40 form an integral part of these financial statements.

Karachi : September 22, 2011

Chairman

Director

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Fazal Textile Mills Limited

STATEMENT OF CHANGES IN EQUITY

for the year ended June 30, 2011
Rupees in thousand Description Balance as on July 01, 2009 Final Dividend for the year ended June 30, 2009 Transfer to/(from) profit and loss account Total comprehensive income for the year Paidup Capital 61,875 Capital Reserve 34,416 Revenue Reserves 610,584 15,000 Unappropriated Profit 29,085 (9,281) (15,000) 624,583 Total 735,960 (9,281) 624,583

Balance as on June 30, 2010 Final Dividend for the year ended June 30, 2010 Transfer to/(from) profit and loss account Total comprehensive income for the year Balance as on June 30, 2011

61,875 61,875

34,416 34,416

625,584 560,000 1,185,584

629,387 (61,875) (560,000) 354,096 361,608

1,351,262 (61,875) 354,096 1,643,483

The annexed notes from 1 to 40 form an integral part of these financial statements.

Karachi : September 22, 2011

Chairman

Director

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Fazal Textile Mills Limited

Notes to the financial statements

for the year ended June 30, 2011.
1. LEGAL STATUS AND OPERATION: The Company was incorporated on July 6, 1963 as a Private Limited Company under the Companies Act, 1913 (Companies Ordinance, 1984) and was converted into a Public Limited Company on May 04, 1966. The Company is quoted on Karachi and Lahore stock exchanges in Pakistan since 1971. The Company is engaged in manufacturing, selling, buying and dealing in all types of yarn and knitted fabrics. The address of its registered office is LA-2/B, Block 21, Rashid Minhas Road, federal "B" Area, Karachi, Pakistan. 2. 2.1 SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The financial statements have been prepared on historical cost convention except for the recognition of certain staff retirement benefits at present value. 2.2 Statement of Compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984 provisions of and directives issued under the Companies Ordinance, 1984. Wherever, the requirements of the Ordinance or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Ordinance or the requirements of the said directives take precedence. 2.3 Standards and interpretation that became effective but not relevant to the Company There are certain new standards, amendment and International Financial Reporting Interpretations Committee (IFRIC) interpretations that became effective during the year and are mandatory for accounting periods beginning on or after July 1, 2010 but are considered not to be relevant or have any significant effect on the company's operations and are, therefore, not disclosed in these financial statements. IAS 17 IAS 27 IFRS 2 IFRS 3 IFRS 5 IFRS 19 2.4 Leases Consolidated and Separate Financial Statements Share-based Payments-Group cash-settled share-based payment ztransactions Business Combinations Non-current Assets Held for Sale and Discontinued Operations Extinguishing Financial Liabilities with Equity Instruments

Standards and interpretations to published approved accounting standards that are not yet effective

The following revised standards, amendments and interpretations with respect to approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standards or interpretations:

Annual Report 2011

21

Fazal Textile Mills Limited

Standards IAS 1 IAS 12 IAS 19 IAS 24 IFRS 7 IFRS 17 IFRIC 14 Presentation of financial statements-amendment to revise the way other comprehensive income is presented Income tax (amendment)- Deferred taxes: Recovery of underlying assets Employee Benefits - Amended standard resulting from the post- employment benefits and termination benefit project Related Party Disclosures (Revised) Financial instruments: Disclosures- Amendments enhancing disclosures about transfer of financial asset Prepayment of a minimum funding requirements - Amendment Prepayments of Minimum Funding Requirements

Effective date July 01,2012 January 01,2012 January 01,2013 January 01,2011 July 01,2011 January 01,2011 January 01,2011

The Company expects that the adoption of the above revisions, amendments and interpretations of the standards will not have material affect on the Company's financial statements in the period of the initial application. In addition to the above, amendments to various accounting standards have also been issued by the IASB. Such improvements are generally effective for accounting periods beginning on or after January 01, 2011. The Company expects that such improvements to the standards will not have any material impact on the Company's financial statements in the period of initial application. Further , the following new standards have been issued by IASB which are yet to be notified by the Securities and Exchange Commission of Pakistan(SECP) for the purpose of applicability in Pakistan: IASB effective date Annual Periods beginning on or after January 1, 2015 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013

Standards IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13 2.5 FinancialInstruments Consolidated Financial Statements Joint Agreements Disclosure of Interests in Other Entities Fair Value Measurement

Significant accounting judgments and estimates The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the process of applying the company's accounting policies, management has made following estimates and judgments which are significant to the financial statements.

a)

Property, plant and equipment The company has made certain estimation with respect to residual value, depreciation method and depreciable lives of property, plant and equipments. Further, the company reviews the value of assets for possible impairment on each reporting period. Provision for stores and spares The Company has made estimation with respect to provision for slow moving, damaged and obsolete items and their net realizable value.

b)

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Fazal Textile Mills Limited

c)

Staff retirement benefits Certain actuarial assumptions have been adopted as disclosed in note no. 16.4 to these financial statements for valuation of present value of defined benefit obligations. Income Taxes The company takes into account relevant provision of current income tax laws while providing for current and deferred taxes as explained in note 2.6 of these financial statements. Contingencies The assessment of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events cannot be predicted with certainty. The Company based on the availability of the latest information, estimates the value of contingent assets and liabilities which may differ on the occurrence/nonoccurrence of the uncertain future events. Staff retirement benefits The Company operates unfunded gratuity scheme covering all employees eligible to the benefit. The present value of the defined benefit obligation has been determined on the basis of actuarial valuation carried out on the Balance Sheet date. In accordance with the requirements of IAS 19, Employees Benefits, actuarial valuation has been carried out using Projected Unit Credit Actuarial Cost Method. Main valuation assumption used for actuarial valuation was as under : Discount Rate Expected rate on increase in salaries 14.00% per annum. 13.00% per annum

d)

e)

2.6

2.7

Taxation Current Provision for current taxation is based on taxable income at current rates of taxation after taking in to account tax credits available rebate and exemption if any, subject to treatment in respect of tax deducted at source on export as final discharge of tax liabilities. Deferred Deferred tax is provided using the liability method, on all temporary differences at the balance sheet date between the tax assets and liabilities and their carrying values for financial reporting purposes and amount used for taxation purpose. Deferred tax assets and liabilities are measured at the tax rate that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates that have been enacted or substantially enacted at the balance sheet date.

2.8

Foreign currency translation Assets and liabilities in foreign currencies are translated into rupee at the rates of exchange ruling on the balance sheet date except for liabilities covered under forward exchange contracts which are translated at the contract rates. The gain or loss due to the rate fluctuation is adjusted against the plant and machinery acquired under the loan.

2.9

Property, Plant & Equipment These are stated at cost less accumulated depreciation except leasehold land and capital work-in-progress, which are stated at cost. Depreciation is charged at normal tax rates on diminishing balance method. In respect of addition/deletion during the year, depreciation is charged from the month of acquisition and up to the month preceding the disposal respectively.

Annual Report 2011

23

Fazal Textile Mills Limited

Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Gain or loss on disposal of assets is included in income currently. 2.10 Capital Work-in-progress All cost/expenditure connected with the assets, incurred during the implementation period are carried under this head. These are transferred to specific assets as and when assets are available for use. 2.11 Stores, spares, loose tools and packing materials These are valued at cost. Cost is determined on first in first out (FIFO) basis. Adequate provision is made for obsolescence and slow moving items as and when required based on parameters set out by management. 2.12 Stocks These are valued as follows: Raw materials Finished goods Work-in-process Waste - At lower of cost or market value on FIFO basis. - At lower of average cost and net realizable value including portion of related factory overheads. - At average cost of raw material and proportionate manufacturing overheads. - At net realizable value.

2.13 Trade debts and other receivables Trade debts and other receivables are recognized and carried at original invoice amount less any estimated allowance made for doubtful receivables based on review of outstanding amount at the year end. Balances considered irrecoverable are written off as and when identified. 2.14 Cash and Cash equivalent Cash and cash equivalent are carried in the balance sheet at cost. For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term highly liquid investments and bank overdraft in the balance sheet, bank overdrafts are included in borrowing in current liabilities. 2.15 Revenue Recognition Sales are recorded on dispatch of goods to customers; Rental Income is recognized as and when earned on annual basis; and Income of deposits is recognized on receipt basis. 2.16 Financial instruments All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured as fair value or cost, as the case may be. 2.17 Employees Leave Entitlement Employees' entitlements to annual leaves are recognized when they accrue to employee. A provision is made for the estimated liability as a result of services rendered by employees up to the balance sheet date.

24

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Fazal Textile Mills Limited

2.18 Borrowing Cost Borrowing costs incurred on finances obtained for the construction/installation of qualifying assets are capitalized up to date the respective assets are available for the intended use. All other mark-up, interest and other related charges are taken to the profit and loss account currently. 2.19 Provisions Provisions are recognized when the company has a present legal or constructive obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 2.20 Impairment of Assets The company reviews the value of assets for possible impairment on each reporting period. If such indication exist, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amounts and impairment losses are taken to profit and loss account. 2.21 Dividend Dividend distribution to the company shareholders' is recognized as a liability in the company's financial statements in the period in which the dividends are approved. 2.22 Related Party Transactions Transactions and contracts with related party are carried out at arms length prices determined in accordance with comparable uncontrolled price method. 2.23 Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if the Company has a legally enforceable right to set-off the recognized amounts and the Company intends to settle either on a net basis or realize the assets and settle the liability simultaneously. 2.24 Functional and Presentation Currency These financial statements are presented in Pakistani Rupees which is the Company's functional and presentation currency. June 2011 3 PROPERTY, PLANT AND EQUIPMENT Operating Fixed Assets Capital Work in Progress 3.1 3.2 575,075 1,989,952 2,565,027 June 2010

Rs 000

629,583 1,685,793 2,315,376

Annual Report 2011

25

Fazal Textile Mills Limited

3.1

OPERATING FIXED ASSETS - TANGIBLE (Rs in 000) Particulars Cost as on 01-07-2010 6,591 31,250 171,389 1,376,723 7,488 5,172 2,158 27,586 8,418 1,636,775 1,625,504 Additions (Deletions) Cost Accumulated Written down Depreciation Rate as on depreciation book value for the % 30-06-2011 30-06-2011 30-06-2011 period 6,591 31,250 171,389 27,816 76,101 896,258 6,522 3,661 1,908 14,447 7,856 6,591 3,434 95,288 451,998 966 2,104 250 13,250 1,194 575,075 629,583 382 5,015 50,211 107 197 28 2,714 477 59,131 63,947 10 5 10 10 10 10 20 33

Land (lease hold) Main factory building (on lease hold land) Other factory buidling (on lease hold land) Plant & machinery Testing equipment, scales and weighments Office equipments Furnitures & fixtures Vehicles Computer equipments Total June 2011 Total June 2010

4,504 1,348,256 (32,971) 593 4,826 (4,715) 632 7,488 5,765 2,158 27,697 9,050

10,555 1,609,644 1,034,569 (37,686) 14,268 1,636,775 (2,997) 1,007,192

3.1.1

Depreciation charge for the year has been allocated as follows : June 2011 June 2010

Rs 000

Cost of sales Administrative expenses

55,715 3,416 59,131

61,343 2,604 63,947

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Fazal Textile Mills Limited

3.1.2 Disposal of operating fixed assets. Particulars Motor Vehicle Motor Vehicle Motor Vehicle Motor Vehicle Motor Vehicle Motor Vehicle Motor Cycle Motor Vehicle Motor Vehicle Plant & Machinery Plant & Machinery Plant & Machinery Total June 2011 Total June 2010 Sold to New Jubilee Insurance Co. Karachi New Jubilee Insurance Co. Karachi Anus Auto Workshop. Karachi Ghulam Hyder Karachi Tahir Saleem Karachi Suleman Joya Karachi New Jubilee Insurance Co. Karachi Syed Nasir Ali Karachi Muhammad Amin Karachi Tex Machines Int. Ltd. Dubai Gaddon Textile Mills Ltd. Gadoon Amazai. Gulf Textile Machine FZS, Dubai.

(Rs in 000)

Cost
817 207 560 499 885 847 77 469 355 23,138 2,281 7,551 37,686 2,997

Accumulated depreciation 724 204 465 399 629 611 6 447 258 20,006 1,511 6,493 31,753 2,419

Book value 93 3 95 100 256 236 71 22 97 3,132 770 1,058 5,933 578

Sale proceeds 1,000 215 415 364 620 593 73 333 302 4,268 1,000 2,957 12,140 2,190

Mode of disposal Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation

June 2011 3.2 CAPITAL WORK IN PROGRESS Karachi Project Nooriabad Project 3.2.1 3.2.2 958,890 1,031,062 1,989,952

June 2010

Rupees in 000

843,662 842,131 1,685,793

Annual Report 2011

27

Fazal Textile Mills Limited

June 2011 3.2.1 KARACHI PROJECT Opening Balance Expenses For The Year Borrowing Cost Capitalized Closing Balance

June 2010

Rupees in 000 843,662 65,821 49,407 958,890 633,472 146,409 63,781 843,662

3.2.1.1This represents commercialization, development and other charges of land situated at the existing premises for the purpose of construction of shopping mall/residential towers. 3.2.2 NOORIABAD PROJECT Opening balance Expenses for the year Addition during the year Closing balance 842,131 188,931 1,031,062 692,343 63,781 86,007 842,131

[Link]

[Link] Additions represents plant & machinery and buildings. Expenses will be capitalized proportionately between plant & machinery and building at the end of project. 4 LONG TERM LOANS AND ADVANCES (Unsecured - Considered Good) Loan to Executives Loan to Employees Current maturity of long term loans and advances 4.1 Loan to executives Opening balance Addition during the year Recovery during the year Closing balance 4.2 4.3 5 4.1, 4.2 & 4.3 4.2 12,683 10,089 22,772 (15,065) 7,707 5,787 9,662 15,449 (2,766) 12,683 5,787 9,775 15,562 (6,106) 9,456 6,204 3,100 9,304 (3,517) 5,787

These interest free loans represent for house assistance, medical expenses and support for children marriage and are repayable within 3 years. The maximum amount due from Executive at the end of any month during the year was Rs 11.368 million (2010 : Rs 6.305 million) STORES, SPARES AND LOOSE TOOLS Stores Spares Loose tools Packing material Less : Provision for slow moving items 12,781 37,503 335 6,625 57,244 1,977 55,267 10,500 35,836 241 6,077 52,654 1,977 50,677

28

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Fazal Textile Mills Limited

June 2011

June 2010

Rupees in 000 5.1 Movement of provision for slow moving items: Opening balance Provision during the year Closing balance 6 STOCK IN TRADE Raw material Work in process Finished goods 7 TRADE DEBTS Considered good Export - secured against L/C Local - unsecured Considered doubtful Against Local sales - unsecured Less: Provision for impairment of trade debts 7.1 Provision for impariment of trade debts: Opening balance Provision during the year Closing balance 7.2 7.3 8 4,248 4,248 4,248 4,248 7.1 478,322 39,280 325,009 842,611 220,462 10,090 177,606 408,158 1,977 1,977 1,977 1,977

547,926 125,739 673,665 4,248 677,913 4,248 673,665

407,760 50,878 458,638 4,248 462,886 4,248 458,638

Trade debts includes amount of Rs 15.348 million (2010: Rs 4.021 million) due from related parties. The maximum amount due to related parties at the end of any month during the year was Rs. 320.548 million (2010 : Rs. 243.783 million) . LOANS AND ADVANCES Considered good Current maturity of long term loans and advances Advances to suppliers 15,065 51,647 66,712 6,106 96,005 102,111

Annual Report 2011

29

Fazal Textile Mills Limited

June 2011 9 TRADE DEPOSIT AND SHORT TERM PREPAYMENTS Security deposits Sales tax refundable 10 OTHER RECEIVABLES Sale of assets Insurance claim receivable Central excise duty 11 TAXATION - Net Income tax refundable at beginning Add : Paid / Deducted in advance Less : Provision for the year Provision for prior years 28.2 7,563 61,437 69,000 59,230 (59,230) 9,770

June 2010

Rupees in 000 23,061 10,905 33,966 3,189 5 3,194 12,937 14,582 27,519 233 354 5 592

824 39,347 40,171 42,140 (9,532) (32,608) 7,563

11.1 12

The income tax assessment of the company has bees finalised up to and including tax year 2010 corresponding to income year June 2010. CASH AND BANK BALANCES Cash in hand Balance with bank in : Current Account Deposits Account 763 8,984 7 8,991 9,754 881 298,248 6 298,254 299,135

13

AUTHORIZED CAPITAL 15,000,000 Ordinary shares of Rs 10/- each 150,000 150,000

14

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 4,579,094 Ordinary shares of Rs 10/- each fully paid issued for cash. 1,608,409 Ordinary shares of Rs 10/- each issued as fully paid bonus shares 45,791 16,084 61,875 45,791 16,084 61,875

14.1

Out of the total share capital of the Company, associated undertaking held 1,142,711 (2010 : 1,142,711) ordinary shares of Rs 10/- each as at June 30, 2011.

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Fazal Textile Mills Limited

June June 2011 2010 Rupees in 000 15 RESERVES Capital Reserve Share premium Revenue Reserve General Reserve Opening balance Transfer from profit & loss account Unappropriated profit 16 DEFERRED GRATUITY (Staff retirement benefit) As mentioned in Note 2.6 the company operates an unfunded gratuity scheme for all its permanent employees. Actuarial valuation of scheme is carried out and the latest actuarial valuation was carried out as at June 30, 2011. The fair value of scheme's assets and the present value of obligation under the scheme at balance sheet date were as follows: 16.1 Reconciliation of Payable to / (Receivable from) Defined Benefit Plan Present Value of Defined Benefit Obligation Net Actuarial Gains/(Losses) not recognized Net Liability For Gratuity Movement in Net Liability Opening Net Liability Expenses/(Income) for the year Benefit paid Closing Net Liability Charge for / (Income from) the Defined Benefit Plan Current service cost Interest cost Actuarial Assumptions: Valuation Discount Rate Salary Increase Rate 39,151 6,939 46,090 40,802 14,851 (9,563) 46,090 10,160 4,691 14,851 14.00% 13.00% 40,870 (68) 40,802 38,796 10,888 (8,882) 40,802 8,928 1,960 10,888 13.00% 11.00% 34,416 34,416

625,584 560,000 1,185,584 361,608 1,581,608

610,584 15,000 625,584 629,387 1,289,387

16.2

16.3

16.4

16.5 16.6

Since the gratuity is unfunded therefore no plan assets are recognized and no contributions as a consequence are made. The unrecognized actuarial gains and losses are recognized in accordance with the directions of IAS 19 that is when they exceed the corridor and ceiling limit.

Annual Report 2011

31

Fazal Textile Mills Limited

June 2011

June 2010

Rupees in 000 17 DEFERRED TAXATION Opening Balance Expense / ( Income ) for the year Closing Balance 18 TRADE AND OTHER PAYABLES Trade creditors Accrued expenses Advance from customers Unclaimed dividend Workers profit participation fund Workers Welfare Fund Advances from employees under vehicle scheme 18.1 18.2 72,523 421,893 287,118 2,173 20,835 1,285 805,827 49,896 363,745 170,710 1,823 33,598 558 1,852 622,182 62,633 (19,700) 42,933 44,032 18,601 62,633

18.1 18.2 18.3

Includes amount due to related parties Rs 283.238 million (2010 : Rs 170.710 million) Workers Profit Participation Fund Opening balance Allocation for the year Add : Markup provided during the year Less : Payments during the year Closing balance 33,598 20,835 2,235 23,070 56,668 35,833 20,835 2,538 33,598 116 33,714 36,252 2,654 33,598

18.3

This amount represents the accumulation of monthly installments adjustable after a specified period against vehicles to be disposed under vehicle scheme. SHORT TERM BORROWINGS - Secured Running finances under mark-up arrangements Export Finance and Import bills 19,350 1,691,641 1,710,991 43,827 520,937 564,764

19

19.1 19.2 19.3 19.4

The markup on bank finances is payable on quarterly basis at rates ranging from 8.50% to 14.00%. (2010 : 7.50% to 14.00%) The overall limit of Rs 3.105 billion ( 2010 : 3.105 billion ) applies on running, export pre/post shipment finances. The carrying amount of inventories and book debts hypothecated as security for the bank borrowings is Rs 1.731 billion ( 2010 : 0.908 billion) The above finances are secured by first parri passu hypothecation charge over stock and book debts of the company. Lien on Export documents and import documents duly accepted bill of discount.

32

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Fazal Textile Mills Limited

June 2011 20 CONTINGENCIES AND COMMITMENTS Guarantees and counter guarantees Letter of credits 20.1 118,528 132,606 251,134

June 2010

Rupees in 000 49,446 1,098,027 1,147,473

The Company has made a reference in the Honorable High Court of Sindh at Karachi u/s 133(i) of the Income Tax Ordinance, 2001 against rejection of loss of Rs 1,461,000 by the Appellate Tribunal vide M.A (Rect) No 402/KB/2005 dated January 25, 2006 for the assessment year 2002-03. The case is pending before Court for adjudication. SALES - Net Export Local Export rebate Research & Development Support Gross sales Less : Export freight Export duty and surcharge Commission 3,700,027 2,078,269 932 4,535 5,783,763 91,572 8,570 76,420 176,562 5,607,201 2,890,868 1,381,290 1,318 5,132 4,278,608 113,367 5,680 83,783 202,830 4,075,778

21

22

COST OF SALES Raw material consumed Opening inventory Purchases Available for consumption Closing inventory Raw material consumed Manufacturing expenses Stores, spares and packing Salaries, wages & other benefits Power and electricity Knitting, dyeing and printing expenses Insurance Repair and maintenance Labor welfare Depreciation Other manufacturing expenses Work in process - opening inventory Work in process - closing inventory Cost of goods manufactured Finished goods - opening inventory Available for sales Finished goods - closing inventory

220,462 4,475,600 4,696,062 (478,322) 4,217,740 200,557 257,472 349,788 146,444 3,128 16,805 4,504 55,715 1,335 1,035,748 5,253,488 10,090 (39,280) (29,190) 5,224,298 177,606 5,401,904 (325,009) 5,076,895

362,207 2,241,225 2,603,432 (220,462) 2,382,970 154,309 216,102 324,485 123,345 2,914 13,259 3,935 61,344 2,826 902,519 3,285,489 5,354 (10,090) (4,736) 3,280,753 133,519 3,414,272 (177,605) 3,236,667

22.1

22.1

This includes Rs 13.630 million in respect of staff retirement benefits (2010 : 10.886 million)

Annual Report 2011

33

Fazal Textile Mills Limited

June 2011 23 SELLING AND DISTRIBUTION EXPENSES Forwarding and other selling expenses 24 ADMINISTRATIVE EXPENSES Salaries, wages & other benefits Postages, telegram and telephone Printing and stationery Fees and subscriptions Traveling and conveyance Entertainment Rent, rates and taxes Motor car expenses Insurance Legal and professional charges Auditors' remuneration Advertisements Donations Depreciation Other expenses 24.1 24.2 24.1 23,078 3,558 3,739 679 5,570 1,897 758 3,500 407 841 639 286 4,843 3,416 727 53,938 30,240 30,240

June 2010

Rupees in 000

48,251 48,251

24.2 24.3

16,462 3,130 5,354 705 8,703 1,851 726 2,850 752 1,725 415 85 752 2,604 4,950 51,064

This includes Rs 1.221 million in respect of staff retirement benefits ( 2010 : Rs 1.577 million) Auditors' remuneration Audit fee Half Yearly Review fee Other certification 500 60 79 639 300 60 55 415

24.3 25

None of the directors and their spouses had any interest in the donees fund. OTHER OPERATING EXPENSES Workers profit participation fund Insurance cliam receivable (Written off ) 20,835 354 21,189 33,598 33,598

26

OTHER OPERATING INCOME Income from financial assets Profit on bank deposits Income from non-financial assets Gain on sale of fixed assets Miscellaneous income Doubling charges Reversal of provision 2,011 6,207 781 2,461 558 12,018 1,611 781 4,587 6,979

26.1

26.1

As per judgement of lahore high court vide case no. [Link].8763/2011 against notice dated 14-06-2011 regarded WWF declared unconstitutional.

34

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Fazal Textile Mills Limited

June 2011 27 FINANCIAL COST Markup on short term finance Interest on workers profit participation fund Bank charges and commission 28 28.1 TAXATION Current Tax - for the year - for the prior years Deferred 28.2 The charge for the year is as under. Tax charge on direct exports Tax charge on indirect exports Tax charge on local turnover treated as exports Tax charge on Other income not falling under P .T.R 29 EARNING PER SHARE Profit after taxation (Rs in "000") Weighted average number of ordinary shares Earning per share (Rs) 29.1 30 There is no dilutive effect on the basic earnings per shares of the Company. CASH GENERATED FROM OPERATION Profit before taxation Adjustment for non cash charges : Depreciation Provision for slow moving items Provision for doubtful debts Profit on sale of fixed assets Provision for gratuity Finance cost Long term loans and advances Long term deposits Changes in working capital 393,626 59,131 (6,207) 14,851 67,775 43,331 1,749 (727) (446,403) 59,351 354,096 6,187,503 57.23 35,745 10,132 10,651 2,702 59,230 28.2 17 59,230 59,230 (19,700) 39,530 23,737 2,235 17,359 43,331

June 2010

Rupees in 000

27,550 116 9,719 37,385

42,140 (9,532) 32,608 18,601 51,209

26,158 7,577 6,236 2,169 42,140

624,583 6,187,503 100.94

675,792 63,947 1,977 4,248 (1,611) 10,888 79,449 37,385 (243) (233,658) 558,725

30.1

Annual Report 2011

35

Fazal Textile Mills Limited

June 2011 30.1 Changes in working capital (Increase)/Decrease in current assets Stores, spares and loose tools Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivable Increase/(Decrease) in current liabilities Trade and other payables Net Increase/(decrease) in working capital 31 CASH AND CASH EQUIVALENTS Cash & cash equivalent comprise the following items as included in the balance sheet Cash and bank balances Short term borrowing 32 TRANSACTION WITH REALTED PARTIES 9,754 (1,710,991) (1,701,237) (6,567) (434,453) (215,027) 35,399 (6,447) (2,602) (629,697) 183,294 (446,403)

June 2010

Rupees in 000

(9,576) 92,922 (258,885) 4,298 (19,474) (587) (191,302) (42,356) (233,658)

299,135 (564,764) (265,629)

Related parties comprise of associated company, directors of the Company, companies in which directors also hold directorship, related group companies and key management personnel. Significant balances and transactions with related parties are as follows: Nature of Transaction Sale of Goods and Providing of Services Lucky Knits (Pvt) Ltd. Lucky Textile Mills Ltd. Gadoon Textile Mills Ltd. Younus Textile Mills Ltd. Purchase of Goods and Receipt of Services Lucky Cement Ltd. Lucky Textile Mills Ltd. Gadoon Textile Mills Ltd. Lucky Knits (Pvt) Ltd. Lucky Energy (Pvt) Ltd. Rent, Allied and Other Charges Received Lucky Energy (Pvt) Ltd. Benefits to key management personnel Long term loans to executives Bonus and earned leaves Dividend Paid Lucky Energy (Pvt) Ltd. 278,124 130,153 1,000 571,742 981,019 13,323 407,100 24,094 346,615 791,132 781 9,662 2,938 11,114 223,046 105,479 576 236,815 565,916 4,768 85 339,854 33,711 320,702 699,120 781 3,100 1,404 1,667

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Fazal Textile Mills Limited

32.1 32.2

All material transactions with associated undertaking are at arm's length. The maximum amount due to related parties at the end of any month during the year was Rs 320.548 million (2010 : Rs 243.783 million) June 2011 June 2010

33

CAPACITY AND ACTUAL PRODUCTION SPINNING Total numbers of spindles at the end of the year Average number of spindles worked Capacity after conversion into 20's (lbs) Production after conversion into 20's (lbs) KNITTING Total number of knitting machines installed Average number of days worked Installed capacity (kgs) Actual production (kgs)

Rupees in 000 59,160 59,150 48,990,026 48,798,460 59,160 59,150 48,990,026 48,858,410

12 228 1,485,000 1,025,942

12 202 1,485,000 916,961

The under utilization of capacity is due to normal maintenance and shut down. It is difficult to describe precisely the production capacity in textile spinning industry, since it fluctuates widely depending on various factors such as count spun, spindles speed, twist and type of raw material. 34 REMUNERATION TO CHIEF EXECUTIVE, DIRECTORS & EXECUTIVES June 2011 June 2010 CHIEF EXECUTIVES CHIEF EXECUTIVES EXECUTIVE EXECUTIVE Rupees in 000 Remuneration House rent Bonus/leaves encashment Utilities 1,000 400 100 1,500 Number of persons 1 6,220 2,488 2,938 622 12,268 9 1,000 400 100 1,500 1 4,935 1,974 1,404 493 8,806 10

Chief Executive and other executives are provided company maintained car and security guards. No meeting fee and remuneration is paid to any director.

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Fazal Textile Mills Limited

35

FINANCIAL INSTRUMENTS BY CATEGORY FINANCIAL RISK MANGEMENT OBJECTIVES The Company finance its operations through equity, borrowings and management of working capital with a view to maintaining an appropriate mix between various sources of finance to minimize risk. Taken as a whole, risk arising from the Company's financial instruments is limited as there is no significant exposure to price and cash flow risk in respect of such instruments. June 2011 FINANCIAL ASSETS Long term loans and advances Long term deposits Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Cash and bank balances FINANCIAL LIABILITIES Trade and other payables Accrued mark-up Short term borrowing Current maturity of long term loan June 2010 Rupees in 000 7,707 1,259 673,665 66,712 33,966 3,194 9,754 796,257 813,929 21,585 1,710,991 2,546,505 9,456 532 458,638 102,111 27,519 592 299,135 897,983 622,182 38,114 564,764 1,000,000 2,225,060

36

FINANCIAL INSTRUMENT AND RELATED DISCLOSURE The Company's activities expose it to a certain financial risks: - Credit risk - Liquidity risk - Market risk (including currency risk, interest rate risk and other price risk) The Company's overall risk management programmes focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance. Risk management is carried out by the Treasury Sub Committee (the Committee) of the Executive Committee (EXCO) of the Board of Directors (the Board) under policies approved by the board. The Board provides written principles for overall risk management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity. All treasury related transactions are carried out within the such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity. All treasury related transactions are carried out within the such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity. All treasury related transactions are carried out within the parameters of these policies.

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Fazal Textile Mills Limited

36.1

Credit risk and concentration of credit risk Credit risk represents the financial loss that would be recognized at the reporting date if counter parties failed completely to perform as contracted. The Company manages credit risk interalia by limiting significant exposure to any customers and by obtaining advance against sales and also obtains collaterals, where considered necessary. Also the company does not have significant exposure in relation to individual customer. Consequently, the Company believes that it is not exposed to any major concentration of credit risk. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to customers, including trade receivables and committed transactions. Out of the total financial assets of Rs. 796,611 thousand (2010: Rs.897,983 thousand) the financial assets that are subject to credit risk amounted to Rs.795,494 thousand (2010: Rs. 897,102 thousand). The maximum exposure to credit risk as at June 30, 2011, along with comparative is stated below:

June 2011 FINANCIAL ASSETS Long term loans and advances Long term deposits Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Bank balances

June 2010

Rupees in 000 7,707 1,259 673,665 66,712 33,966 3,194 8,991 795,494 The bank balances along with credit ratings are stated below: Credit ratings AAA AA+ AA AAA+ 559 7,505 752 152 23 8,991 547 296,230 1,288 160 29 298,254 9,456 532 458,638 102,111 27,519 592 298,254 897,102

Due to strong business relationship with these counterparties since long whereas giving due consideration to their financial soundness the management does not expect non-performance by these counter parties on their obligations to the company.

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Fazal Textile Mills Limited

36.2

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The management forecasts liquidity risks on the basis of expected cash flow considering the level of liquid assets necessary to meet such risk. This involves monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans. Financial liabilities in accordance with their contractual maturities are presented below:
Rupees in 000 Interest / Mark-up bearing Financial liabilities Maturity upto one year Maturity Sub-total after one year Non-Interest / Mark-up bearing Maturity upto one year Maturity after one year Sub-total Total June 2011 Total June 2010

Trade and other payable Accrued markup Short term borrowings 1,710,991 Current Maturity of long term loan 1,710,991
Off Balance Sheet Item Maturity upto one year

1,710,991 1,710,991

813,929 21,585 835,514

Maturity upto one year

Maturity after one year

813,929 21,585 835,514

Sub-total

813,929 21,585 1,710,991 2,546,505

Total June 2011

622,182 38,114 564,764 1,000,000 2,225,060

Total June 2010

Interest / Mark-up bearing Maturity Sub-total after one year

Non-Interest / Mark-up bearing

Guarantees and counter guarantees Letter of Credits

132,606 132,606

118,528 118,528

118,528 132,606 251,134

118,528 132,606 251,134

49,446 1,098,027 1,147,473

The effective interest/markup rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements. 36.3 Market Risk

36.3.1 Foreign exchange risk management Foreign exchange risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign exchange risk arise mainly from future economic transactions or receivables and payables that exist due to transaction in foreign exchange. The Company is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the US Dollar (USD) and Euro. Currently, the Companys foreign exchange risk exposure is restricted to the amount receivable / payable from / to the foreign entities and outstanding letters of credit.

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Fazal Textile Mills Limited

36.3.2 Price risk Price risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer. The Company is not exposed to equity price risk since there are no investment in equity securities. The Company is also not exposed to commodity price risk since it has a diverse portfolio of commodity supplier. 36.3.3 Interest / Markup rate risk management Interest / Markup rate risk arises from the possibility of changes in Interest / Markup rates which may effect the value of financial instruments. As at June 30, 2011 the company's financial instruments mainly affected due to changes in the interest rates are short term borrowings the most of which are associated with kibor rates the fluctuations in which are not considered as material by management, therefore no any special efforts are made by management in this area. 36.4 Fair value of Financial Assets and liabilities The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair value except those which are described in policy notes.. 37 CAPITAL RISK MANAGEMENT The Company's objective when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefit for other shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust capital structure, the company may adjust the amount of dividend paid to shareholders, return capital to shareholders or issue new shares or sell assets to reduce debt. Consistent with others in industry , the company manages its capital risk by monitoring its debt levels and liquid assets and keeping in view future investment requirements and expectations of shareholders. During 2011 the companys strategy was to maintain gearing. The gearing ratio as at june 30, 2011 and 2010 were as follows: June 2011 Total borrowings Cash and bank Net debt / (cash) Total equity Total capital 1,710,991 (9,754) 1,701,237 1,773,957 3,475,194 Gearing ratio 49% 1,564,764 (299,135) 1,265,629 1,351,262 2,616,891 48% June 2010

Rupees in 000

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Fazal Textile Mills Limited

38

PROPOSED DIVIDEND AND APPROPRIATION OF PROFIT The Board of Directors at their meeting held on September 22, 2011 have proposed a cash dividend of Rs. 6/- per share (2010 : Rs 10/- per share ) for the year ended June 30, 2011, amounting to Rs.37.125 million ( 2010 : Rs. 61.875 million ), and transfer to general reserve of Rs. 300 million ( 2010 : Rs 560/million ) subject to the approval of members at the annual general meeting to be held on October 25, 2011.

39

DATE OF AUTHORIZATION FOR ISSUE The financial statements were authorized for issue by the Board of Directors on September 22, 2011.

40

GENERAL Figures have been rounded off to the nearest thousand rupees.

Karachi : September 22, 2011

Chairman

Director

Statement u/s 241 (2) of the Companies Ordinance 1984 The financial statements have not been authenticated by the Chief Executive as he is presently out of Pakistan.

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Fazal Textile Mills Limited

FORM OF PROXY
The Company Secretary FAZAL TEXTILE MILLS LTD. LA-2/B Block # 21, Rashid Minhas Road, Federal B Area, Karachi - 75950. I / We ____________________________________________________________________________________ of ___________________________________________________________________________(full address) being a member of FAZAL TEXTILE MILLS LTD. hereby appoint _________________________________ of ___________________________________________________________________________(full address) or failing him _____________________________________________________________________________ of ___________________________________________________________________________(full address) another member of the Company to attend and vote for me / us and on my / our behalf at the 49th Annual General Meeting of the Company to be held on October 25, 2011 at 11:00 Hrs and at any adjournment thereof. As witness my / our hand this ____________________ day of _________________________ 2011. Witness No.1 Name Address Rs.5/Revenue Stamp

NIC No. Witness No. 2 Name Address NIC No. Folio No

Signature of Member(s)

(Name in Block letters) Participant ID No Account No. in CDS

Important: 1. A member entitled to attend a General Meeting is entitled to appoint a proxy to attend and vote instead of him / her. No person shall act as a Proxy (except for a corporation) unless he / she is entitled to be present and vote in his / her own right. 2. Members are requested: (a) to affix Revenue Stamp of Rs. 5/- at the place indicated above. (b) to sign across the Revenue Stamp in the same style of signature as is registered with the Company. (c) to write down their Folio Numbers/Participant ID Numbers/Account Numbers in CDS(as applicable) at the place indicated above. 3. The instrument appointing a proxy, together with the Board of Directors' resolution / Power of Attorney (if any) under which it is signed or a notarially certified copy thereof, should be deposited at the Registered Office not less than 48 hours before the time for holding the meeting. 4. CDC Account Holders are requested to strictly follow the guidelines mentioned in Circular No.1 dated January 26, 2000 of SECP. 5. CDC Account Holders or their proxies are each requested to attach an attested photocopy of their National Identity Card or Passport to this proxy form when submitting the same to the Company.

Annual Report 2011

FAZAL TEXTILE MILLS LIMITED

LA-2/B Block-21, Rashid Minhas Road, Fedral B Area, Karachi, Pakistan. Tel : (92-21) 36321311 Fax : (92-21) 36313372 Email : finance@[Link] [Link]