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NAGINA COTTON MILLS LTD.

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ANNUAL REPORT 2012

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CONTENTS

Company Information

Notice of Annual General Meeting

Vision and Mission Statement

Directors’ Report to the Members

Statement of Compliance with the Code of Corporate Governance

Shareholders’ Information

Notice u/s 218 of the Companies Ordinance, 1984

Pattern of Shareholding

Key Financial Information

Auditors’ Review Report to the Members on Statement of Compliance with

Best Practices of the Code of Corporate Governance

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

Form of Proxy

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COMPANY INFORMATION

Non-Executive Director / ChairmanNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorExecutive DirectorExecutive DirectorExecutive Director

Chairman

Member

Member

Secretary

ChairmanMemberMemberSecretary

Chairman MemberMemberMember

BOARD OF DIRECTORS

MANAGING DIRECTOR (Chief Executive)

AUDIT COMMITTEE

HUMAN RESOURCE & REMUNERATION (HR & R) COMMITTEE

EXECUTIVE COMMITTEE

CORPORATE SECRETARY

CHIEF FINANCIAL OFFICER (CFO)

AUDITORS

LEGAL ADVISOR

LEAD BANKERS

REGISTERED OFFICE

WEB REFERENCE

SHARE REGISTRAR

MILLS

Mr. Shaikh Enam EllahiMr. Javaid Bashir SheikhMr. Shahzada Ellahi ShaikhMr. Shafqat Ellahi ShaikhMr. Shaukat Ellahi ShaikhMr. Iftikhar Taj MianMr. Munawar Iqbal

Mr. Shaukat

Ellahi Shaikh

Mr. Shafqat Ellahi ShaikhMr. Shaikh Enam Ellahi Mr. Shahzada Ellahi Shaikh

Mr. Iftikhar Taj Mian

Mr. Shafqat

Ellahi ShaikhMr. Shahzada

Ellahi ShaikhMr. Iftikhar Taj Mian

Mr. Muhammad Azam

Mr. Shaikh Enam EllahiMr. Shahzada Ellahi ShaikhMr. Shaukat Ellahi ShaikhMr. Shafqat Ellahi Shaikh

Mr. Iftikhar Taj Mian

Mr. Tariq Zafar Bajwa

Messrs M. Yousuf Adil Saleem & Co.Chartered Accountants

Makhdoom & Makhdoom Advocates

Albaraka Bank (Pakistan) Ltd. Allied Bank Ltd. Askari Bank Ltd.

Bank Alfalah Ltd. Barclays Bank PLC, Pakistan

Faysal Bank Ltd.

Habib Bank Ltd.

Habib Metropolitan Bank Ltd.

HSBC Bank Middle East Ltd.

Industrial Development Bank of PakistanMCB Bank Ltd.

National Bank of Pakistan

Samba Bank Ltd.Standard Chartered Bank (Pakistan) Ltd.The Bank of Punjab

United Bank Ltd.

2nd Floor, Shaikh Sultan Trust Bldg. No.226, Civil Lines, Beaumont Road,Karachi -

75530

www.nagina.com

M/s Hameed Majeed Associates (Pvt.) Ltd. 5th

Floor, Karachi Chambers,

Hasrat Mohani Road,

Karachi. Phone # 021-32412754, 32424826Fax # 021-32424835

Aminabad, A-16, S.I.T.E.,National Highway, Kotri

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NOTICE OF ANNUAL GENERAL MEETING

th45 Annual General Meeting of NAGINA COTTON MILLS LTD. will be held at the Registered Office of the Company, 2nd Floor, Shaikh Sultan Trust Bldg. No. 2, 26, Civil Lines, Beaumont Road, Karachi - 75530 on Tuesday, October 30, 2012 at 3:00 p.m., to transact the following business:-

th1) To confirm minutes of the 44 Annual General meeting held on October 28, 2011.

2) To receive and adopt audited accounts of the Company for the year ended on June 30, 2012 together with the Directors' and Auditors' reports thereon.

3) To approve Dividend as recommended by the Directors. 4) To appoint auditors and fix their remuneration.

5) To transact any other ordinary business with the permission of the Chair.

Statement under Section 160 of the Companies Ordinance, 1984 is annexed.

By Order of the Board

Iftikhar Taj MianCorporate Secretary September 27, 2012

NOTES:

1. The share transfer books for ordinary shares of the Company will be closed from Wednesday, October 24, 2012 to Tuesday, October 30, 2012 (both days inclusive). Valid transfer(s) received in

th order by our Share Registrar, M/s Hameed Majeed Associates (Pvt.) Limited, 5 Floor, Karachi Chambers, Hasrat Mohani Road, Karachi by the close of business on Tuesday, October 23, 2012 will be in time to be passed for payment of Dividend to the transferee(s).

2. A member entitled to attend and vote at the general meeting is entitled to appoint another member as proxy. Proxies, in order to be effective, must be received at the Company's registered office not less than forty eight (48) hours before the time of meeting. Members through CDC appointing proxies must attach attested copy of their Computerised National Identity Card (CNIC) with the proxy form.

3. The Shareholders through CDC, who wish to attend the Annual General Meeting are requested to please bring, original CNIC with copy thereof duly attested by their Bankers, Account number and Participant I.D number for identification purpose.

4. In case of corporate entity, certified copy of the Board of Directors' resolution / power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form of the Company.

5. Members who have not yet submitted photocopy of their CNIC are requested to send the same to the Share Registrar of the Company.

6. Shareholders are requested to promptly notify the Company of any change in their registered address.

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Statement under Section 160of the Companies Ordinance, 1984

In compliance with The Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012

Members had approved a special resolution u/s 208 of the Companies Ordinance, 1984 on October 28, 2009. The Company has not made any investment under the resolution. The following is the status:

a. Total investment approved.

Rs. 75,000,000/= (Rupees seventy five million only) to each of the following Associated Company:

i) Ellcot Spinning Mills Ltd. (ESML) ii) Prosperity Weaving Mills Ltd. (PWML)

b. Amount of investment made to date.

Nil

c. Reason for not having made complete investment so far where resolution required it to be implemented in specified time.

Due to better cash flows, the Associated Companies did not need funds envisaged u/s 208 of the Companies Ordinance, 1984. Therefore, no investment transaction took place during the year 2011-12.

d. Material change

in financial statements of associated company or associated undertaking since date of the resolution passed for approval of investment in such company.

Present Financial Position as

on June 30, 2012

Financial Position at the time of Approval as

on June 30, 2009

PWML ESML PWML ESMLRupees in Millions

Net sales 5,382.23 4,025.29 3,634.559 2 441.020

Gross Profit 374.69 432.74 368.861 273.099

Profit before tax 108.17 200.01 108.120 5.254

Profit after tax 77.52 146.40 83.902 0.997

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Vision:

To strive for excellence through commitment, integrity, honesty and team work.

Mission:

The mission of company is to operate state of the art spinning machinery capable of producing high quality carded and combed, cotton, core spun and blended yarn for knitting and weaving.

The company will conduct its operations prudently assuring customer satisfaction and will provide profits and growth to its shareholders through;

ØProviding quality products and services to our customers mainly engaged in the manufacturing of textile products.

ØManufacturing of cotton, core spun and blended yarn as per the customers' requirements and market demand.

ØExploring the global market with special emphasis on Europe and USA.

ØKeeping pace with the rapidly changing technology by continuously balancing, modernization and replacement (BMR) of plant and machinery.

ØEnhancing the profitability by improved efficiency and cost controls.

ØRecruiting, developing, motivating and retaining the personnel having exceptional ability and dedication by providing them good working conditions, performance based compensation, attractive benefit program and opportunity for growth.

ØProtecting the environment and contributing towards the economic strength of the country and function as a good corporate citizen.

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DIRECTORS' REPORT TO THE MEMBERS

IN THE NAME OF ALLAH THE MOST GRACIOUSTHE MOST BENEVOLENT THE MOST MERCIFUL

thThe Directors have the honour to present 45 Annual Report of your Company together with audited accounts and auditors' report thereon for the year ended June 30, 2012. Figures for the previous year ended June 30, 2011 are included for comparison.

Company Performance

Sales revenue and gross profits for the year have declined as compared to previous year. Sales revenue for the year is Rs. 3,674,769,216 as compared to Rs. 4,596,740,385 in previous year showing fall of 20.06%. This was mainly due to fall in International prices of raw cotton and consequently selling prices of manufactured cotton yarn. The unit price for yarn sold fell by 20.89%.

In line with reduction in International prices and timely buying, Company was able to reduce average cost of raw cotton by almost 24.85% over previous year. However, inflation and high energy prices pushed other manufacturing expenses up by 15% over the previous year. Combination of all these factors caused reduction in gross profits which stood at Rs. 616,633,133 for the year as compared to Rs. 888,745,406 showing reduction of 30.62%.

Operating expenses for the year are Rs. 196,892,495 as compared to Rs. 240,689,097 in previous year showing reduction of 18.19%. Other operating income for the year is Rs. 46,666,407 as compared to Rs. 27,818,988 showing rise of 67.75%. This was achieved mainly due to efficient placement of surplus funds.

Finance cost for the year was Rs. 102,374,102 as compared to Rs. 94,873,635 showing an increase of 7.91%. This was mainly due to mark up on long term loans taken for expansion and modernisation of plant and machinery.

Over all profit after tax for the year reduced to Rs. 329,166,340 from Rs. 466,585,435 of previous year registering a decline of 29.45%. Reduction in gross profits was the main reason for decline in after tax profits.

This year earning per ordinary share (EPS) is Rs. 17.60 as compared to last year Rs. 24.95 per ordinary share showing decrease of Rs. 7.35 per share.

Your Company has been able to generate stable cash flows and discharge its operating and financial liabilities in time. Through efficient working capital management your Company was able to reduce exposure on working capital borrowings and paid off all the due installments of long term loans during the year in time.

We want to draw your attention to note-13.1(c) of Financial Statements regarding Contingencies. The Company has not made provision for Workers Welfare Fund for the year ended on June 30, 2012 for the reasons as set out in the said note.

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Future Prospects and Outlook

For the next financial year of 2012-13 Directors are optimistic about the profitability of the Company. State Bank of Pakistan (SBP) reduced its discount rate in giving much needed incentive to private sector. On finance side, Government has announced to reduce rate of mark up on export finance schemes. Ministry of Textiles has also announced Technology Up gradation Fund scheme where they would offer subsidy in mark up rates and other incentives on investments in machinery and technology. All these factors shall contribute to reduce cost of doing business and attract private business investment in the economy.

The recent heavy rains in Sindh and Punjab is reported to have caused damage to cotton crop and could possibility hit cotton production target of 15 million bales.

Uncertainty in the international financial and commodity markets, high inflation, volatility in raw cotton prices, energy shortages in Pakistan, forth coming general elections and political factors are likely to affect the profitability of the Company.

Dividend

The Directors have pleasure to recommend payment of Cash Dividend @ 50% i.e. Rs. 5/= per ordinary share. The Dividend will amount to Rs. 93,500,000/=.

Capital Assets Investment

During the year your Company invested Rs. 250,221,783/= in Balancing, Modernization, Replacement (BMR) of building plant and machinery and other assets. This was done in line with Company's strategic plans for the improvement in the production capacity of the plant and to cater both domestic and International markets. Environment, Health and Safety

The Company maintains safe working conditions avoiding the risk to the health of employees and public at large. The management has maintained safe environment in all its operations throughout the year and is constantly upgrading their safety and living facilities.

Corporate Governance & Financial Reporting Framework

As required by the Code of Corporate Governance, Directors are pleased to report that:

a) The financial statements prepared by the management of the Company present fair state of Company's operations, cash flows and changes in equity.

b) Proper books of account of the Company have been maintained.

Despite all the challenges faced by textile sector, we achieved success through timely procurement of cotton due to which our average cotton cost remained low, full utilization of the production capacity, timely investments, effective business planning, aggressive marketing strategy, strong customer base and diversified product range.

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c)statements and accounting estimates are based upon reasonable and prudent judgment.

d) International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

e) The system of internal control is sound in design and has been effectively implemented and monitored.

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

g) Key operating and financial data for the last six years is annexed.

h) There are no statutory payments on account of taxes, duties, levies and charges which are outstanding as on June 30, 2012 except for those disclosed in the financial statements.

I) No adverse material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year to which this balance sheet relates and the date of the Director's Report.

j) During 2011-2012, no trade in the shares of the Company carried out by any of its Directors, CEO, CFO, Company Secretary and their spouses and minor children except Mr. Shaikh Enam Ellahi who purchased 10,000 shares of the Company.

k) Requirement under Listing Regulation No. 35 (xi) has been complied with.

Related Parties

The transactions between the related parties were carried out at an arm's length basis. The Company has fully complied with the best practices of the transfer pricing as contained in the listing regulation of stock exchanges in Pakistan.

Financial Statements Audit

Financial statements of the Company have been audited without any qualification by Messrs. M. Yousuf Adil Saleem & Co., Chartered Accountants, the auditors of the Company.

Shareholding pattern

The shareholding pattern as at June 30, 2012 including the information under the Code of Corporate Governance, for ordinary shares is annexed.

Notice u/s 218 of the Companies Ordinance, 1984

Notice u/s 218 of the Companies Ordinance, 1984 is annexed.

Committees of the Board

In compliance with the Code of Corporate Governance and Articles of Association of the Company the Board of Directors had formed following Committees.

Appropriate accounting policies have been consistently applied in the preparation of financial

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? Audit Committee

? Human Resource and Remuneration (HR & R) Committee

? Executive Committee

The names of the members of above committees are given in the Company information.

Board of Directors and Committees’ Meetings

During the year four (4) meetings of the Board of Directors were held. Attendance by each Director is as follows:-

Leave of absence was granted to Directors who could not attend some of the Board meeting.

Audit Committee

During the year, five (5) meetings of Audit Committee of the Board were held. Attendance by each Director is as follows:

S # Name of Director Attendance

1 Mr. Shaikh Enam Ellahi 5 (five)

2 Mr. Shahzada Ellahi Shaikh 5 (five)

3 Mr. Shafqat Ellahi Shaikh 5 (five)

Executive Committee

During the year, nine (9) meetings of Executive Committee of the Board were held. Attendance by each Director is as follows:


1 Mr. Shaikh Enam Ellahi 9 (nine)

2 Mr. Shahzada Ellahi Shaikh 9 (nine)

3 Mr. Shaukat Ellahi Shaikh 9 (nine)

4 Mr. Shafqat Ellahi Shaikh 9 (nine)


1. Mr. Shaikh Enam Ellahi 3 (Three)

2. Mr. Javaid Bashir Sheikh 3 (Three) 3. Mr. Shahzada Ellahi Shaikh 4 (Four)

4. Mr. Shaukat Ellahi Shaikh 4 (Four)

5. Mr. Shafqat Ellahi Shaikh 4 (Four)

6. Mr. Munawar Iqbal 2 (Two)

7. Mr. Iftikhar Taj Mian 4 (Four)

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Human Resource and Remuneration (HR&R) Committee


1 Mr. Shafqat Ellahi Shaikh 1 (one)

2 Mr. Shahzada Ellahi Shaikh 1 (one)

3 Mr. Iftikhar Taj Mian 1 (one)

Appointment of Auditors

The audit committee has recommended for re-appointment of present auditors, Messrs. M. Yousuf Adil Saleem & Co., Chartered Accountants, Karachi. They are due to retire and being eligible, offer themselves for re-appointment as auditors for the year 2012-13. Acknowledgment

The continued good results have been possible due to continued diligence and devotion of the Staff and workers of the Company and the continued good human relations at all levels deserve acknowledgement. The Directors also wish to place on record their thanks to the Bankers for their continued support to the Company.

On behalf of the Board

Shaukat Ellahi Shaikh September 27, 2012 Mg. Director (Chief Executive)

The Board of Directors formed HR & R Committee in April, 2012. During the year, one (1)

meeting of HR & R Committee of the Board was held. Attendance by each Director is as

follows:

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STATEMENT OF COMPLIANCE WITH THE

CODE OF CORPORATE GOVERNANCE

FOR THE YEAR ENDED JUNE 30, 2012

This statement is being presented to comply with the Code of Corporate Governance contained in

Regulation No. 35 of listing regulations of Karachi & 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 CCG in the following manner:

1. The Board of Directors of the Nagina Cotton Mills Ltd., has always supported and re-confirms its

commitment to continued support and implementation of the highest standards of Corporate

Governance at all times.

2. The Company encourages representation of independent, non-executive directors and directors

representing minority interests on its Board of Directors. At present the Board includes:

Mr. Shaikh Enam Ellahi Non-Executive Director/Chairman

Mr. Javaid Bashir Sheikh Non-Executive Director

Mr. Shahzada Ellahi Shaikh Non-Executive Director

Mr. Shafqat Ellahi Shaikh Non-Executive Director

Mr. Shaukat Ellahi Shaikh Executive Director

Mr. Iftikhar Taj Mian Executive Director

Mr. Munawar Iqbal Executive 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 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.

5. No casual vacancy occurred during the year.

6. 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 supporting policies and

procedures.

7. 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.

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8. 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, other executive and non-executive directors, have been taken by the Board in line with

Articles of Association of the Company.

9. 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.

10. Requirement under Listing Regulation No. 35 (xi) has been complied with.

11. The Board had approved appointment of CFO, Company Secretary and Head of Internal Audit, in line with Code of Corporate Governance.

12. The Directors' report for this year has been prepared in compliance with the requirements of CCG and fully describes the salient matters required to be disclosed.

13. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board.

14. 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.

15. The Company has complied with all the corporate and financial reporting requirements of the CCG.

16. The Board has formed an Audit Committee. It comprises three members, all members are non-executive directors.

17. 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 terms of reference of the committee have been formed and advised to the committee for compliance.

18. The Board has formed a Human Resource and Remuneration Committee. It comprises three members, of whom two are non-executive directors including the Chairman.

19. The Board has formed an executive committee comprising four Directors to meet and take decisions on behalf of Board in the absence of full Board. The minutes of the meetings are properly maintained.

20. The Board has set up an effective internal audit function.

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21. 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 Accountants (IFAC) guidelines on code

of ethics as adopted by the ICAP.

22. 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.

23. 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).

24. The related party transactions have been placed before the Audit Committee and approved by the Board of Directors.

25. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s).

26. We confirm that all other material principles enshrined in the CCG have been complied with.

for & on behalf of the Board

SHAUKAT ELLAHI SHAIKHSeptember 27, 2012 Mg. Director (Chief Executive)

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Shareholders' Information

Annual General Meeting

th45 Annual General Meeting of NAGINA COTTON MILLS LTD. will be held at the Registered Office of the Company, 2nd Floor, Shaikh Sultan Trust Bldg. No.2, 26, Civil Lines, Beaumont Road, Karachi - 75530 on Tuesday, October 30, 2012 at 3:00 p.m.

Eligible shareholders are encouraged to participate and vote.

Ownership

On June 30, 2012, the Company has 994 Shareholders.

Web Reference The Company maintains a functional website. Annual, Half-yearly and Quarterly reports are regularly posted at the Company's website: www.nagina.com

Dividend

The Board of Directors have recommended in their meeting held on September 27, 2012, payment of final cash dividend at the rate of Rs. 5/= per share i.e. 50% for the year ended June 30, 2012.

Dividend Mandate (Optional)

In pursuance of the directions given by the Securities and Exchange Commission of Pakistan vide Circular Number 18 of 2012 dated June 5, 2012, transferee of shares may exercise option for dividend mandate by using the revised “Form of Transfer Deed”. The revised form of transfer deed will enable the transferees to receive cash dividend directly in their bank accounts, if such transferee provides particulars of its bank account which he/she/it desires to be used for credit of cash dividend.

The existing shareholders have the option to seek the dividend mandate option by sending the mandate information on the following format, directly to the Company's Share Registrar in case of physical shareholders and directly to the relevant Participant / CDC Investor Account Service in case of maintaining shareholding under Central Depository System (CDS).

Detail of Bank Mandate

Title of Bank AccountBank Account NumberBank’s NameBranch Name and AddressCell number of Shareholder / Transferee

Landline number of Shareholder / Transferee, if any

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It is stated that the above-mentioned information is correct, that I will intimate the changes in the above-mentioned information to the Company and the concerned Share Registrar as soon as these occur.

_______________________Signature of the Shareholder

Requirement of CNIC Number / National Tax Number (NTN) Certificate

With reference to the notification of Securities and Exchange Commission of Pakistan (SECP), SRO 779(I)/2011 dated August 18, 2011 and SRO 831(I)2012 dated July 5, 2012 which mandate that dividend warrants should bear CNIC number of the registered member.

Members who have not yet submitted copy of their valid Computerized National Identity Card (CNIC) / National Tax Number (NTN) Certificate (in case of Corporate Entity) are requested to submit the same at the earliest.

Copy of CNIC/NTN may be sent directly to the Share Registrar:

M/s Hameed Majeed Associates (Pvt.) Limited, th

5 Floor, Karachi Chambers, Hasrat Mohani Road, KarachiPh # (+92-21) 32412754, 32424826 Fax # (+92-21) 32424835

Kindly note that in case of non compliance of the submission of CNIC, the Company may be constrained to withhold the dispatch of dividend warrant in future.

Investor Relations Contact

Mr. Iftikhar Taj Mian, Corporate SecretaryEmail: [email protected], Ph # (+92-42) 35756270, Fax: (+92-42) 35711856

Delivery of the Unclaimed / Undelivered Shares

Members are requested to contact the Registered Office of the Company or the Share Registrar, th

M/s Hameed Majeed Associates (Pvt.) Limited, 5 Floor, Karachi Chambers, Hasrat Mohani Road, Karachi for collection of their shares which they have not received due to any reasons.

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To: All members of the Company

NOTICE UNDER SECTION 218 OF THE COMPANIES ORDINANCE, 1984

In pursuance of Section 218 of the Companies Ordinance, 1984, the members of the Company are hereby informed that upon recommendation of Human Resource and Remuneration (HR&R) Committee, Board of Directors in their meeting held on September 27, 2012 has approved the increase in remuneration of Mr. Shaukat Ellahi Sheikh, Mg. Director (Chief Executive) and Mr. Munawar Iqbal, full time working Director effective from July 1, 2012 as under:

Description

Present Remuneration

Remuneration After increase

Remuneration Rs. 264,500/= per month. Rs. 325,000/= per month inclusive of 10% medical allowance

Other benefits

Transport Two company maintained cars with drivers.

No Change

Utilities Actual cost of utilities, i.e. gas, electricity and water at his residences and telecommunication facilities.

No Change

Leave Fare Assistance (LFA)

Leave passage for self and family.

No Change

a) Remuneration of Mr. Shaukat Ellahi Shaikh, Mg. Director (Chief Executive)

Description

Present Remuneration

Remuneration After increase

Remuneration Rs. 90,000/= per month

As per Company policy As per Company policy

Rs. 100,000/= per month

Other benefits

b) Remuneration of Mr. Munawar Iqbal, full time working Director

Iftikhar Taj Mian Corporate Secretary September 27, 2012

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Total

From To Shares Held

427

1

100

14,576

295

101

500

80,385

72

501

1,000

57,003

140 1,001

5,000

341,680

28 5,001

10,000

196,518

7 10,001

15,000

83,096

3 15,001

20,000

49,111

6 20,001

25,000

136,700

2 25,001

30,000

55,184

2 30,001

35,000

69,368

- 35,001

45,000

-

1 45,001

50,000

46,000

- 50,001

85,000

-

1 85,001

90,000

89,498

1 90,001

95,000

92,192

1 95,001

100,000

97,001

- 100,001

315,000

-

1 315,001

320,000

318,658

- 320,001

435,000

-

1 435,001

440,000

437,008

- 440,001

1,015,000

-

3 1,015,001

1,020,000

3,051,542

- 1,020,001

4,480,000

-

2 4,480,001

4,485,000

8,963,080

- 4,485,001

4,520,000

-

1 4,520,001

4,525,000

4,521,400

994

Total:- 18,700,000

Categories of Shareholders Shares Held Percentage

Directors, Chief Executive Officer, and their spouse

13,935,236

74.52

Associated Companies, undertakings and related parties 3,060,542

16.37

NIT and ICP 1,430

0.01

Banks, Development Finance Institutions, Non Banking

Finance Institutions 96,688

0.52

Insurance Companies 318,658

1.70

Modarabas and Mutual Funds Nil Nil

Shareholders Holding 10% or more 13,484,480 72.11

General Public

a. Local 1,236,730 6.61b. Foreign Nil Nil

Others (Joint Stock Companies) 50,716 0.27

PATTERN OF SHAREHOLDING

As at June 30, 2012

CUIN (Incorporation Number) 0002500

and minor children

ShareholdingNo. of

Shareholders

Shares S # Name Held Percentage

1) Associated Companies, Undertaking and Related Parties

i) HAROON OMER (PVT) LIMITED 1,017,147 5.44

ii) MONELL (PVT) LIMITED 1,017,147 5.44

iii) ICARO (PVT) LIMITED 1,017,248 5.44

iv) ELLAHI INTERNATIONAL (PVT) LTD. 9,000 0.05

3,060,542

16.37

2) Mutual Funds Nil Nil

3) Directors, Chief Executive Officer and their spouse and

minor children

i) MR. SHAIKH ENAM ELLAHI 437,008 2.34

ii) MR. SHAHZADA ELLAHI SHAIKH 4,481,680 23.97

iii) MR. SHAUKAT ELLAHI SHAIKH 4,521,400 24.18

iv) MR. SHAFQAT ELLAHI SHAIKH 4,481,400 23.97

v) MRS. HUMAIRA SHAHZADA 4,248 0.02

vi) MRS. MONA SHAUKAT 4,248 0.02

vii) MRS. SHAISTA SHAFQAT 4,248 0.02

viii) MR. MUNAWAR IQBAL 2 -

ix) MR. JAVAID BASHIR SHEIKH 500 -

x) MR. IFTIKHAR TAJ MIAN 502 -

13,935,236 74.52

4) Executives 19 -

5) Public Sector Companies and Corporations 1,430 0.01

6)

415,346 2.22

7) Shareholders holding five percent or more voting rights

i) HAROON OMER (PVT) LIMITED 1,017,147 5.44 ii) MONELL (PVT) LIMITED 1,017,147 5.44 iii) ICARO (PVT) LIMITED 1,017,248 5.44 iv) MR. SHAHZADA ELLAHI SHAIKH 4,481,680 23.97 v) MR. SHAUKAT ELLAHI SHAIKH 4,521,400 24.18 vi) MR. SHAFQAT ELLAHI SHAIKH 4,481,400 23.97

Banks, Development Financial Institutions, Non Banking

Financial Institutions, Insurance Companies, Takaful,

Modarabas and Pension Funds.

Information under clause xvi (j) of the Code of Corporate Governance

As at June 30, 2012

NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

20

KEY FINANCIAL INFORMATION

YEAR ENDED 30TH JUNE

2012 2011 20102009

Restated

2008

Restated2007

Sales Rs.'000 3,674,769

4,596,740

2,746,754

2,158,571

1,833,591

1,527,038

Gross profit Rs.'000 616,633

888,745

486,759

216,856

141,367

163,445

Operating profit Rs.'000 466,407

675,875

338,323

119,431

82,618

107,569

Profit before tax Rs.'000 364,033

489,530

262,550

14,650

12,609

54,882

Profit after tax Rs.'000 329,166

466,585

248,511

7,576

1,109

43,182

Share capital - paid up Rs.'000 187,000

187,000

187,000

187,000

187,000

187,000

Shareholders' equity Rs.'000 1,271,227

1,054,261

660,407

411,896

404,320

560,978

Total assets Rs.'000 1,851,471

2,049,587

1,255,841

1,290,139

1,190,503

1,210,566

Earning per share - pre tax Rs. 19.47

26.18

14.04

0.78

0.20

2.14

Earnings per share - after tax Rs. 17.60

24.95

13.29

0.41

(0.41)

1.52

Cash Dividend per share Rs. 6.005.00

-

-

-

1.50

Specie Dividend - Ellcot % -

-

15.00

-

-

-

Specie Dividend - Prosperity % -

-

5.00

-

-

-

Market value per share as on 30 June Rs. 22.96

15.00

11.29

8.00

15.50

16.35

Gross profit to sales % 16.78

19.33

17.72

10.05

7.71

10.70

Operating profit to sales % 12.69 14.70 12.32 5.53 4.51 7.04

Profit before tax to sales % 9.91 10.65 9.56 0.68 0.69 3.59

Profit after tax to sales % 8.96

10.15

9.05

0.35

0.06

2.83

Current ratio 3.95:1 2.03:1 1.5:1 1.04:1 1.01:1 1.35:1

Total debt to total assets ratio % 31.34 48.57 47.27 67.93 65.86 53.66

Debt equity ratio % 22.16 28.00 30.12 44.30 43.19 34.47

21

NAGINA

NAGINA GROUP

NAGINA


NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

22

NAGINA

NAGINA GROUP

NAGINA

23


NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

24

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised share capital

50,000,000 ordinary share

of Rs 10/- each

Issued, subscribed and paid up capital

Capital reserves

Accumulated profit

Total Equity

LIABILITIES

NON-CURRENT LIABILITIES

Long term financing

Liabilities against assets subject to

finance lease

Deferred liabilities

CURRENT LIABILITIES

Accrued interest/mark-up

Short term borrowings

Current portion of long term financing

Current portion of liabilities against assets

subject to finance lease

CONTINGENCIES AND COMMITMENTS

Total Equity and Liabilities

The annexed notes from 1 to 42 form an integral part of these financial statements.

Trade and other payables

1,851,470,637 2,049,586,655

2012 2011

Note Rupees Rupees

500,000,000

500,000,000

5 187,000,000 187,000,000

6 253,964,417 253,964,417

6 830,262,465 613,296,125

7 274,018,051

291,067,660

8 2,250,408

4,595,934

9 20,670,764

29,517,328

11 16,289,809

19,834,742

12 38,918,086

371,749,271

7 83,404,444

111,203,942

8 2,152,446

3,062,916

13

1,271,226,882

1,054,260,542

296,939,223

325,180,922

283,304,532

670,145,191

142,539,747

164,294,320

10

BALANCE SHEET AS AT JUNE 30, 2012

September 27, 2012Javaid Bashir Sheikh

Director

NAGINA

NAGINA GROUP

NAGINA


25

Shaukat Ellahi ShaikhMg. Director (Chief Executive)

ASSETS

NON - CURRENT ASSETS

Property, plant and equipment

Investment properties

Long term investments

Long term deposits

CURRENT ASSETS

Stock-in-trade

Short term deposits

and prepayments

Other receivables

Sales tax refundable

Other financial assets

Total Assets

Cash and bank balances

Stores and spares

Trade debts

Loans and advances

1,851,470,637 2,049,586,655

2012 2011

Note Rupees Rupees

14 714,050,491

667,299,556

15 16,110,504

16,482,006

16 - -

1,653,300

1,821,100

18 528,066,937 559,899,557

21 1,546,959

1,987,141

22 4,262,679

13,277,012

7,814,386

3,689,604

23 70,514,411

697,905,772

1,119,656,342 1,363,983,993

24 61,418,641

6,415,155

731,814,295

685,602,662

17 21,228,615

17,235,277

19 399,617,602

26,835,008

25,186,112

20 36,739,467

NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

26

Earnings per share - basic and diluted (Rupees)


33 17.60 24.95

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED JUNE 30, 2012

Sales

Cost of goods sold

Gross profit

Distribution costAdministrative expenses

Other operating expenses

Other operating income

Operating profit

Finance cost

Loss on investments in associates distributed

to owners as specie dividend

Loss on sale of investments in associates

Share of profit from associated undertakings

Profit before taxation

Provision for taxation

Profit after taxationOther comprehensive income

Total comprehensive income for the year

2012 2011

Note Rupees Rupees

25 3,674,769,216 4,596,740,385

26 (3,058,136,083)

(3,707,994,979)

616,633,133

888,745,406

27 (109,676,918)

(128,653,055)

28 (67,611,879)

(65,665,312)

29 (19,603,698)

(46,370,730)

(196,892,495)

(240,689,097)

419,740,638

648,056,309

30 46,666,407

27,818,988

466,407,045

675,875,297

31 (102,374,102)

(94,873,635)

364,032,943

581,001,662

16.2 -

(115,437,304)

16.3 -

(2,926,505)

-

26,892,347

364,032,943 489,530,200 32 (34,866,603) (22,944,765)

329,166,340

466,585,435 -

-

329,166,340 466,585,435

Javaid Bashir SheikhDirector

Shaukat Ellahi ShaikhMg. Director (Chief Executive)September 27, 2012

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NAGINA GROUP

NAGINA

27


CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2012

2012 2011Note Rupees Rupees

A. CASH FLOWS FROM OPERATING ACTIVITIES 35 155,890,005 587,266,174

(Payments) made / receipt of: Employees retirement benefits (10,597,058)

(11,444,482)

Finance cost (105,919,035)

(90,573,131)

Income tax (38,886,432)

(60,519,526)Long term deposits 167,800

(199,850)

Net cash generated from operating activities A 655,280

424,529,185

B. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (114,801,962)

(166,574,331)Proceeds from disposal of property, plant and equipment 1,595,603

1,625,000Purchase of other financial assets (420,576,029)

(1,226,000,000)Proceeds from disposal of other financial assets 1,081,266,883

542,755,383Proceeds from disposal of long term investment -

2,180,000

Dividend received -

13,036,389

Net cash generated from / (used in) investing activities B 547,484,495

(832,977,559)

C. CASH FLOWS FROM FINANCING ACTIVITIES

Long term finances obtained 63,520,539

200,731,639Repayment of long term finances (108,369,646)

(76,345,350)

Repayment of principal portion of liabilities against assets subject to finance lease (3,255,997) (2,599,355)

Net (decrease) / increase in Short term borrowings excluding running finance (344,262,056) 289,986,056

Dividend paid (112,200,000)

-

Net cash (used in) / generated from financing activities C (504,567,160)

411,772,990

Net increase in cash and cash equivalents (A+B+C) 43,572,615

3,324,616

Cash and cash equivalents at the beginning of the year (348,060)

(3,672,676)

Cash and cash equivalents at the end of the year 43,224,555

(348,060)

Cash and cash equivalents

Cash and bank balances 24 61,418,641 6,415,155Short term running finances (18,194,086) (6,763,215)

43,224,555 (348,060)




NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

28

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2012

Revenue reserve

Paid up Amalgamation Redemption Accumulated

Share reserve

Share of capital

reserves of

associates

reserve fund profit Total

capital Note 6.1 Note 6.2

Balance as at July 1, 2010 187,000,000

12,104,417

2,934,363

241,860,000

216,508,440

660,407,220

Comprehensive income

Profit for the year -

-

-

-

466,585,435

466,585,435

Other comprehensive income -

-

-

-

-

-

Total comprehensive income -

-

-

-

466,585,435

466,585,435

Transactions with owners

Specie dividend (note 16.1) -

-

-

-

(69,797,750)

(69,797,750)

of associates -

-

(2,934,363)

-

-

(2,934,363)

Balance as at June 30, 2011 187,000,000

12,104,417

-

241,860,000

613,296,125

1,054,260,542

Comprehensive income

Profit for the year -

-

-

-

329,166,340

329,166,340

Other comprehensive income -

-

-

-

-

-

Total comprehensive income -

-

-

-

-

-

-

-

329,166,340

329,166,340

Transactions with owners

Final dividend @ 60% i.e.

Rs. 6 per ordinary share (112,200,000) (112,200,000)

Balance as at June 30, 2012 187,000,000 12,104,417 - 241,860,000 830,262,465 1,271,226,882


Capital reserves

---------------------------------------------------------- Rupees ---------------------------------------------------------

Reversal of capital reserves



NAGINA

NAGINA GROUP

NAGINA

29


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2012

1. GENERAL INFORMATION

1.1

1.2

2.

Standard or Interpretation or Amendments

Amendment to IAS 1 - Presentation of Financial Statements

IAS 24 (as revised in 2009) - Related Party Disclosures

Amendment to IAS 34 - Interim Financial Reporting

Amendment to IFRS 7 – Disclosures – Transfer of Financial Assets

Amendment to IFRIC 13 - Customer Loyalty Programmes

Amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement

2.1

Standard or Interpretation or Amendments

Effective date

Nagina Cotton Mills Limited (the Company) was incorporated in Pakistan on May 16, 1967 as a public limited company under

the Companies Act, 1913 as repealed by the Companies Ordinance, 1984, and listed on Karachi and Lahore Stock

Exchanges of Pakistan. The registered office is situated at 2nd floor, Shaikh Sultan Trust Building No.2, Beaumont Road,

Karachi in the province of Sindh. The principal business of the Company is manufacture and sale of blended yarn. The

Company's manufacturing facilities are located in Kotri Industrial Trading Estate in the province of Sindh.

These financial statements are presented in Pak Rupees, which is the Company's functional and presentation currency.

ADOPTION OF NEW STANDARDS, AND AMENDMENTS AND INTERPRETATIONS TO THE PUBLISHED APPROVED

ACCOUNTING STANDARDS

(accounting periods

January 01, 2011

January 01, 2011

January 01, 2011

July 01, 2011

January 01, 2011

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.

January 01, 2011

July 01, 2012

beginning on or after)

January 01, 2012

January 01, 2013

Standards, interpretations and amendments to the published approved accounting standards not yet effective:

Effective date (accounting periods beginning on or after)

The Company expects that the adoption of the above standards and interpretation will not have any material impact on its financial

statements in the period of initial application except for increase in disclosure requirement.

January 01, 2013IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine

The following standards, amendments to standards and interpretations including amendments to interpretations became effective,

however, the application of these amendments and interpretations did not have material impact on the financial statements of the

Company:

The following Standards, amendments and interpretations are only effective for accounting periods, beginning on or after the date

mentioned against each of them. These standards, interpretations and the amendments are either not relevant to the Company's

operations or are not expected to have significant impact on the Company's financial statements other than certain additional

disclosures.

Amendments to IAS 1 - Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income

Amendments to IAS 12 - Income Taxes – Deferred Tax: Recovery of Underlying Assets

Amendments to IAS 19 - Employee Benefits

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NAGINA GROUP

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ANNUAL REPORT 2012

30

IFRS 9

IFRS 10

IFRS 11

IFRS 12

IFRS 13

IAS 27

IAS 28

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Statement of compliance

3.2 Basis of preparation

3.3 Accounting for leases

3.4 Employee benefits cost - Defined benefit plan

Details of the scheme are given in note 9.1 to these financial statements.

The potential impact of standards, amendments and interpretations not yet effective on the financial statements on the Company is

as follows:

The amendments to IAS 19 Employee Benefits are effective for annual period beginning on or after January 01, 2013. The

amendments eliminate the corridor approach and therefore require an entity to recognize changes in defined benefit plans obligations

and plan assets when they occur. All actuarial gains or losses in other comprehensive income arising during the year are recognized

immediately through other comprehensive income. The amendments also require additional disclosures and retrospective application

with certain exceptions. Management anticipates that the amendments will be adopted in the Company’s financial statements for

annual period beginning on or after January 01, 2013, and the application of amendments may have impact on amounts reported in

respect of defined benefit plans. However, management has not performed detailed analysis of the impact of the application of the

amendments and hence yet not quantified the extent of the impact.

January 01, 2013

January 01, 2013

January 01, 2013

January 01, 2013

January 01, 2013

January 01, 2013Investments in Associates and Joint Ventures due to non-adoption of

IFRS 10 and IFRS 11

January 01, 2013

Separate Financial Statements due to non-adoption of IFRS 10 and IFRS 11

Financial Instruments

These financial statements have been prepared in accordance with the approved accounting standards as applicable in

Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the

International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives

issued under the Companies Ordinance, 1984. In case requirements differ, the provisions of or directives issued under the

Companies Ordinance, 1984 shall prevail.

The Company operates an unfunded gratuity scheme for its confirmed employees who have completed the minimum

qualifying period of service as defined under the respective scheme. Provisions are made to cover the obligations under the

schemes on the basis of actuarial assumptions and are charged to profit and loss account. The most recent valuation was

carried out on August 30, 2011 using the 'Project Unit Credit Method'.

Cumulative net unrecognized actuarial gains and losses are recognised in the year when they arises.

Effective date

Consolidated Financial Statements

Joint Arrangements

Disclosure of Interests in Entities

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of

ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognized as assets of the Company at their fair value at the inception of the lease or,

if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the

balance sheet as liabilities against assets subject to finance lease. The liabilities are classified as current and non-current

depending upon the timing of payment. Lease payments are apportioned between finance charges and reduction of the

liabilities against assets subject to finance lease so as to achieve a constant rate of interest on the remaining balance of the

liability. Finance charges are charged to profit and loss account.

Standards or interpretation

These financial statements have been prepared under the historical cost convention, except for staff retirement benefits at

present value, and financial instruments at fair value.

The amount recognized in the balance sheet represents the present value of defined benefit obligations as adjusted for

unrecognized actuarial gains and losses.

(accounting periods beginning on or after)

Fair Value Measurement

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NAGINA GROUP

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31


3.5 Trade and other payables

3.6 Provisions

3.7 Property, plant and equipment

Owned

Assets held under finance lease

Capital work in progress

3.8 Investment properties

3.9 Investments

Regular way purchase or sale of investments

Financial assets at fair value through profit or loss

A financial asset other than a financial asset held for trading may be designated as at Fair Value Through Profit & Loss uponinitial recognition if:

Assets are derecognised when disposed or when no future economic benefits are expected from its use or disposal. Gains or

losses on disposal of assets, if any, are recognised in profit and loss account, as and when incurred.

Depreciation on buildings is charged to profit and loss account applying the reducing balance method at the rates specified inthe note 15.

All purchases and sales of investments are recognized using trade date accounting. Trade date is the date that the Companycommits to purchase or sell the investment.

Property, plant and equipment except freehold land and capital work in progress are stated at cost less accumulated

depreciation and impairment loss, if any. Freehold land and capital work in progress are stated at cost, less impairment if any.

Investment properties are properties held to earn rentals and / or capital appreciation. The investment property of theCompany comprises land and buildings which are valued using the cost method i.e. at cost less accumulated depreciationand impairment, if any.

These are investments designated at fair value through profit or loss at inception or held for trading. These are initiallymeasured at fair value and changes on re-measurement are taken to profit and loss account.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when itis probable that future economic benefits associated with the item will flow to the Company and the cost of the item can bemeasured reliably. All other repairs and maintenance are charged to profit and loss account during the financial year in whichthey are incurred.

Liabilities for trade and other amounts payable are measured at cost which is the fair value of the consideration to be paid inthe future for goods and services received whether billed to the company or not.

Provisions are recognized when the Company has a present, legal or constructive obligation, as a result of past events, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current

best estimate.

Assets subject to finance lease are depreciated over their expected useful lives on the same basis as owned assets.

All cost / expenditure connected with specific 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.

Assets' residual values and their useful lives are reviewed and adjusted at each balance sheet date, if significant andappropriate.

Depreciation is charged to income applying the reducing balance method at the rates specified in the note 14.1. Depreciation on all additions is charged from the date on which the asset is available for use and no depreciation is charged from the date of disposal.

NAGINA

NAGINA GROUP

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ANNUAL REPORT 2012

32

Derecognition

3.10 Investments in Associates

These investments are accounted for using equity method of accounting and initially are recognized at cost.

3.11 Stores and spares

3.12 Stock in trade

These are valued at lower of cost and net realisable value applying the following basis:

Raw material Weighted average costWork in process Average manufacturing costFinished goods Average manufacturing costWaste Net realisable value

3.13 Trade debts and other receivables

3.14 Cash and cash equivalents

3.15 Impairment

Financial assets

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Company’s risk management or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at Fair Value Through Profit & Loss.

Average manufacturing cost in relation to work in process and finished goods represents manufacturing cost which consists ofprime cost and proportion of manufacturing overheads.

Net realizable value represents estimated selling price in the ordinary course of business less estimated cost of completionand estimated costs necessary to make the sale.

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cashequivalents consist of cash in hand, balances with banks, short-term running finances.

Trade debts and other receivables are carried at original invoice amount less an estimate made for doubtful receivable based

on review of outstanding amounts at the year end. Balances considered bad and irrecoverable are written off when identified.

These are valued at lower of moving average cost or (and) net realizable value, except furnace oil, diesel and lubricants which

are valued at lower of cost on first in first out basis and net realizable value less allowance for obsolete and slow moving

items. Items in transit are valued at cost accumulated up to the balance sheet date.

The Company assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group

of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is

objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset

(an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the

group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a

group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the

probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a

measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate

with defaults.

All investments are de-recognized when the rights to receive cash flows from the investments have expired or have been

transferred and the Company has transferred substantially all risks and rewards of ownership.

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NAGINA GROUP

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33


Non-financial assets

3.16 Financial instruments

3.17 Offsetting of financial assets and financial liabilities

3.18 Foreign currency translations

3.19 Revenue recognition

Dividend is recognized when right to receive is established.

Rental income is recognized when it is due.

3.20 Borrowing costs

All other borrowing costs are recognized in profit and loss account in the period in which they are incurred.

3.21 Taxation

Current

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the

instrument and de-recognized when the Company loses control of the contractual rights that comprise the financial asset and

in case of financial liability when the obligation specified in the contract is discharged, cancelled or expired.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have beendetermined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss isrecognised immediately in profit and loss account.

The Company assesses at each balance sheet date whether there is any indication that non-financial assets except deferred

tax assets and inventories may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to

assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective

recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognized in

profit and loss account. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

Other particular recognition methods adopted by the Company are disclosed in the individual policy statements associatedwith each item of financial instruments.

A financial asset and a financial liability shall be setoff and the net amount is reported in the balance sheet, if the Companyhas a legally enforceable right to set off the transactions and also intends either to settle on a net basis, or to realize the assetand settle the liability simultaneously.

Foreign currency transactions are translated into Pak Rupees at the rates prevailing at the date of transaction except for thosecovered by forward contracts, which are translated at contracted rates. At each balance sheet date, monetary assets andliabilities that are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date.Exchange differences are included in profit and loss account.

Sales are recorded on dispatch of goods or on segregation of goods for delivery against confirmed customer's orders whererisks and rewards are transferred to a customer.

Interest income is accrued on a time proportionate basis, by reference to the principal outstanding and at the applicableeffective interest rate.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets thatnecessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets,until such time as the assets are substantially ready for their intended use or sale. Investment income earned on thetemporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowingcosts eligible for capitalization.

The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicabletax credit, rebates and exemption available if any or minimum taxation at the rate of one percent of the turnover whichever ishigher. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.

NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

34

Deferred

3.22 Dividend distribution

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

i. Provision for taxation and deferred taxation (note 3.21, 9.2 & 32)

ii. Retirement benefits (note 3.4 & 9.1)

iii. Provision for doubtful debts (note 19)

iv. Determining the residual values and useful lives of property, plant and equipment (note 3.7 & 14)

5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL

2012 2011 2012 2011Rupees Rupees

Ordinary shares of Rs.10/- each fully paid3,133,000 3,133,000

In cash 31,330,000

31,330,000

15,567,000 15,567,000

As bonus shares 155,670,000

155,670,000

18,700,000 18,700,000

187,000,000

187,000,000

5.1 There were no movements in shares during the reporting periods.

5.2

5.3 Following shares were held by associates of the Company as at the balance sheet date.

Associates 2012 2011

Monell (Private) Limited 1,017,147 1,017,147Haroon Omer (Private) Limited 1,017,147 1,017,147ICARO (Private) Limited 1,017,248 1,017,248M/s Ellahi International (Private) Limited 9,000 9,000

3,060,542 3,060,542

The Company has one class of ordinary shares which carry no right to fixed income. The holders are entitled to receivedividends as declared from time to time and are entitled to one vote per share at meetings of the shareholders. All shares rankequally with regard to the Company's residual assets.

Deferred tax is provided using the liability method for all temporary differences at the balance sheet date between tax basesof assets and liabilities and their carrying amounts for financial reporting purposes. In this regard, the effects on deferredtaxation of the portion of income subject to final tax regime is also considered in accordance with the requirement of TechnicalRelease – 27 of Institute of Chartered Accountants of Pakistan.

Deferred income tax asset is recognized for all deductible temporary differences and carry forward of unused tax losses, ifany, to the extent that it is probable that taxable profits and taxable temporary differences will be available against suchtemporary differences and tax losses can be utilized.

Deferred income tax assets and liabilities are measured at the tax rate that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical

accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's

accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including

expectations of future events that are believed to be reasonable under the circumstances. The areas where various

assumptions and estimates are significant to the Company's financial statements or where judgment was exercised in

application of accounting policies are as follows:

Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period inwhich the dividends are approved by the appropriate authority.

No. of Shares

No. of ordinary shareof Rs.10/- each

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NAGINA

35


2012 20116. RESERVES Note Rupees Rupees

Capital reserves

Amalgamation reserve 6.1 12,104,417 12,104,417

Capital redemption reserve 6.2 241,860,000 241,860,000

Revenue reserve

Accumulated profit 830,262,465

613,296,125

1,084,226,882

867,260,542

6.1

6.2

7.LONG TERM FINANCING

From banking companies and other financial institutions - secured

Demand finances 7.1 49,804,500 66,406,000Term finances 7.2 265,264,827

269,191,226Export oriented projects (EOP) 7.3 15,955,598

31,903,598

Long term financing facility (LTFF) 7.4 23,565,415

31,938,623

354,590,340

399,439,447

Custom debentures 7.5 2,832,155

2,832,155

357,422,495 402,271,602

Less: Current portion:

Demand finances (16,601,500)

(16,601,500)

Term finance (38,666,983)

(67,446,940)

Export oriented projects (EOP) (15,955,598)

(15,951,264)

Long term financing facility (LTFF) (9,348,208)

(8,372,083)

Custom debentures (2,832,155)

(2,832,155)

(83,404,444)

(111,203,942)

274,018,051

291,067,660

7.1

7.2

This represents capital reserve created when Ellahi Electric Company was amalgamated with the Company.

This represents capital reserve for the redemption of preference shares.

Term Finance Facility II from Habib Bank Limited amounting to Rs. 10.896 million carries mark-up at the rate of 6 months average KIBOR offer rate plus 175 bps (2011 : 6 months average KIBOR plus 175 bps) which is repayable in 8 equal half yearly installments commenced from December 2010.

Term Finance Facility II from Faysal Bank Limited amounting to Rs. 84.868 million carries mark-up at the rate of 6 monthsaverage KIBOR offer rate plus 200 bps (2011 : 6 months KIBOR plus 200 bps) which is repayable in 11 equal half yearlyinstallments commencing from February 2013.

These term finance facilities comprise of :

Demand finance facility from National Bank of Pakistan is secured against first pari passu and mortgage charge over allpresent and future fixed assets of the Company and personal guarantee of directors. The loan carries mark-up at a rate of 3month's average KIBOR ask side plus 200 bps (2011 : 3 month's average KIBOR ask side plus 200 bps). The loan isrepayable in 16 quarterly equal installments commenced from August 2011.

Term Finance Facility I from Habib Bank Limited amounting to Rs. 7 million carries mark-up at the rate of 6 months averageask side KIBOR offer rate plus 175 bps (2011 : 6 months average KIBOR plus 175 bps) repayable in 8 equal half yearlyinstallments commenced from December 2010.

Term Finance Facility I from Faysal Bank Limited amounting to Rs. 100 million carries mark-up at the rate of 6 months KIBOR

offer rate plus 200 bps (2011 : 6 months KIBOR plus 200 bps) which is repayable in 9 equal half yearly installments

commencing from March 2013.


NAGINA

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ANNUAL REPORT 2012

36

7.3

7.4

7.5

7.6

2012 2011

Rupees Rupees

- Short term borrowings 38,918,088

371,749,271

- Long term loans 315,069,327

335,597,226

- Liabilities against assets subject to finance lease 4,402,853

7,685,850

7.7

8. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Minimum Minimum

lease lease

payments payments

Within one year 2,565,147

2,152,446

3,977,461

3,062,916

After one year but not more than five years 2,407,966

2,250,408

5,239,061

4,595,934

Total minimum lease payments 4,973,113

4,402,854

9,216,522

7,658,850

Amount representing finance charges (570,259) - (1,557,672) -

Present value of minimum lease payments 4,402,854 4,402,854 7,658,850 7,658,850

Less: Current portion (2,152,446) (2,152,446) (3,062,916) (3,062,916)

2,250,408 2,250,408 4,595,934 4,595,934

2012 2011

The exposure of the Company's borrowings to interest rate changes and the contractual repricing dates at the balance sheetdates are as follows:

Debentures had been issued in favour of Collector of Customs of Karachi to cover deferred payment of custom duty onimported machinery. Debentures are subject to surcharge @ 11% per annum. Repayment is secured against a bankguarantee.

Present

value

These loans are secured against first parri passu and mortgage charge on present and future fixed assets of the Company,

lien on import documents of the title to the goods and personal guarantees of sponsoring directors. These comprise of loans

amounting to Rs.10.810 million and Rs. 5.145 million respectively, repayable in 20 and 16 equal quarterly installments, which

commenced from July 2007 and August 2008 respectively. These loans carry mark-up at the rate of 7% (2011: 7%). The

company swapped a portion of term finance facility amounting to Rs. 200 million and Rs. 125 million respectively under the

SMED Circular No. 19 of 2006 dated 4 September 2006 of State Bank of Pakistan pertaining to the SBP LTF-EOP scheme.

The loan is secured against first pari passu charge over fixed assets (land, building, plant and machinery) of the Companyexcluding power generation plant, and personal guarantees of all the sponsoring directors. It comprises of loan facilitiesamounting to Rs. 12.669 million from National Bank of Pakistan which carries mark-up at the rate of 10.4% and loan facilitiesRs. 3.447 million, Rs. 1.854 million and Rs. 5.595 million from Habib Bank Limited carry mark-up at the rate of 9.7%, 9.7%and 10.4% respectively. These loans were obtained under SBP's LTFF scheme and SMEFD circular no. 06 dated, March 31,2010 and circular no. 16 dated, October 31, 2009.

Future minimum lease payments under finance lease together with the present value of the net minimum lease payments are asfollows:

6 months or less

Management considers that there is no significant non compliance of the financing agreements with banking companies andfinancial institutions, where the Company is exposed to penalties.

Term Finance Facility from Pakistan Kuwait Investment Company Private Limited amounting to Rs. 62.50 million carries mark-up at the rate of 6 months average KIBOR offer rate plus 250 bps (2011 : 6 months average KIBOR offer rate plus 250 bps)repayable in 18 equal quarterly installments commenced from December 2011.

- - - - - - - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - - - - - - - - - -

Present

value

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37


8.1

2012 2011

Note Rupees Rupees

9. DEFERRED LIABILITIES

Provision for gratuity 9.1 14,217,145 19,910,140

Deferred taxation 9.2 6,453,619

9,607,188

20,670,764

29,517,328

9.1 Provision for gratuity

Movement in the net liability is as follows:

Opening balance 19,910,140 19,545,821

Charge for the year 4,904,063 11,808,801

Payment made during the year (10,597,058) (11,444,482)

Provision for gratuity 14,217,145

19,910,140

Reconciliation:

Present value of defined benefit obligation 14,217,145

19,910,140

Unrecognized actuarial loss -

-

14,217,145

19,910,140

Charge for the year:

Current service cost 2,593,399

5,709,656

Interest cost 2,310,664

1,382,358

Actuarial losses recognised -

4,716,787

4,904,063

11,808,801

Changes in the present value of the defined benefit obligation:

Opening defined benefit obligation 19,910,140 19,545,821

Current service cost 2,593,399

5,709,656

Interest cost 2,310,664

1,382,358

Actuarial losses -

4,716,787

Benefits paid (10,597,058)

(11,444,482)

Closing defined benefit obligation 14,217,145 19,910,140

2012 2011

Discount rate 14% 14%

Expected rate of salary increase 10% 10%

Average expected remaining working life of the employees 15 years 15 years

The Projected Unit Credit actuarial cost method based on the following significant assumptions was used for valuation of the

Scheme. The basis of recognition are as follows:

These represent vehicles acquired under finance lease. The effective financing rate used as discounting factor is ranging from12.90% to 16.78% per annum (2011: 14.24% to 16.76% per annum) .These are secured against demand promissory notesand security deposits having terms of 3 to 5 years. The Company intends to exercise its option to purchase the vehicles uponcompletion of the lease period.

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ANNUAL REPORT 2012

38

Experience adjustments on obligation and plan assets

2011 2010 2009 2008

Present value of obligation 19,910,140 19,545,821 17,791,051 17,639,661Fair value of plan assets - - - -

Deficit 19,910,140

19,545,821

17,791,051

17,639,661

Actuarial (loss) on obligation (4,716,787)

(2,419,575)

-

(3,164,534)

Actuarial (gain) / loss on assets -

-

-

-

9.2 Deferred taxation

Movement for the year ended June 30, 2012

This comprises of the following;

Deferred tax liability on taxable temporary

differences arising in respect of :

Accelerated tax deprecation allowance 27,106,864

(17,804,567)

9,302,297

Assets subject to finance lease -

203,935

203,935

Other financial assets 889,941

(871,937)

18,004

27,996,805

(18,472,569)

9,524,236

Deferred tax asset on deductible temporary


Provision for bad debts (368,284)

279,869

(88,415)

Finance leases 77,221

(231,321)

(154,100)

Provision for gratuity (2,090,565)

1,592,965

(497,600)

Provision for write down on

stock-in-trade due to NRV testing (16,007,989)

16,007,989

-

Carry forward tax losses -

(143,359)

(143,359)

Unused Tax credit for Investment u/s 65-B -

(2,187,143)

(2,187,143)

9,607,188

(3,153,569)

6,453,619

Movement for the year ended June 30, 2011

Deferred tax liability on taxable temporary


Accelerated tax deprecation allowance 20,845,970

6,260,894

27,106,864

Investment in associated

undertakings (restated) 15,239,802

(15,239,802)

-

Other financial assets -

889,941

889,941

36,085,772

(8,088,967)

27,996,805

Deferred tax asset on deductible temporary


Provision for bad debts (233,247) (135,037) (368,284)

Finance leases (6,091) 83,312 77,221

Provision for gratuity (1,299,797) (790,768) (2,090,565)

Provision for write down on

stock-in-trade due to NRV testing - (16,007,989) (16,007,989)

34,546,637 (24,939,449) 9,607,188

Deferred tax liability worked out after taking effect of income covered under final tax regime.

---------------------------------------- Rupees ----------------------------------------

2012

14,217,145

------------------------------------------- Rupees ------------------------------------------------------

-

14,217,145

-

Opening balance

Recognized in Profit

and Loss Account

Closing

balance

The most recent valuation was carried out on August 30, 2011 using the 'Project Unit Credit Method' by M/s Sidat Hyder Morsheed &associate.

-

Amounts for the current and previous four years are as follows:

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39



10. TRADE AND OTHER PAYABLES

Creditors 31,328,357 21,436,392Accrued liabilities 64,188,114 85,381,507Advance from customers and tenants 5,654,825

5,386,987Unclaimed dividend 4,070,679

3,674,447Workers' Profit Participation Fund 10.1 19,603,698

24,915,607Workers' Welfare Fund 13.1 (c) 9,684,072

9,684,072Preference shares redemption liability and dividend 893,365

893,365Other Government Expenses - Infrastructure fee 6,888,045

12,847,488Others 228,592

74,455

142,539,747

164,294,320

10.1 Workers' Profit Participation Fund

Opening balance 24,915,607 14,125,292

Interest on fund utilized in the Company's business 8,056,727 1,679,362

32,972,334

15,804,654 Allocation for the year 19,603,698

24,915,607

52,576,032

40,720,261 Amount paid to the fund (32,972,334)

(15,804,654)

19,603,698

24,915,607

11. ACCRUED INTEREST / MARK-UP

Long-term financing

Custom debentures 6,147,703

5,767,104

From banking companies 8,691,001

10,229,327

14,838,704

15,996,431

Liabilities against assets subject to finance lease 26,267

58,800

Short term borrowings 1,424,838

3,779,511

16,289,809 19,834,742

12. SHORT TERM BORROWINGS

Banking Companies - Secured

Foreign currency finance 20,724,000

355,547,033

Cash finance -

9,439,023Running finance 18,194,086

6,763,215

38,918,086 371,749,271

12.1 Company can avail foreign currency, term, cash and running finance facilities from various banks aggregating to Rs. 2,580

million (2011 : Rs. 2,330 million). These borrowings are secured against hypothecation of stocks and book debts / receivables

of the Company and pari passu charge on present and future current assets, demand promissory notes, personal guarantee

of the Directors and lien on export orders / contracts. These are subject to variable markup ranging from one and three

months KIBOR + 0.1% to 1.85% (2011 : from one and three months KIBOR + 1% to 2.25%) payable on quarterly basis.

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ANNUAL REPORT 2012

40

12.2

13. CONTINGENCIES AND COMMITMENTS

13.1 Contingencies

2012 2011

Note Rupees Rupees

13.2 Commitments

Stores and spares 3,861,456

16,266,852

Machinery 36,580,000 31,529,084

40,441,456

47,795,936

14. PROPERTY, PLANT AND EQUIPMENT

Operating assets 14.1 694,133,418 511,962,662

Capital work in progress 14.2 19,917,073 155,336,894

714,050,491 667,299,556

(a) Irrevocable revolving letter of credit issued in favour of Sui Southern Gas Company Limited amounting to Rs.26,381,018(2011 : Rs.19,862,500).

During the current period, management filed a legal petition in the Honorable High Court of Sindh to challenge the legality ofsuch amendments based on the knowledge that the Lahore High Court had already struck down the aforementionedamendments to the WWF Ordinance and the Honorable High Court of Sindh had already given stay order on similar petitionsto other companies. The Company's legal counsel is also of view that the similar order will be passed on the Company'spetition as well. Based on these circumstances and the fact that Company's whole of the income falls under FTR,management is of the view that recording of WWF liability is no longer applicable to the Company. Accordingly, no provisionamounting to Rs.7,280,659 has been made for the year ended June 30, 2012.

(c) Prior to certain amendments made through Finance Acts of 2006 & 2008, Worker Welfare Fund (WWF) was levied at 2%

of the Total Income assessable under the Income tax ordinance, 2001 excluding incomes falling under the Final Tax Regime

(FTR). An amendment was made in Section 4 of the WWF Ordinance, 1971 (the Ordinance) whereby WWF liability wasrequired at 2% of the higher of the profit before taxation as per the accounts or declared income as per the return.

(b) Bank guarantee issued in favour of Hyderabad Electric Supply Company (HESCO) for Rs.14,161,000/- in connection withnew connection for a load of 4,900 KW.

The aggregate unavailed short-term borrowing facilities available amounted to Rs. 2,541 million (2011 : Rs. 1,958 million).

41

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14.1 Operating assets

COST DEPRECIATION Written down

Particulars As at Additions / As at As at For the year / As at value as at

July 1, Transfer/ June 30, July 1, (deletions) June 30, June 30,

2011 (Deletion) 2012 2011 2012 2012 %

Owned

Land - free hold 7,527,701

-

7,527,701

-

-

-

7,527,701

-

Commercial building on

free hold land 13,917,064

2,782,546

16,699,610

8,021,490

364,342

8,385,832

8,313,778

5

Mill buildings on freehold land 124,643,788

16,923,916

141,567,704

81,092,635

4,417,081

85,509,716

56,057,988

10

Other buildings on freehold land 25,105,632

-

25,105,632

11,938,903

658,336

12,597,239

12,508,393

5

Machinery and equipment 1,097,394,732

204,492,892

1,300,123,624

701,908,366

53,511,514

754,774,556

545,349,068

10

(1,764,000)

(645,324)

Electric installations

and equipment 55,247,871

14,221,410

69,469,281

34,761,432

2,919,686

37,681,118

31,788,163

10

Gas installations 3,264,556

-

3,264,556

2,094,117

117,044

2,211,161

1,053,395

10

Office equipment 11,961,387

859,382

12,820,769

7,449,741

498,465

7,948,206

4,872,563

10

Furniture and fixtures 13,356,325

6,730,177

20,086,502

7,599,123

932,408

8,531,531

11,554,971

10

Vehicles 17,709,126

4,211,460

23,592,384

11,693,995

1,819,976

14,311,706

9,280,678 20

2,312,760

1,201,878

(640,962)

(404,143)

1,370,128,182 252,534,543 1,620,257,763 866,559,802 66,440,730 931,951,065 688,306,698

(2,404,962) (1,049,467)

Held under finance lease

Vehicles 12,883,760

(2,312,760)

10,571,000

4,489,478

1,456,680

4,744,280

5,826,720 20

(1,201,878)

2012 Rupees 1,383,011,942 250,221,783 1,630,828,763 871,049,280 66,695,532 936,695,345 694,133,418

(2,404,962) (1,049,467)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2012 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Annual

rate of

Dep.

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ANNUAL REPORT 2012

42

COST DEPRECIATION Written down

Particulars As at Additions / As at As at For the year / As at value as at

July 1, (Deletion) June 30, July 1, (deletions) June 30, June 30,

2010 2011 2010 2011 2011 %

Owned

Land - free hold 7,527,701

-

7,527,701

-

-

-

7,527,701

-

Commercial building on

free hold land 13,917,064

-

13,917,064

7,711,197

310,293

8,021,490

5,895,574

5

Mills buildings on freehold land 124,228,552

415,236

124,643,788

76,265,121

4,827,514

81,092,635

43,551,153

10

Other buildings on freehold land 25,105,632

-

25,105,632

11,245,917

692,986

11,938,903

13,166,729

5

Machinery and equipment 1,088,863,770

8,530,962

1,097,394,732

658,411,854

43,496,512

701,908,366

395,486,366

10

Electric installations

and equipment 55,112,063

135,808

55,247,871

32,492,971

2,268,461

34,761,432

20,486,439

10

Gas installations 3,264,556

-

3,264,556

1,964,068

130,049

2,094,117

1,170,439

10

Office equipment 10,772,983

1,188,404

11,961,387

7,034,843

414,898

7,449,741

4,511,646

10

Furniture and fixtures 12,409,317

947,008

13,356,325

7,032,680

566,443

7,599,123

5,757,202

10

Vehicles 20,401,816

779,550

17,709,126

12,465,321

1,578,758

11,693,995

6,015,131

20

(3,472,240)

(2,350,084)

1,361,603,454

11,996,968

1,370,128,182

814,623,972

54,285,914

866,559,802

503,568,380

(3,472,240)

(2,350,084)

Held under finance lease

Vehicles 9,385,760

3,498,000

12,883,760

2,533,967

1,955,511

4,489,478

8,394,282

20

2011 Rupees 1,370,989,214 15,494,968 1,383,011,942 817,157,939 56,241,425 871,049,280 511,962,662

(3,472,240) (2,350,084)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2011 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Annual

rate of

Dep.

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43


2012

Note Rupees

14.1.1 Depreciation for the year has been allocated as under:

Cost of goods manufactured 26.1 61,348,566Administrative expenses 28 5,718,469

Total depreciation on property, plant and equipment

and investment property 67,067,035

It includes depreciation on investment properties amounting to Rs. 371,502 (2011: Rs. 391,055).

14.1.2 Detail of disposal of assets

Accumulated Written Sale Mode

Depreciation Down Value Proceed of disposal

69,880

64,814

5,066

10,000 Negotiation

68,500

6,667

61,833

66,000 Negotiation

66,500

-

66,500

66,500 Negotiation

436,082

332,661

103,421

160,000

Negotiation

1,764,000

645,324

1,118,676

1,293,103 Negotiation

2,404,962 1,049,466 1,355,496 1,595,603

3,472,240

2,350,084

1,122,156

1,625,000

2012

Note Rupees

14.2 Capital work-in-Progress

Civil work 14.2.1 438,371

Machinery and electrical installations 14.2.2 19,478,702

19,917,073

14.2.1 Civil work

Opening balance 15,861,053

Additions during the year 16,321,970

32,183,023Transfer to mills building on free hold land (31,744,652)

Transfer to property, plant and equipment during the year -

Closing balance 438,371

14.2.2 Machinery and electrical installations

Opening balance 139,475,841Additions during the year 78,996,654

218,472,495Transfer to property, plant and equipment during the year (198,993,793)

Closing balance 19,478,702

2011

Rupees

51,048,1345,584,346

56,632,480

15,861,053

139,475,841

Description of

AssetsCost Particulars of buyers

Mr. Jahangir Khan House No 65-11-B Liaqatabad Dak Khana

Karachi

New Hampshir Insurance Co

7th Floor Dawood Centre M.T. Khan Road Karachi

New Hampshir Insurance Co

7th Floor Dawood Centre M.T. Khan Road Karachi

155,336,894

Akhlaq Hussain -

House No 382 Street No.5 Azam Basti Karachi

Dawood Textile Printing Industries Pvt Ltd

Sargodha Road Faisalabad

2011

Rupees

-

16,511,704

16,511,704

(650,651)

15,861,053

-

759,531141,859,054

142,618,585(3,142,744)

139,475,841

Vehicle

Vehicle

Vehicle

Vehicle

Machinery &

Equipment

Rupees 2012

Rupees 2011

NAGINA

NAGINA GROUP

NAGINA

ANNUAL REPORT 2012

44

15. INVESTMENT PROPERTIES

DEPRECIATION Written down Annual

As at As at As at As at value as at Rate

July 1, Additions / June 30, July 1, For the June 30, June 30, of Dep.

2011 (deletions) 2012 2011 year 2012 2012 %

Land in Sheikhupura - freehold 751,338 - 751,338 - - - 751,338 -

Land in Lahore - free hold 8,300,631

-

8,300,631

-

-

-

8,300,631

-

17,539,312

-

17,539,312

10,109,275

371,502

10,480,777

7,058,535

5%

2012 Rupees 26,591,281

-

26,591,281

10,109,275

371,502

10,480,777

16,110,504

2011 Rupees 26,591,281

-

26,591,281

9,718,220

391,055

10,109,275

16,482,006

15.1

2012Rupees

16. LONG TERM INVESTMENTS

- Investment in associated undertakings

Carrying value as of July 1, 2010 - Add: Share of profit of associate -

Less: Dividend received -

Less: Reversal of share of surplus on revaluation

of land / capital reserves -

-

Carrying value of shares distributed to owners

as dividend in specie -

Carrying value of shares sold in open market -

-

16.1

2012

Rupees

16.2 Carrying value of shares distributed to owners as dividend in specie -

Market value -

Loss on investments in associates distributed to owners as specie dividend -

16.3 Carrying value of shares sold in open market -

Market value -

Loss on sale of investments in associates -

(115,437,304)

(2,926,505)

Note

COST

The free hold land was revalued by the professional valuer M/s Surval on August 08, 2012. Fair value of land in Sheikhupura is Rs. 27.75 (2011: Rs. 20.35) million and of land and building in Lahore - free hold is Rs.255.348 (2011: Rs. 261.815) million.

Building on free hold land

190,341,559

(185,235,054)

(5,106,505)

2011Rupees

181,253,083 26,892,347

(13,036,389)

(4,767,482)

(185,235,054)

-

The shareholders of the Company in the annual general meeting held on October 28, 2010 approved specie dividend at the rate of 15 ordinary shares of Ellcot Spinning Mills Limited (ESML) for every 100 shares of the Company and 5 ordinary shares of Prosperity Weaving Mills Limited (PWML) for every 100 shares of the Company.

69,797,750

(5,106,505)

2,180,000

Rupees

2011

in Lahore

16.1 & 16.2

16.3

NAGINA

NAGINA GROUP

NAGINA

45


2012

Note Rupees

17. STORES AND SPARES

In hand

Stores 11,632,400 8,268,241

Spares 9,596,215

8,967,036

21,228,615 17,235,277

18. STOCK-IN-TRADE

Raw material in hand 443,006,183

415,032,539

Work in process 41,643,960

42,947,628

Finished goods 41,704,826

97,992,671

Waste 1,711,968

3,926,719

528,066,937

559,899,557

19. TRADE DEBTS

Considered good:

Foreign - secured 19.1 394,341,772

19,480,201

Local - unsecured 19.2 5,275,830

7,354,807

399,617,602

26,835,008Considered doubtful 2,526,149 3,507,469

402,143,751 30,342,477

Less: Provision for doubtful debts (2,526,149)

(3,507,469)

399,617,602 26,835,008

19.1 These are secured against letters of credit in favour of the Company.

19.2 Trade debts are non-interest bearing and are generally on 30 to 45 day terms.

19.3

19.4

2012 2011

Rupees Rupees19.4.1 Aging of past due but not impaired

46-90 days - -

91-180 days 32 34,415

181 days and above 1,852,309 2,080,697

1,852,341 2,115,112

Trade debts consist of a large number of customers, spread across geographical areas. Ongoing credit evaluation is

performed on the financial condition of credit customers.

Trade debts include debtors with a carrying amount of Rs. 1.852 million (2011: 2.115 million) which are past due at the

reporting date, against which the Company has not made a provision as there has not been a significant change in credit

quality and the amount is considered recoverable.

2011

Rupees

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ANNUAL REPORT 2012

46

2012 2011

Note Rupees Rupees

20. LOANS AND ADVANCES

Loans:

Employees 91,015 125,154

Advances:

Income tax 20.1 12,064,314

11,198,054

Suppliers 11,912,082 11,666,650

Expenses 162,784 72,669

Letters of credit 955,917

13,676,940

25,186,112

36,739,467

20.1 Movement of advance tax is as under: -

Opening balance 11,198,054

1,662,722

Paid during the year 38,886,432

60,519,526

Adjusted during the year -

2,500,000

Provision for tax (37,995,558) (50,958,207)

Reversal of prior years (24,614) (2,525,987)

12,064,314 11,198,054

21. SHORT TERM DEPOSITS AND PREPAYMENTS

Short term deposits 38,100 38,100

Prepayments 1,508,859 1,949,041

1,546,959

1,987,141

22. OTHER RECEIVABLES

Income tax refundable 892,665 892,665Other receivables 3,370,014 12,384,347

4,262,679 13,277,012

Considered good

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47


23. OTHER FINANCIAL ASSETS

Fair value through profit or loss - held for trading

Investments in open ended fund

2012 2011 2012 2011 2012 2011

-

60,154,848 - 154,848 -

903,293 -

10,007,859

-

7,859

-

1,463 1,039,248

151,025

107,021,733

151,025

1,015,375

1,152 1,622,992

115,563

162,643,592

115,563

2,643,592

6,492 36,445,114

65,257

377,549,514

65,257

4,549,514

195 505,836

19,859

50,690,933

19,859

690,933

2012 2011

Rupees Rupees

24. CASH AND BANK BALANCES

Cash with banksIn current accounts 61,416,212 6,412,426In deposit accounts 81 81

Cash in hand 2,348 2,648

61,418,641 6,415,155

NAFA Government Securities Fund (2012: Bonus Units) (2011: Cost Rs. 373,000,000)

MCB Cash Management Optimizer (2012: Bonus Units) (2011: Cost Rs. 50,000,000)

1,497,404

Faisal Saving Growth Fund (2012: Bonus Units) (2011 : Cost Rs. 106,006,358)

UBL Liquidity Fund (2012: Bonus Units) (2011: Cost Rs. 160,000,000)

NIT Government Bond Fund (Cost : Rs. 10,000,000) (2011: Nil)

70,514,411

697,905,772 514,411

8,899,41439,613,190

[Total Cost -Rs. 70,000,000 (2011: 689,006,358)]

584,809 HBL Money Market Fund (Cost : Rs. 60,000,000) (2011: Nil)

Unrealized gain on

Number of Units

------------------------------------ Rupees ----------------------------------------

Fair value revaluation of investments

NAGINA

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ANNUAL REPORT 2012

48

25. SALES

Local Export 2012 2011

Note

Yarn 25.1 & 25.2 248,107,313 3,321,190,946 3,569,298,259 4,353,500,905

Waste 39,236,128 66,234,829 105,470,957 243,239,480

287,343,441

3,387,425,775

3,674,769,216

4,596,740,385

25.1 Export sales includes net exchange loss of Rs. 9,118,923 (2011 : Net gain Rs.75,677,982).

25.2 Export sales includes indirect export sales of Rs. 94,215,470 (2011 : Rs.167,970,840).


26. COST OF GOODS SOLD

Opening stock - finished goods 101,919,390

121,310,242

Cost of goods manufactured 26.1 2,976,793,318

3,664,477,163

Purchase of finished goods 22,840,169

24,126,964

3,101,552,877

3,809,914,369

Closing stock - finished goods (43,416,794)

(101,919,390)

3,058,136,083

3,707,994,979

26.1 Cost of goods manufactured

Raw material consumed 26.1.1 2,331,974,495

3,126,035,087 Packing material consumed 56,578,274 48,032,128 Stores and spares consumed 63,294,528 48,298,259 Salaries, wages and benefits 26.1.2 195,313,885 187,893,628 Fuel 235,558,813

188,783,312

Rent, rates and taxes 378,529

378,619

Insurance 8,178,176

9,425,091 Repairs and maintenance 5,422,759

1,725,299 Depreciation 14.1.1 61,348,566

51,048,134 Doubling charges 13,248,310

20,219,856 Other manufacturing overheads 4,193,315

3,693,932

2,975,489,650

3,685,533,345

Work in process

Opening stock 42,947,628

21,891,446

Closing stock (41,643,960)

(42,947,628)

1,303,668

(21,056,182)

2,976,793,318

3,664,477,163

26.1.1 Raw material consumed

Opening stock 415,032,539 260,073,238 Purchases 2,359,948,139 3,280,994,388

2,774,980,678 3,541,067,626 Closing stock (443,006,183) (415,032,539)

2,331,974,495 3,126,035,087

26.1.2 It includes Rs. 4,143,933 (2011 : Rs.9,978,438) in respect of staff retirement benefits.

- - - - - - - - - - - -- - -- - - - - - - - Rupees - - - - - - - - - - - - - -- - - - - - - - -

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2012 2011

Note Rupees Rupees

27. DISTRIBUTION COST

Freight 42,444,039 41,415,384

Commission:-Local 870,659 1,142,729-Export 37,109,169 58,264,899

Stamp duty 4,445,254 6,423,153Travelling 4,974,949 1,759,501Export development surcharge 8,193,719

10,254,572

Quality claims 1,599,324

96,083

Distribution expense 774,000

715,577

Other 9,265,805

8,581,157

109,676,918

128,653,055

28. ADMINISTRATIVE EXPENSES

Directors' remuneration, fees and benefits 4,299,000 3,870,000Staff salaries and benefits 28.1 27,733,258 27,859,211Travelling and conveyance 1,298,002

1,453,889

Printing and stationery 1,211,798

1,631,549

Postage and telephone 2,818,069

2,807,942

Fees, subscription and periodicals 813,804

785,091

Legal and professional 559,412

1,241,488

Advertisement 52,967 66,828 Utilities - net of recoveries 3,532,786 2,909,002 Rent, rates and taxes 2,868,280 2,752,328 Insurance 1,292,726

1,149,587

Auditors' remuneration 28.2 802,000

973,000

Repairs and maintenance 3,988,199

4,526,942

Vehicles running and maintenance 7,976,078

6,326,229

Entertainment 1,121,441

1,132,017

Charity and donations 28.4 1,000,000

-

Depreciation 28.3 & 14.1.1 5,718,469

5,584,346

Other 525,590

595,863

67,611,879 65,665,312

28.1 It includes Rs.760,130 (2011: Rs.1,830,363) in respect of staff retirement benefits.

2012 2011Rupees Rupees

28.2 Auditors' remuneration

Annual audit fee 500,000

500,000

Half yearly review fee 130,000

150,000

Out of pocket 59,500

50,000

Other certifications 37,500 92,500

Tax advisory services 75,000 180,500

802,000 973,000

28.3 It includes depreciation on investment properties amounting to Rs. 371,502 (2011 : Rs. 391,055).

28.4 Donations were not made to any donee in which a director or his/her spouse had any interest at any time during the year.

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ANNUAL REPORT 2012

50


29. OTHER OPERATING EXPENSES

Workers' Profit Participation Fund 19,603,698 24,915,607Workers' Welfare Fund 13.1 (c) - 8,699,232Other government expenses - infrastructure fees - 12,755,891

19,603,698

46,370,730

30. OTHER OPERATING INCOME

Income from financial assets

Gain on sale of other financial assets - held for trading 32,785,085

5,761,741Profit on bank deposits -

20,443Unrealized gain on revaluation of investments - held for trading 514,412

8,899,414

Income from assets other than financial assets

Scrap sales 1,281,996

1,721,770Gain on disposal of property, plant and equipment 240,108

502,844Rental income from investment property 11,844,806

10,912,776

46,666,407

27,818,988

31. FINANCE COST

Mark-up / interest on:Debentures 380,599

380,075

Long term loans 57,135,577

39,685,066Liabilities against assets subject to finance lease 848,640 1,202,245Short term borrowings including bills discounting 26,823,579 39,689,049Workers' Profit Participation Fund 8,056,727

1,679,362

Bank charges and commission 9,128,980

12,237,838

102,374,102

94,873,635

32. PROVISION FOR TAXATION

Current - for the year 37,995,558

50,958,207- for prior year 24,614

(3,073,993)Deferred (3,153,569)

(24,939,449)

34,866,603

22,944,765

32.1 TAXATION

Relationship between tax expense and accounting profit:

Accounting profit before tax 364,032,943

489,530,200

Tax @ 35% (2011: 35%) 127,411,530

171,335,570

Effect of:

Income chargeable to tax at reduced rates (89,312,316) (149,819,230)

Reversal of previously recognised deferred tax (5,444,368) 509,780

Reversal of prior year tax 24,614 3,073,993

Deferred tax impact of tax credit 2,187,143 -

Tax on income not included in accounting profit - (2,155,348)

34,866,603 22,944,765

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51


33. EARNINGS PER SHARE - basic and diluted

2012 2011

Profit after taxation Rupees 329,166,340 466,585,435

Weighted average number of ordinary shares 18,700,000 18,700,000

Earnings per share Rupees 17.60

24.95

34. REMUNERATION OF DIRECTORS AND EXECUTIVES

2012 2011 2012 2011 2012 2011

Remuneration 2,539,200

2,226,975

720,000

660,000

8,683,200

7,308,000

House rent allowance 634,800

533,025

324,000

297,000

3,907,440

3,288,600

Other allowances -

-

36,000

33,000

434,160

365,400

Meeting fee -

-

45,000

120,000

-

-

3,174,000

2,760,000

1,125,000

1,110,000

13,024,800

10,962,000

Number of persons 1 1 2 4 12 11

34.1

34.22012 2011

Rupees Rupees35. CASH GENERATED FROM OPERATIONS

Profit before taxation 364,032,943

489,530,200

Adjustments for :

Depreciation 67,067,035

56,632,480

Provision for gratuity 4,904,063

11,808,801

Provision of impairment on stock-in-trade -

152,457,036

Gain on disposal of property, plant and equipment (240,108)

(502,844)

Unrealized gain on revaluation of investment (514,411)

(8,899,414)

Share of profit from associated undertakings -

(26,892,347)

Gain on sale of investments - held for trading (32,785,085)

(5,761,741)

Finance cost 102,374,102

94,873,635

Loss on investments in associates distributed to owners as specie dividend -

115,437,304

Loss on sale of Investment in Associates -

2,926,505

504,838,539

881,609,615

Decrease / (increase) in current assets;

Stores and spares (3,993,338)

(6,008,480)

Stock - in - trade 31,832,620

(309,081,667)

Trade debts (372,782,594)

35,307,308

Loans and advances 12,419,615

(21,050,661)

Short-term deposits and prepayments 440,182 (818,420) Other receivables 9,014,333 (9,041,315)

Sales tax refundable (4,124,782) 5,337,332

(327,193,964) (305,355,903)

Increase / (decrease) in current liabilities; Trade and other payables (21,754,570) 11,012,462

Cash generated from operations 155,890,005 587,266,174

Chief Executive and a Director are provided with free use of Company maintained car and Chief Executive is reimbursed with utilitiesbills.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

There is no dilutive effect on the basic earnings per share of the Company which is based on :

Director Other Executives Chief Executive

Meeting fee was paid to non-executive directors.

NAGINA

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ANNUAL REPORT 2012

52

36. TRANSACTIONS WITH RELATED PARTIES

2012 2011Relationship with the Company Nature of Transactions Rupees Rupees

Ellcot Spinning Mills Limited

Associated undertaking* Purchase of goods and services 19,053,789

167,305,793Sale of goods and services 381,653

42,484,948Rental income 480,000

480,000Dividend income -

9,999,483

Prosperity Weaving Mills Limited

Associated undertaking* Sale of goods and services 76,074,720

1,647,750Rental income 755,000

755,000Dividend income -

3,036,906

*

37. PLANT CAPACITY AND ACTUAL PRODUCTION

2012 2011 2012 2011

Kgs. Kgs. Kgs. Kgs.

Coarse 3,755,315

3,755,315

4,680,601

4,921,411

Medium 2,133,701

2,133,701

7,297,146

6,294,465Fine 256,043

256,043

27,352

153,729

6,145,059

6,145,059

12,005,099

11,369,605

2012 2011

Total number of spindles installed 46,428

46,428Total number of spindles worked 46,428

46,428Number of shifts per day 3

3Actual number of shifts in a year 1,093

1,089

38. FINANCIAL RISK MANAGEMENT

The related parties comprise of associated undertakings, directors of the Company and key management personnel. The Company inthe normal course of business carries out transactions with various related parties. The amounts due from and to related parties areshown under receivable and payables. There is no balance outstanding with or from associated undertakings. Remuneration of directorsand key management personnel is disclosed in note 34 and amount due in respect of staff retirement benefits is disclosed in note 9.Other significant transactions with related parties are as follows:

These entities should have been ceased to be associates from October 28, 2010, as the Company transferred the shares held as speciedividend to the shareholders. However, these are still treated as associates based on common directorship.

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk),credit risk and liquidity risk.

Actual ProductionProduction Capacity

It is difficult to describe precisely the production capacity in textile industry since it fluctuates widely depending on various factors suchas count of yarn spun, raw material used, spindle speed and twist. It would also vary according to the pattern of production adopted in aparticular year.

The Company’s principal financial liabilities, comprise long term financing, liabilities against assets subject to finance lease, trade andother payables, and short term borrowings. The main purpose of these financial liabilities is to raise finance for the Company’soperations. The Company's principal financial assets comprise of trade debts, advances, short-term deposits, other receivables, units ofopen ended mutual fund and cash and bank balances that arrive directly from its operations. The Company also have long termdeposits.

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38.1 Credit risk and concentration of credit risk

Name of bankShort-term Long-term

HSBC STANDARD & POOR'S B AA2Bank Al-falah Limited PACRA A1+ AAFaysal Bank Limited PACRA A1+ AAHabib Bank Limited JCR-VIS A1+ AA+National Bank of Pakistan Limited JCR-VIS A1+ AAASamba Bank Limited JCR-VIS A1 AA-Barclays Bank Limited STANDARD & POOR'S A1+ A2

Allied Bank Limited PACRA A1+ AA

Askari Bank Limited PACRA A1+ AA

Standard Chartered Bank (Pakistan) Limited PACRA A1+ AAA

Al-Baraka Bank (Pakistan) Limited PACRA A1 A

Pak Kuwait Investment Company (Pvt) Ltd. PACRA A1+ AAA

Habib Metropolitan Bank PACRA A1+ AA+

Bank of Punjab Limited PACRA A1+ AA-

MCB Bank Limited PACRA A1+ AA+

Credit risk related to receivables

38.2 Liquidity risk

Rating agency Credit rating

Customer credit risk is managed subject to the Company’s established policy, procedures and control relating to customer credit

risk management. The management monitors and limits the Company's exposure of credit risk by limiting transactions with specific

counter parties and continually assessing their credit worthiness. Outstanding customer receivables are regularly monitored and

any shipments to major export customers are generally covered by letters of credit or other form of credit insurance.

Trade debts consist of a large number of customers, spread across geographical areas. Ongoing credit evaluation is performed onthe financial condition of accounts receivable. The Company does not have any significant credit risk exposure to any singlecounterparty or any group of counterparties having similar characteristics.

The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the financial performance.

The Company is exposed to credit risk from its operating activities primarily for trade debts and other receivables, deposits withbanks and financial institutions, and other financial instruments. The credit risk on liquid funds is limited because the counterparties are banks with reasonably high credit ratings. The names and credit ratings of major banks, where the Company maintainsbank balances are as follows:

Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties fail completely to

perform as contracted. Out of the total financial assets of Rs. 561,798,174 (2011: 745,524,636), the financial assets which are

subject to credit risk amounted to Rs. 561,795,826 (2011: Rs 745,521,988). The Company manages credit risk in trade debts by

assigning credit limits to its customers and thereby does not have significant exposure to any individual customer.

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts,bank loans and finance leases. 45.7% of the Company’s financial liabilities will mature in less than one year at June 30, 2012(2011: 68%) based on the carrying value of borrowings reflected in the financial statements.

Liquidity risk reflects the Company’s inability in raising funds to meet commitments. Management closely monitors the Company’sliquidity and cash flow position. This includes maintenance of balance sheet liquidity ratios, debtors and creditors concentrationboth in terms of the overall funding mix and avoidance of undue reliance on large individual customer.

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ANNUAL REPORT 2012

54

38.2.1Liquidity and Interest Risk Table

FINANCIAL LIABILITIES

On balance sheet

Long term financing 11,827,505

19,592,416

102,009,836

321,949,711

22,947,748

478,327,216 Liabilities against assets

subject to finance lease 65,519

968,923

1,955,063

1,983,608

-

4,973,113 Short term borrowings -

-

38,918,086

-

-

38,918,086 Interest / mark-up payable - non interest bearing -

-

16,289,809

-

-

-

-

-

-

16,289,809 Trade and other payables - non interest bearing 100,709,107

100,709,107

11,893,024 137,560,255 142,882,985 323,933,319 22,947,748 639,217,331

FINANCIAL LIABILITIES

On balance sheet

Long term financing 12,832,155 19,637,875 78,733,912 261,082,576 29,985,084 402,271,602

Liabilities against assets subject to finance lease 46,317 740,981 2,275,618 4,595,934 - 7,658,850

Short term borrowings - - 371,749,271 -

-

371,749,271 Interest / mark-up payable - non interest bearing -

19,834,742

-

-

-

19,834,742

Trade and other payables - non interest bearing -

111,460,166

-

-

-

111,460,166

12,878,472 151,673,764 452,758,801 265,678,510 29,985,084 912,974,631

Effective rates of interest are mentioned in respective notes to the financial statements.

38.3 Market risk

Interest rate risk

Interest rate sensitivity analysis

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s profit for theyear ended June 30, 2012 would decrease/increase by Rs. 3.584 million (2011 : Rs. 7.150 million). This is mainly attributable to theCompany’s exposure to interest rates on its variable rate borrowings.

More than 5

years - - - - - - - - - - - - - - - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - - - - - - - - - - - - -

1 - 3 months

1 - 5 yearsMore than 5

years- - - - - - - - - - - - - - - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - - - - - - - - - - - -

Less than 1

month

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities. The tables havebeen drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company canbe required to pay. The table includes both interest and principal cash flows.

3 months - 1

year

Total

1 - 3 months

3 months - 1

year1 - 5 years

Total

Interest / mark-up rate risk arises from the possibility that changes in interest / mark-up rates will effect the value of financialinstruments. The Company has significant amount of interest based financial liabilities which are largely based on variable interest/ mark-up rates, therefore the Company has to manage the related finance cost which exposes it to the risk of 1 month, 3 monthsand 6 months KIBOR. Since the impact on interest rate exposure is significant to the Company, management analyses its interestrate exposure on a regular basis by monitoring existing facilities against prevailing market interest rates and taking into accountother financing options available.

Less than 1

month

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2012 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2011 - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company'sincome or the value of its holdings of financial instruments. The objective of market risk management is to manage and controlmarket risk exposures within acceptable parameters while optimising returns.

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Foreign currency exchange risk

Foreign currency sensitivity analysis

Equity price risk management

38.4 Fair values of financial instruments

38.5 Fair value hierarchy

Level 1:

Level 2:

Level 3:

38.6 Financial Instruments by Category

The accounting policies for financial instruments have been applied for line items below:

Assets as per balance sheet

Long term deposits 1,653,300 - 1,653,300Trade debts 399,617,602 - 399,617,602Other receivables 3,370,014 - 3,370,014Loans and advances 91,015 - 91,015Short term deposits 38,100 - 38,100Other financial assets - 70,514,411 70,514,411Cash and bank balances 61,418,641 - 61,418,641

The Company's total investments constitutes investments in financial assets through profit and loss account - held for trading andthe fair values of such investments are readily quoted. These investments are categorised as level 1 investments in accordancewith the fair value method used. The fair values of such investments held were Rs.70,514,411 (June 2011: Rs 697,905,772) as atthe balance sheet date.

There were no Level 2 and Level 3 investments held during the year.

Total June 30,

2012

The fair values of the financial instruments have been analysed in various levels as follows:

At June 30, 2012, if the Rupee had weakened / strengthened by 5% against the US dollar with all other variables held constant, theCompany's profit for the year would have increased / decreased by Rs. 198,062 (2011: decreased / increased by Rs. 980,708),mainly as a result of foreign exchange gains / losses on translation of US dollar-denominated trade debts.

Held for

trading

Loans and

receivables

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in anarms length transaction, other than in a forced or liquidation sale.

inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

The carrying value of all the financial instruments reported in the financial statements approximates their fair value.

-------------------- Rupees -------------------

The Company is exposed to equity price risk arising from equity investments. If the Prices of units had increased / decreased by5% with all variables held constant, the Company's profit for the year would have increased / decreased by Rs. 3,525,721 (2011:decreased / increased by Rs. 34,895,289).

quoted prices (unadjusted) in active markets for identical assets or liabilities

There were no transfers between Level 1, 2 and 3 during the year.

inputs for the asset or liability that are not based on observable market data (unobservableinputs).

Foreign currency risk arises mainly where receivables and payables exist due to transactions with foreign undertakings andbalances held in foreign currency. However, the Company is not materially exposed to foreign currency risk on assets andliabilities. The Company enters into forward foreign exchange contract to manage the foreign currency exchange risk associatedwith the anticipated sales. As at June 30, 2012 financial assets include Rs. 3.961 million (2011: Rs. 19.614 million) and financialliabilities include Nil (2011: Nil) which are subject to foreign currency risk against US Dollars.

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Liabilities as per balance sheet

Long-term financing 357,422,495

357,422,495Liabilities against assets subject to finance lease 4,402,854

4,402,854Short-term borrowings 38,918,086

38,918,086Trade and other payables 100,709,107

100,709,107Interest / mark-up accrued on loans 16,289,809 16,289,809

Assets as per balance sheet

Long term deposits 1,821,100

-

1,821,100Trade debts 26,835,008

-

26,835,008Other receivables 12,384,347

-

12,384,347Loans and advances 125,154

-

125,154Short-term deposits 38,100

-

38,100Other financial assets -

697,905,772

697,905,772Cash and bank balances 6,415,155

-

6,415,155

Liabilities as per balance sheet

Long-term financing 402,271,602 402,271,602Liabilities against assets subject to finance lease 7,658,850

7,658,850

Short-term borrowings 371,749,272

371,749,272

Trade and other payables 111,460,166

111,460,166Interest / mark-up accrued on loans 19,834,742 19,834,742

39. CAPITAL RISK MANAGEMENT

40. OTHERS

40.1 Non cash transactions

----------------- Rupees ----------------

The objective of the Company when managing capital is to safeguard the Company’s ability to continue as a going concern so that it cancontinue to provide returns for shareholders and bene?ts for other stakeholders and to maintain a strong capital base to support thesustained development of its businesses.

----------------------- Rupees ------------------------

Financial

Liabilities

measured at

amortized

cost

Financial

Liabilities

measured at

amortized

cost

Total June 30,

2012

Additions to vehicles during the year amounting to Rs. NIL (2011: Rs 3,498,000 ) were financed by new finance leases. This acquisitionwill be reflected in the cash flow statements over the term of the finance lease via lease payments.

Total June 30,

2011----------------- Rupees ----------------

Loans and

receivables

Held for

trading

The Company is not subject to any externally imposed capital requirements.

Total June 30,

2011

The capital structure of the Company consists of share capital and reserves as well as debts of the Company. The Company managesits capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. Inorder to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to the shareholders or issue newshares. The Company's overall strategy remains unchanged from 2011.

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return tostakeholders through the optimisation of the debt and equity balance.

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41. DATE OF AUTHORIZATION FOR ISSUE

42. GENERAL

Figures have been rounded off nearest to Rupee.

These financial statements were authorized for issue on September 27, 2012 by the Board of Directors of the Company.

40.2 Subsequent events

The Board of Directors in its meeting held on September 27, 2012 proposed to distribute to the shareholders of the Company a cash dividend at the rate of 50 percent ( i.e. Rs. 5 per ordinary share).The dividend is subject to the approval by the shareholders of the Company in its forthcoming Annual General Meeting. These Financial Statements do not reflect the effect of such dividend which will be accounted for in the financial statements of the Company subsequent to the year end.

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FORM OF PROXY

The Secretary,


2nd Floor, Shaikh Sultan Trust Building No. 2,

26-Civil Lines, Beaumont Road,

Karachi – 75530

I/We ______________________________________________________ of _________________ being member(s) of

NAGINA COTTON MILLS LTD., and holder of ____________________ Ordinary Shares as per Share Register Folio

No. ________________ (In case of Central Depository System Account Holder A/c No. _______________ Participant

I.D. No. __________________________) hereby appoint __________________________________________ of

__________________ who is member of the Company as per Register Folio No. _______________________ (In case

of Central Depository System Account Holder A/c No. _______________ Participant I.D. No. _____________-

_____________) or fai l ing him/her ______________________________________________ of

__________________ who is member of the Company as per Register Folio No. _____________________ (In case of

Central Depository System Account Holder A/c No. _______________ Participant I.D. No. ________________) as

my/our proxy to vote for me/us and on my/our behalf at the 45th Annual General Meeting of the Company to be held on

October 30, 2012 and at any adjournment thereof.

(Signature should agree with the

Specimen signature registered

with the Company)

Signed at ____________________ this the ______________ day of ___________________ 2012

NOTE:

1. If a member is unable to attend the meeting, he/she may sign this form and send it to the Secretary so

as to reach him not less than 48 hours before the time of holding the meeting.

2. Members through CDC appointing proxies must attach attested copy of their Computerized National Identity Card (CNIC) with the proxy form.

3. The Shareholders through CDC, who wish to attend the Annual General Meeting are requested to please bring, original CNIC with copy thereof duly attested by their Bankers, Account number and Participant I.D number for identification purpose.

4. In case of corporate entity, certified copy of the Board of Directors’ resolution / power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form of the Company.

Affix Rs. 5/=-

Revenue Stamp

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