GHAZI FABRICS INTERNATIONAL LIMITED

CONTENTS

COMPANY PROFILE 2

VISION STATEMENT, MISSION STATEMENT 3

STATEMENT OF ETHICS & BUSINESS PRACTICES 4

NOTICE OF ANNUAL GENERAL MEETING 6

DIRECTOR’S REPORT 8

PATTERN OF SHAREHOLDING 14

SIX YEARS FINANCIAL STATISTICAL SUMMARY 16

FINANCIAL HIGHLIGHTS 17

STATEMENT OF VALUE ADDITION 18

STATEMENT OF COMPLIANCE 19

REVIEW REPORT TO THE MEMBERS ON STATEMENT 21

OF COMPLIANCE WITH BEST PRACTICES OF CODE OF

CORPORATE GOVERNANCE

AUDITOR’S REPORT TO THE MEMBERS 23

BALANCE SHEET 24

PROFIT AND LOSS ACCOUNT 25

STATEMENT OF COMPREHENSIVE INCOME 26

STATEMENT OF CASH FLOWS 27

STATEMENT OF CHANGES IN EQUITY 28

NOTES TO THE ACCOUNTS 29

PROXY

Annual Report 2016

 COMPANY PROFILE

Board of directors Share registrar

Mrs. Azra Yasmin M/s. Corplink (Pvt.) Ltd.

Chairperson Wings Arcade, 1-K, Commercial, Model Town,
Lahore
Mohammad Arshad Chaudhry
Chief Executive/ Director Legal Advisor

Kamran Arshad Raja Muhammad Akram & Co.,

Corporate Legal Consultants & Advocates
Rizwan Arshad
33-C, Main Gulberg, Lahore
Fareeha Arshad
Wajeeha Haaris Bankers
Muhammad Imran Rasheed
United Bank Limited
Audit Committee Habib Bank Limited

Muhammad Imran Rasheed

Chairman/ member Registered Office

Rizwan Arshad 8-C, E-III, Gulberg-III, Lahore – 54660

Member 042-35764026-28, Fax: 042-35764032
www.ghazifabrics.com
Fareeha Arshad
Member
Mills
Human Resource & Remuneration
Committee 46- K. M. Multan Road, Bhaipheru, Distt. Kasur.

Mrs. Azra Yasmin

Chairperson/ member

Mohammad Arshad Chaudhry

Member
Wajeeha Haaris
Member

Company Secretary

Nauman Iqbal, FCA

Chief Financial Officer

Abid Rafi

Internal Auditor

Nasir Imran Elahi, ACA

Auditors

M/s. Qadeer & Company

Chartered Accountants
Lahore.

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

VISION AND MISSION STATEMENT

VISION STATEMENT
A modern dynamic industrial unit,
which is a true model of socially
responsible and professionally managed
successful business enterprise.

MISSION STATEMENT

Ghazi Fabric International Ltd., strives to excel

in the global competitive environment as the most
progressive and quality-oriented company in terms
of industry benchmarks, profitability and stake
holders interest. To realize our mission, we firmly
believe in continuous process of balancing,
modernization and replacement of our technology;
commitment in developing innovative products, services
and human resources; and the betterment of all those
involved directly or indirectly with the company.

Annual Report 2016

 STATEMENT OF ETHICS AND BUSINESS PRACTICES

Annual Report 2016

GHAZI FABRICS INTERNATIONAL LIMITED

Annual Report 2016

 NOTICE OF 27th ANNUAL GENERAL MEETING.

NOTICE is hereby given that the 27th Annual General Meeting of the Shareholders of GHAZI FABRICS
INTERNATIONAL LTD. will be held on Monday the 21st November, 2016 at 10:30 a.m. at Qasr-e-Noor, 9-E-2,
Gulberg-III, Lahore to transact the following business:-

ORDINARY BUSINESS:
1. To confirm the minutes of 26th Annual General Meeting of the members of the Company held on Saturday the 31st
October, 2015.

2. To receive, consider and adopt the audited accounts of the Company for the year ended June 30, 2016 together
with the Directors' and Auditors' Reports thereon...

3. To appoint Auditors and fix their remuneration for the year ending June 30, 2017.The present auditors M/s. Qadeer &
Co., Chartered Accountants, retire and being eligible has offered themselves for reappointment.

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

SPECIAL BUSINESS:
5. To Consider and if deemed fit, pass a special resolution to amend the Articles of Association of the Company to set
out the members' right to exercise their votes by electronic means.

6. To seek the consent of shareholders for transmission of Annual Audited Accounts through CD/DVD/USB instead
of transmitting the said accounts in hard copies in compliance with Securities and Exchange Commission of
Pakistan's SRO No.470(1)/2016 dated May 31,2016.

A statement of material facts under section 160(1)(b) of the Companies Ordinance 1984 covering the above
mentioned special business is being sent to the shareholders along with a copy of this notice.
by order of the Board

L A H O R E: (NAUMAN IQBAL)
October 31, 2016. Company Secretary

NOTES:-

I. Share Transfer Books of the Company will remain closed from 15th November, 2016 to 21st November, 2016 (both
days inclusive).

II. A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote instead of him/her.
Proxy Forms must be deposited at the Company's Registered Office not less than 48 hours before the time for
holding the meeting.

III. Shareholders whose shares are deposited with CDC must bring their Original Computerized National Identity
Card or Passport alongwith Participant's ID number and their account number at the time of attending the
meeting to prove identity and in case of proxy must enclose an attested copy of CNIC. Representatives of
Corporate Members should bring the usual documents required for this purpose.

IV. Members are requested to provide by fax or courier of their latest Computerized National Identity Card Number
or Passport Number if foreigner (unless it has been provided earlier) to enable the Company comply with relevant
law.

V. Shareholders are requested to notify the change in their addresses, if any, immediately.

VI. In pursuance of the directions given by SECP vide SRO 787 (1)/ 2014 dated 8 September 2014, those shareholders
who desire to receive Annual Financial Statement in future through Email instead of receiving the same by Post are
advised to give their formal consent along with their valid email address on a standard request from which is
available at the Company's website i.e. www.ghazifabrics.com and send the said form duly filled in and signed along
with copy of his /her /its CNIC / Passport to the Company's registered address.
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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

Statement of Material Facts under Section 160(1)(b) ofThe Companies Ordinance 1984.

Item No. 5 of the Notice

Amendment in Articles of Association regarding E-Voting

SECP has issued The Companies (E-Voting) Regulations, 2016.These Regulations provide members with a right to vote at
general meetings through electronic means, subject to satisfaction of certain conditions, including the amendment of
Articles of Association so as to stipulate that in case of E-Voting both members and non-members can be appointed as
proxy.
For the purpose of incorporation the facility of E-Voting in the Articles of Association of the Company, it is proposed that
the following special resolution be passed to amend Articles of Association.

Resolved that
a. Article 66 be replaced with

A member duly registered shall be entitled to be present or to vote on any question either personally or by
proxy, or as proxy for another member, or to be reckoned in a quorum, at any General Meeting. In case of E-
voting voters may appoint either members or non-members as proxy.

b. Article 67 be replaced with

Votes may be cast either, personally or by proxy or electronically. Provided that no company shall vote by proxy
as long as a resolution of the board of directors in accordance with Section 162 of the Ordinance is in force.

c. The following new Article 70A be and hereby inserted after Article 70.

An instrument appointing a proxy for the purpose of E-Voting shall be in the following form, and shall be
deposited in writing with the Company at its registered office or through email at the email address of the
Company provided for this purpose, at least ten (10) days prior to the date of general meeting.

I/We _______________ of _______________ being a member of Ghazi Fabrics International Limited, holder of
_______________ ordinary share(s) as per registered folio/CDC investor account number _______________
hereby opt for E-Voting through intermediary and hereby consent the appointment of execution officer
_______________ as proxy and will exercise E-Voting as per The Companies (E-Voting) Regulations, 2016 and hereby
demand for poll for resolutions.
My secured email address is _______________ please send login details, password and electronic signature through
email.

Further Resolved that the Chief Executive/Directors and Company Secretary be and is hereby authorized and
empowered to fulfill all legal, corporate and procedural formalities to give effect to these resolutions and to do or cause
to be done all acts, deeds and things that may be necessary or required for alteration of the Company's Articles of
Association.

Further Resolved that in case of any omission or mistake if pointed out by the Commission (SECP) and any other
competent authority in the aforesaid resolutions the Company Secretary be and is hereby authorized to make necessary
corrections as permitted under the law in letter and spirit.

Item No. 6 of the Notice

Securities and Exchange Commission of Pakistan through SRO No.470 (1)/2016 dated May 31, 2016 has allowed
companies to circulate the annual audited accounts to its members through CD/DVD/USB at their registered address
after approval by members.The Company shall supply hard copies of the annual audited accounts to the shareholders, on
demand, at their registered addresses, free of cost, within one week of such demand. For the convenience of its members,
the company shall place on its website a standard request form, for despatch of annual audited accounts in hard copy
instead of sending the same through CD/DVD/USB, along with postal and email address.

Annual Report 2016

 DIRECTORS' REPORT

The directors of your Company are hereby present the annual report of the Company along-with the audited financial
statements for the year ended June 30, 2016.
In compliance with the Code of Corporate Governance, these financial statements have been endorsed by the Chief
Executive Officer and Chief Financial Officer of the Company, recommended for approval by the Audit Committee of the
Board and approved by the Board of Directors for presentation.
The financial results for the year under review along-with comparative figures are presented herewith to have cursory
look at the company operating performance;
2016 2015
R u p e e s (000)
Sales 4,819,932 5,114,903
Gross profit 172,679 298,953
Operating profit/(loss) (85,857) 27,871
Financial charges (149,386) (208,876)
(Loss)/ profit after tax (269,364) (182,990)
(Loss)/ earning per share (EPS) Rs. (8.25) (5.61)
The company has not declared dividend due to incurring of losses.
Financial and operational performance:
As the above figure show, company has posted after tax loss of Rs.269.34 million as compared to a loss of Rs.182.99
million last year.This is the result of depressed cotton yarn demand from Chinese as well as in local market.
The shortage of raw cotton during this period and relatively high prices of available stocks contributed significantly to the
difficulties. Moreover, increase in minimum wages and the imposition of Universal Obligation Surcharge, Debt Servicing
Surcharge and Gas Infrastructure Development Cess (GIDC) contributed significantly to the Company's loss.
The Textile sector had to face deprivation with intensified power outages and gas shortages bearing further load due to
higher rates which affected the performance of sector as a whole and compelled the units to run under capacity further
increase their cost of production. Due to strong regional competition and devaluation of the US Dollar, the sector could
not enjoy the benefit of GSP plus status awarded in FY 2014.
Market review
Export sales of Pakistani products are declining in the stagnant global economy due to weak demand and unsold cotton
stocks worldwide especially in China. Increasing shortages in power and gas supply particularly in the Punjab region along-
with upsurge in overhead costs due to high fuel and power costs is adversely affecting production activities, pushing up
input costs, and eroding margins.
Future prospects
In the current scenario, the revival of domestic textile industry is largely dependent on continuous availability of power
and gas in the country.
We will continue to explore and tap emerging and new market opportunities in the sector. Pakistan is the fourth largest
producer and third largest consumer of cotton, in addition to being one of the largest exporter of cotton yarn in the
world. Cotton sector along-with textile and apparel industry, account for 11 percent of the country GDP and 60 percent
of the country's export value, while employing 35 percent of the industrial work force.An Important sector for the local
economy and future prospects for country linked with the progress of textile chain, hence, will remain in focus for all
stakeholders.
The cost and availability of energy remains the biggest challenge for the company. Keeping view the energy shortage and
gas outages the Company has successfully installed 9.5 MW HFO based power house during the year which will
contribute successfully towards the optimal usage of Company's production capacities which would other-wise remain
idle. Increase in cost of production is damaging the competitiveness of local product in the international market. The
company is trying its best to meet these challenges through improvement in product development, marketing efforts and
working on energy efficiency measures.
Board of Directors and Management is fully committed to make this project successful.
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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

Related parties
The transactions between the related parties were carried out at arm's length prices determined in accordance with the
comparable uncontrolled prices method.The Company has fully complied with the best practices on transfer pricing as
contained in the listing regulations of the stock exchanges in Pakistan.
Health, Safety and Environment (HSE)
Your Company take all possible measures to ensure that all our employees as well as communities within which we
operate remain safe at all time. Environmental protection is a top priority on company's SHE agenda.The company ensures
that its production processes are eco friendly and efficient. We constantly try and improve energy efficiencies both at
production facilities and in our offices.
Your Company has also obtained BCI Certification (Better Cotton Initiative) besides holding OEKO-TEX Certificate
(Eco-Friendly Cotton).
Compliance with Code of Corporate governance
The management is fully aware of the company's obligation for compliance with as incorporated in the Listing Regulations
of the Pakistan Stock Exchange and steps are been taken for its effective implementation within the allowed time frame
work.The various statements, as required by the Code, are given below:
1. Financial statements prepared by the management represent fairly and accurately Company's state of affairs,
results of its operations, cash flows, and changes in equity,
2. Proper books of accounts have been maintained,
3. Appropriate accounting policies have been consistently applied in the preparation of financial statements and
accounting estimates are based on reasonable and prudent judgment.
4. International Financial Reporting Standards as applicable in Pakistan have been followed in the preparation of
financial statements.
5. System of internal control is sound in design, has been effectively implemented and being monitored
continuously. On-going review will continue in future for further improvements in controls.
6. The Company has sound potentials to continue as going concern.
7. Financial highlights for the last six years are annexed
8. There has been no material departure from best practices of corporate governance.
9. Transactions undertaken with related parties during the financial year have been ratified by the Audit Committee
and approved by the Board.
10. During the year under review, four meetings of the Boards and six meeting of the Audit Committee whereas one
meeting of Human Resource and Remuneration Committee were held and following were in attendance:

Sr. # Attendance in meetings Board Audit HR & Remuneration

Committee Committee
1. Mrs. Azra Yasmin 4 0 1
2. Mohammad Arshad Chaudhry 4 0 1
3. Kamran Arshad 4 0 0
4. Rizwan Arshad 4 6 0
5. Fareeha Arshad 4 6 0
6. Wajeeha Haaris 4 0 1
7. Muhammad Imran Rasheed 4 6 0

Annual Report 2016

 11. To the best of our knowledge, directors, chief executive, CFO and Company Secretary, Company's auditors, their
spouses and minor children have not undertaken any trading of company's shares.
Auditors
The present auditors M/s. Qadeer & Company, Chartered Accountants retire and being eligible have offered themselves
for reappointment.The Audit Committee has recommended their reappointment.
Board's Performance Evaluation
The Board has evaluated the individual performance of Directors as per established mechanism.
CEO's Performance Evaluation
During the year, the Human Resource and Remuneration Committee of the Board evaluated the performance of the CEO.
Combined pattern of CDC and physical shareholdings
Combined pattern of CDC and physical shareholding is annexed to the directors' report.
Acknowledgement
The Directors of your Company would like to place on record their deep appreciation for support of customers, bankers,
regulators and shareholders for their support and hope that this cooperation and supports will also continue in future.
The Directors of your Company would also like to express their appreciation for the services, loyalty and efforts being
continuously rendered by the executives, staff members and workers of the Company and hope that they will continue to
do so in future as well.

For and on behalf of the Board

Lahore (Mohammad Arshad Chaudhry)

October 24, 2016 Chief Executive
10

Annual Report 2016

GHAZI FABRICS INTERNATIONAL LIMITED

11
12

Annual Report 2016

GHAZI FABRICS INTERNATIONAL LIMITED

13
 PATTERN OF SHAREHOLDING
As At June 30, 2016

NUMBER OF H O L D I N G S T OT A L
SHAREHOLDERS FROM TO SHARES HELD
555 1 100 50,812
3,450 101 500 1,581,798
375 501 1,000 354,685
310 1,001 5,000 785,999
45 5,001 10,000 358,747
16 10,001 15,000 196,900
5 15,001 20,000 87,700
4 20,001 25,000 88,200
3 25,001 30,000 85,100
3 30,001 35,000 101,000
1 35,001 40,000 35,500
1 40,001 45,000 43,400
2 55,001 60,000 118,900
1 65,001 70,000 68,000
1 95,001 100,000 100,000
1 120,001 125,000 124,500
1 145,001 150,000 150,000
1 260,001 265,000 262,000
1 270,001 275,000 270,200
1 275,001 280,000 277,000
1 640,001 645,000 641,459
1 875,001 880,000 877,200
2 3,220,001 3,225,000 6,447,000
1 3,225,001 3,230,000 3,229,500
1 16,295,001 16,300,000 16,300,000
4,783 32,635,600
Categories of sharehoders Shares held Percentage
Directors, Chief Executive Officers 16,844,000 51.6123%
and their spouse and minor children
Associated Companies, undertakings 0 0.0000%
and related parties. (Parent Company)

NIT and ICP 12,000 0.0368%

Banks Development, Financial 26,600 0.0815%
Institutions, Non Banking Financial
Institutions
Insurance Companies 124,500 0.3815%
Modarabas and Mutual Funds 1,100 0.0034%
Shareholders holding 10% and more 16,300,000 49.9455%
General Public
Local 9,123,304 27.9551%
Foreign 6,453,500 19.7744%

Joint Stock Companies 50,596 0.1550%

14

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

CATEGORIES OF SHAREHOLDING

No. of Shares Percentage

Associated Companies, Undertakings and Related Parties (Name wise Detail) - -

Mutual Funds (Name Wise Detail) - -

Directors and their Spouse and Minor Chidren (Name Wise Detail) :

MR. MOHAMMAD ARSHAD CHAUDHRY 16,300,000 49.9455

MRS. AZRA YASMIN 1,000 0.0031

MR. MUHMMAD KAMRAN ARSHAD 278,000 0.8518

MISS. FAREEHA ARSHAD 1,000 0.0031

MISS. WAJEEHA ARSHAD 500 0.0015

MR. RIZWAN ARSHAD 263,000 0.8059

MR. MUHAMMAD IMRAN RASHEED 500 0.0015

Executives 3,000 0.0092

Public Sector Companies & Corporations

Banks, Development Finance Institutions, Non Bank Finance 152,200 0.4664

Companies, Insurance Companies, Takaful, Modarabas and

Pension Funds:

Shareholders holding five percent or more voting intrest in the

listed company (Name Wise Detail)

MR. MOHAMMAD ARSHAD CHAUDHRY 16,300,000 49.9455

MR. ABDUL KHLIQ BALOCH 3,229,500 9.8956

MR. IBRAHIM HUSSAIN IBRAHIM ALHOSANI 3,225,000 9.8818

MR. AHMAD YUSUF ALI 3,222,000 9.8727

All trades in the shares of the listed company, carried out by its Directors,

Executives and their spouses and minor children shall also be disclosed:

Name SALE PURCHASE

MR.MUHAMMAD KAMRAN ARSHAD (CDC) - 240,000

MR.RIZWAN ARSHAD (CDC) 252,000

15
 SIX YEARS FINANCIAL STATISTICAL SUMMARY

Measure of performance 2016 2015 2014 2013 2012 2011

Sales - net 4,819,932 5,114,903 5,338,764 5,381,510 4,847,590 5,767,986

Cost of sales 4,647,253 4,815,950 4,822,883 4,862,690 4,555,985 5,040,340
Gross profit 172,679 298,953 515,881 518,820 291,605 727,647
Operating profit/(Loss) (85,857) 27,871 224,865 195,875 12,672 471,499
(Loss) / profit after tax (269,364) (182,990) 55,681 55,681 (161,460) 209,445

In % age terms
Cost of sales 96.42 94.16 90.34 90.36 93.98 87.38
Operating profit/(Loss) (1.78) 0.54 4.21 3.64 0.26 8.17
(Loss)/ profit after tax (5.59) (3.58) 1.04 1.03 (3.33) 3.63

Financial position
Property, plant and equipement-net 1,605,032 1,535,324 1,456,991 1,348,336 1,313,227 1,352,372
Capital work in progress 34,210 129,013 113,381 17,726 - 1,263
Fixed assets 1,639,243 1,664,337 1,570,372 1,366,062 1,313,227 1,353,635

Current assets
Stores, spares and loose tools 93,385 89,718 78,944 84,351 82,590 76,336
Stocks in trade 626,434 804,905 1,069,597 1,037,516 771,887 985,308
Other current assets 432,965 545,622 534,726 443,851 362,498 335,491
Cash and cash equivalent 4,156 25,007 4,452 1,617 15,060 5,273
1,156,940 1,465,251 1,687,719 1,567,335 1,232,035 1,402,409

Current liabilities
Short term borrowings 940,649 1,020,173 1,050,660 975,906 765,263 871,618
Current portion of long term loans 143,462 224,126 123,796 136,219 141,495 122,819
Other current liabilities 485,477 419,470 404,324 345,900 375,418 404,765
1,569,588 1,663,769 1,578,780 1,458,025 1,282,176 1,399,202

Net working capital (412,648) (198,518) 108,939 109,310 (50,141) 3,207

Long term loans - excluding sponsors' loan 350,000 387,308 528,666 359,141 182,280 124,575

16

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

FINANCIAL HIGHLIGHTS

Financial Highlights 2016 2015 2014 2013 2012

Rupees

A. Profitability Ratios:
Earning before interest, taxation and depreciation Rs. 65,980,209 181,026,024 343,877,527 326,619,458 139,622,791
Earning before interest and taxation Rs. (85,857,366) 27,870,518 224,864,633 218,353,387 12,672,352
Profit / (Loss) before taxation and depreciation Rs. (83,405,422) (27,849,953) 150,249,391 187,658,605 13,932,622
Gross profit ratio % 3.58 5.84 9.66 9.91 6.02
Operating profit / (loss) margin to sales (net) % (1.78) 0.54 4.21 4.06 0.26
Net profit / (loss) margin to sales (net) % (5.59) 3.58 0.18 1.27 (3.33)
EBITD margin to sales (net) % 1.37 3.54 6.44 6.07 2.88

B. Liquidity Ratios :
Current ratio 0.74 0.88 1.07 1.07 0.9:1
Quick / Acid-test ratio 0.34 0.34 0.34 0.31 0.29:1
Cash to current liabilities % 0.26 1.50 0.28 0.11 1.17
Cash flow from operations to sales % 4.67 4.70 1.05 (4.13) 2.67
Working capital (Net current assets) Rs. (412,649,253) (198,517,658) 108,939,322 109,310,127 (50,140,333)
Working capital turnover Times (11.68) (25.77) 49.01 49.23 (96.68)

C. Activity / Turnover Ratios 5.98

Debtors turnover ratio Times 24.73 19.59 15.36 18.36 19.51
No. of days in receivables / Average collection period Days 14.76 18.25 23.77 19.88 18.70
Inventory turnover ratio Times 6.49 6.35 4.58 5.36 1.30
No. of days in inventory Days 56.21 62.05 79.73 68.11 70.39
Creditors turnover ratio Times 7.79 20.67 26 29 21
No. of days in creditors / Average payment period Days 47 18.25 14.06 12.77 17.78
Property, plant and equipment turnover Days 118.91 109.50 90.06 77.92 100.35
Total assets turnover Days 225.36 223.93 206.70 174.34 200.56

D. Investment Ratios
Basic earnings / (loss) per share Rs. (8.25) (5.61) 0.29 2.09 (4.95)
Cash dividend per share Rs. - - - - -

E. Capital Structure Ratios

Total liabilities to total assets % 70.50 104.94 99.41 100.11 87.24
Interest coverage (0.57) 0.13 1.16 1.57 0.10

17
 STATEMENT OF VALUE ADDITION

Statement of Value addition 2016 2015

Sales 4,819,931,739 5,114,903,010

Less: Manufacturing / administration and general expenses 4,259,791,132 4,494,735,979
560,140,607 620,167,031
Other income 9,898,078 17,515,441
Total value added 570,038,685 637,682,472

Distribution

Employees :
Salaries and wages 496,377,779 447,198,887

Government :
Corporate tax 34,120,958 1,984,518
Development surcharge 7,680,697 9,457,561
41,801,655 11,442,079
Lenders :
Markup on loans 149,385,631 208,875,976

Retained in business:
Depreciation 151,837,575 153,155,506
Profit / (Loss) (269,363,955) (182,989,976)
(117,526,380) (29,834,470)

570,038,685 637,682,472

Percentage

Employees 87.08 70.13

Government 7.33 1.79
Lenders 26.21 32.76
Retained in business (20.62) (4.68)

Value Addition Value Addition

(20.62) Retained in business

Retained in business
(4
.6
8)

Employees Employees

26.21 70.13
87.08
32.76

7.33
Lenders Lenders
1.79

Government Government

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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE

GOVERNANCE FOR THE YEAR ENDED AT JUNE 30, 2016
This statement is being presented to comply with the Code of Corporate Governance of listing regulations of Stock
Exchanges in Pakistan for the purpose of establishing a framework whereby a listed Company is managed in compliance
with the best practices of good Corporate Governance.
The Company has applied the principle contained in the Code of Corporate Governance in the following manner:
1. The Company encourages representation of independent non-executive directors and directors
representing minority interest on its board of directors.At present board includes:
Category Names
Independent Director o Mohammad Imran Rasheed
Executive Directors o Mohammad Arshad Chaudhry
o Kamran Arshad
Non-Executive Directors o Mrs. Azra Yasmin
o Rizwan Arshad
o Fareeha Arshad
o Wajeeha Haaris

The independent director meet the criteria of independence under clause 5.19.1.(b) of the Code of
Corporate Governance.
2. The directors have confirmed that none of them is serving as a director on more than seven listed
companies, including this company (excluding the listed subsidiaries of listed holding companies where
applicable).
3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in
payment of any loan to a banking company, development financial institution or non-banking financial
institution or, being a broker of a stock exchange, has been declared as a defaulter by that stock exchange.
4. There has been no casual vacancy in the Board during the year 2016.
5. The Company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken
to disseminate it throughout the company along with its supporting policies and procedures.
6. The board has developed a vision/mission statement, overall corporate strategy and significant policies of
the company. A complete record of particulars of significant policies along with the dates on which they
were approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions, including
appointment and determination of remuneration and terms and conditions of the employment of CEO,
other Executive and Non- Executive Directors, have been taken by the board/shareholders.
8. The meetings of the board were presided over by the chairman and, in his absence, by a director elected by
the board for this purpose and the board met at least once in every quarter. Written notice of the board
meeting along with agenda and working papers were circulated at least seven days before the meeting.The
minutes of the meeting were appropriately recorded and circulated.
9. The Directors are aware of their duties and responsibilities under the relevant laws and regulations and they
are regularly appraised with amendments in corporate and other laws, if any. One of our directors Mr.
Rizwan Arshad has attended training session under board development series. Majority of the directors are
exempted under exemption criteria of 14 years of education and 15 years of experience on the board of
listed company.
10. The Board has approved the appointment, remuneration and terms and conditions of employment of the
CFO, Company Secretary and Head of Internal Audit.
11. The Directors' report for this year has been prepared in compliance with the requirement of Code of
Corporate Governance and fully describes the salient matters required to be disclosed.

19
 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the
Board.
13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that
disclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the CCG.
15. The Board has formed an audit committee. It comprises three members, all of them are non-executive
directors, including the chairman of the committee who is an independent director.
16. The meetings of the audit committee were held at least once every quarter prior to the approval of interim
and final results of the Company and as required by the Code of Corporate Governance. The terms of
reference of the committee have been formed and advised to the committee for compliance.
17. The Board has formed a Human Resource & Remuneration Committee. It comprises of 3 members, of
whom two are non-executive directors and a chairperson of the committee is a non- executive director.
18. The Board has setup an effective internal audit function who are considered suitably qualified and
experienced for the purpose and re conversant with the policies and procedures of the company.
19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under
the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any
of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the
firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on
code of ethics as adopted by the Institute of Chartered Accountants of Pakistan.
20. The statutory auditors or the persons associated with them have not been appointed to provide other
services except in accordance with the listing regulations and the auditors have confirmed that they have
observed IFAC guidelines in this regards.
21. The 'closed period', prior to the announcement of interim/final results, and business decisions, which may
materially affect the market price of company's securities, was determined and intimated to directors,
employees and stock exchange
22. Material/price sensitive information has been disseminated among all market participants at once through
stock exchange.
23. We confirm that all other material principles enshrined in the Code of Corporate Governance have been
complied with.

For and on behalf of the Board

Lahore (Mohammad Arshad Chaudhry)

October 24, 2016 Chief Executive

20

Annual Report 2016

 QADEER & COMPANY
CHARTERED ACCOUNTANTS

REVIEW REPORT TO THE MEMBERS

On The Statement of Compliance with the Code of
Corporate Governance

We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of
Corporate Governance (the Code) prepared by the Board of Directors of GHAZI FABRICS
INTERNATIONAL LIMITED (the Company) for the year ended June 30, 2016 to comply with the
requirements of of Rule 5.19 of the Rule Book of the Pakistan Stock Exchange where the Company is listed.
The responsibility for compliance with the Code is that of the Board of Directors of the company. Our
responsibility is to review, to the extent where such compliance can be objectively verified, whether the
statement of compliance reflects the status of the Company's compliance with the provisions of the Code and
report if it does not and to highlight any non-compliance with the requirements of the Code.A review is limited
primarily to inquiries of the Company's personnel and review of various documents prepared by the Company
to comply with the Code.

As a part of our audit of financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not
required to consider whether the Board of Directors' statement on internal control covers all risks and
controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate
governance procedures and risks.

The Code requires the Company to place before the Audit Committee, and upon recommendation of the
Audit Committee, place before the Board of Directors for their review and approval its related party
transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's
length transactions and transactions which are not executed at arm's length price and recording proper
justification for using such alternate pricing mechanism.We are only required and have ensured compliance of
this requirement to the extent of approval of the related party transactions by the Board of Directors upon the
recommendation of the Audit Committee.We have not carried out any procedures to determine whether the
related party transactions were undertaken at arm's length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of
Compliance does not appropriately reflect the Company's compliance, in all material respects, with the
best practices contained in the Code as applicable to the Company for the year ended June 30, 2016.

QADEER AND COMPANY

Lahore
CHARTERED ACCOUNTANTS
October 24, 2016 NAWAZ KHAN FCA

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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

Financial Statements
For the year ended June 30, 2016

22

Annual Report 2016

 QADEER & COMPANY
CHARTERED ACCOUNTANTS

AUDITOR’S REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of GHAZI FABRICS INTERNATIONAL LIMITED ('the Company')
as at June 30, 2016 and the related Profit and Loss Account, Statement of Comprehensive Income, Cash Flow Statement
and Statement of Changes in Equity together with the notes forming part thereof, for the year then ended and we state
that we have obtained all the information and explanations which, to the best of our knowledge and belief, were
necessary for the purposes of our audit.

It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare
and present the above said statements in conformity with the approved accounting standards and the requirements of
the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan.These standards require that
we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any
material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the above said statements. An audit also includes assessing the accounting policies and significant estimates made by
management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and, after due verification, we report that:-

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

(b) In our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in
conformity with the Companies Ordinance, 1984 and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the company's business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were in
accordance with the objects of the company;

(c) in our opinion and to the best of our information and according to the explanations given to us, the Balance
Sheet, Profit and Loss Account, Statement of Comprehensive Income, Cash Flow Statement and Statement of
Changes in Equity together with the notes forming part thereof, conform with the approved accounting
standards as applicable in Pakistan, and give the information required by the Companies Ordinance, 1984, in the
manner so required and respectively give a true and fair view of the state of the company's affairs as at June 30,
2016 and of the Loss, total comprehensive Loss, its cash flows and changes in equity for the year then ended; and

(d) In our opinion Zakat deductible at source under the Zakat & Ushr Ordinance, 1980 (XVIII of 1980), was
deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that
Ordinance.

QADEER AND COMPANY

Lahore
CHARTERED ACCOUNTANTS
October 24, 2015 NAWAZ KHAN FCA

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Annual Report 2016

 BALANCE SHEET
AS AT JUNE 30, 2016

2016 2015
CAPITAL AND LIABILITIES Note Rupees

Share Capital and Reserves

Authorized capital
40,000,000 (2015 : 40,000,000) ordinary
shares of Rs. 10 each 400,000,000 400,000,000

Issued, subscribed and paid up capital 5 326,356,000 326,356,000

Directors' loan 6 1,255,727,835 1,177,727,835
Accumulated loss (753,437,747) (481,505,557)
828,646,088 1,022,578,278

Non Current Liabilities

Long term financing 7 350,000,030 387,307,720
Deferred liabilities 8 60,906,493 68,944,910
410,906,523 456,252,630

Current Liabilities
Trade and other payables 9 439,316,968 392,199,200
Accrued interest / mark up 10 10,985,629 11,500,140
Short term borrowings 11 940,648,513 1,020,173,051
Current portion of long term financing 7 143,461,540 224,125,561
Provision for taxation 12 35,228,181 15,770,915
1,569,640,831 1,663,768,867
Contingencies and Commitments 13 - -

2,809,193,442 3,142,599,775
ASSETS

Non Current Assets

Property, plant and equipment 14 1,605,032,489 1,535,323,787
Capital work in progress 15 34,210,062 129,013,034
1,639,242,551 1,664,336,821
Long term deposits 13,011,744 13,011,744
1,652,254,295 1,677,348,565

Current Assets
Stores, spares and loose tools 16 93,384,579 89,717,957
Stock in trade 17 626,433,802 804,904,645
Trade debts 18 128,667,713 261,062,462
Loans and advances 19 120,113,204 154,451,342
Trade deposits and short term prepayments 20 300,000 2,010,414
Tax refunds due from the Government 183,884,120 128,097,838
Cash and bank balances 21 4,155,728 25,006,550
1,156,939,147 1,465,251,209

2,809,193,442 3,142,599,775
The annexed notes form an integral part of these financial statements.

CHIEF EXECUTIVE DIRECTOR

24

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30, 2016

2016 2015
Note Rupees

Sales - Net 22 4,819,931,739 5,114,903,010

Cost of goods sold 23 4,647,252,589 4,815,950,268

Gross Profit 172,679,150 298,952,741

Operating expenses:
- Selling and distribution 24 150,120,384 181,344,296
- Administrative and general 25 116,360,826 104,644,562
- Other operating charges 26 1,953,384 2,608,806
268,434,594 288,597,665

(95,755,444) 10,355,077

Other operating income 27 9,898,078 17,515,441

(Loss) / Profit from operation (85,857,366) 27,870,518

Finance cost 28 149,438,062 208,875,976

(Loss) / Profit before taxation (235,295,428) (181,005,459)

Taxation 29 34,120,958 1,984,518

(Loss) / Profit for the year (269,416,386) (182,989,976)

(Loss) per share - Basic 30 (8.25) (5.61)

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

CHIEF EXECUTIVE DIRECTOR

25

Annual Report 2016

 STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2016

2016 2015

Rupees

Profit/ (Loss) for the year (269,416,386) (182,989,976)

Other comprehensive income/ (Loss)

Remeausurements of defined benefit oblifation (2,763,405) 9,348,501

Impact of deferred tax 247,601 (748,456)

(2,515,804) 8,600,045

Total comprehensive income/ (Loss) for the year (271,932,190) (174,389,931)

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

CHIEF EXECUTIVE DIRECTOR

26

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2016

2016 2015
Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation (235,295,428) (181,005,459)

Adjustments for:
- Depreciation 151,837,575 153,155,506
- Provision for W.P.P.F - -
- (Gain) / loss on disposal of property, plant and equipment (497,473) (12,063,808)
- Provision for gratuity 23,519,139 22,322,150
- Finance cost 149,438,062 208,875,976
324,297,303 372,289,824
Operating profit before working capital changes 89,001,875 191,284,365

(Increase) / decrease in current assets:

- Stores, spares and loose tools (3,666,622) (10,773,993)
- Stock in trade 178,470,843 264,692,772
- Trade debts 132,394,749 101,350,223
- Loans and advances 34,338,138 (29,081,026)
- Trade deposits and short term prepayments 1,710,414 (1,710,414)
- Other receivables (55,786,282) (72,460,227)
Increase / (decrease) in current liabilities:
- Trade and other payables 47,117,768 74,799,885
334,579,008 326,817,220
Cash generated from operations 423,580,883 518,101,585
Income tax paid / deducted (30,715,165) (18,674,366)
Gratuity paid (18,021,886) (12,835,050)
Workers profit participation fund paid - (5,167,049)
Finance cost paid (149,952,573) (240,960,273)
Net cash generated from / (used in) operating activities 224,891,259 240,464,847

CASH FLOW FROM INVESTING ACTIVITIES

Property, plant and equipment purchased (221,553,803) (250,481,342)

Capital work in progress 94,802,972 (15,632,314)
Proceeds from disposal of property, plant and equipment 505,000 31,057,002
Net cash used in investing activities (126,245,831) (235,056,654)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds / (repayment) of long term loans (117,971,711) (41,029,093)
Long term deposit - (59,730)
Loan from directors and others - net 78,000,000 86,722,430
Short term borrowings (79,524,538) (30,486,804)
Net cash generated from financing activities (119,496,249) 15,146,803

Net increase / (decrease) in cash and cash equivalents (20,850,822) 20,554,994

Cash and cash equivalents at the beginning of the year 25,006,550 4,451,556
Cash and cash equivalents at the end of the year 21 4,155,728 25,006,550
The annexed notes form an integral part of these financial statements.
0

CHIEF EXECUTIVE DIRECTOR

27

Annual Report 2016

 STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED JUNE 30, 2016

Accumulated
Share Capital Directors' loan Total
(Loss)
Rupees

Balance as at July 01, 2014 326,356,000 1,091,005,405 (307,115,626) 1,110,245,779

Transaction with owner loan from directors - 86,722,430 - 86,722,430

Total comprehensive income for the year 2015 - - (174,389,931) (174,389,931)

Balance as at July 01, 2015 326,356,000 1,177,727,835 (481,505,557) 1,022,578,278

Transaction with owner loan from directors - 78,000,000 - 78,000,000

Total comprehensive income for the year 2016 - - (271,932,190) (271,932,190)

Balance as at June 30, 2016 326,356,000 1,255,727,835 (753,437,747) 828,646,088

CHIEF EXECUTIVE DIRECTOR

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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2016

1 REPORTING ENTITY

Ghazi Fabrics International Limited ("the Company") was incorporated in Pakistan on April 30, 1989 as a Private Limited Company and
converted into Public Limited Company on January 07, 1990. Its shares are quoted on Karachi and Lahore Stock Exchanges. With effect
from January 11, 2016 all stock exchanges(Karachi, lahore & Islamabad) merged into Pakistan Stock Exchange. The main activities of the
Company are textile manufacturing, production of cotton and P.C. yarn and grey cloth that are marketed both within and outside
Pakistan. The registered office of the Company is situated at 8-C, E-III, Gulberg III, Lahore.

2 BASIS OF PREPARATION

2.1 Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the
requirements of the Companies Ordinance, 1984. Approved accounting standards comprise of such International Financial
Reporting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the
Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the
requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives
take precedence.

2.2 Basis of measurement

These accounts have been prepared under the historical cost convention except for certain financial instruments at fair value. In
these financial statements, except for the amounts reflected in the cash flow statement, all transactions have been accounted for
on accrual basis.

2.3 Judgment, estimates and assumptions

The preparation of financial statements in conformity with IASs as applicable in Pakistan requires management to make judgments,
estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.
The estimates and related assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances the results of which form the basis of making the judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources, actual results may differ from the estimates. The estimates
and related assumptions are reviewed on an ongoing basis. Accounting estimates are revised in the period in which such revisions
are made and in any future periods affected.

Significant management estimates in these financial statements relate to the useful life of property, plant and equipment, provisions
for doubtful receivables, slow moving inventory and taxation. However, the management believes that the change in outcome of
estimates would not have a material effect on the amounts disclosed in the financial statements.

Judgment made by management in the application of approved standards as applicable in Pakistan that have significant effect on the
financial statements and estimates with a risk of material adjustment in subsequent year are as follows;

2.3.1 Depreciation method, rates and useful lives of property, plant and equipment

The management of the Company reassesses useful lives, depreciation method and rates for each item of
property, plant and equipment annually by considering expected pattern of economic benefits that the
Company expects to derive from that item.

2.3.2 Recoverable amount of assets/ cash generating units

The management of the Company reviews carrying amounts of its assets and cash generating units for possible
impairment and makes formal estimates of recoverable amount if there is any such indication.

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Annual Report 2016

 2.3.3 Fair value of financial instruments having no active market
Fair value of financial instruments having no active market is determined using discounted cash flow analysis
after incorporating all factors that market participants would consider in setting a price and using inputs that
reasonably represent market expectations and measures of the risk-return factors inherent in the financial
instrument.

2.3.4 Taxation
The Company takes into account income tax law and decisions taken by appellate authorities. Instances where
the Company's view differs from the view taken by tax department at the assessment stage and where the
Company considers that its view of items of material nature is in accordance with law, the amounts are shown
as contingent liabilities.

2.3.5 Provisions
Provisions are based on best estimate of the expenditure required to settle the present obligation at the
reporting date, that is, the amount that the Company would rationally pay to settle the obligation at the
reporting date or to transfer it to a third party.

2.4 Functional currency

Items included in the financial statements are prepared using the currency of the primary economic environment in which the
company operates i.e. Pak Rupees which is the Company's functional currency.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the financial statements.

3.1 Ordinary share capital

Ordinary share capital is recognized as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized
as deduction from equity.

3.2 Employee benefits

Defined benefit plan
The Company operates an unfunded gratuity scheme covering its permanent employees. Employees are eligible for benefits under
this scheme after the completion of a prescribed qualifying period of service. The latest actuarial valuation was carried out as at
June 30, 2016. Charge for the current year is based on estimates provided by the actuary as at June 30, 2015. The following
significant assumptions were used in the latest actuarial valuation:
2016 2015
Discount rate 7.25% 9.75%
Expected rate of salary increase in future years 5.25% 7.75%
Average expected remaining working life time of employees 9 years 9 years
Actuarial valuation method Projected unit credit method

3.3 Borrowings
These are recognized initially at fair value less attributable transaction cost. Subsequent to initial recognition, these are stated at
amortized cost with any difference between cost and redemption value being recognized in the profit and loss over the period of
the borrowings on an effective interest basis.

3.4 Provisions
Provisions are recognised 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 can be
made of the amount of the obligation. Provisions are reviewed periodically and adjusted to reflect the current best estimates.

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Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

3.5 Taxation

Current

The charge for taxation for the year is based on minimum tax at the current rates of taxation after taking into account tax rebates
and credits available, if any.

Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and
deferred tax assets, as required by IAS - 12 (Income Taxes), are recognized to the extent of potential available taxable profit
against which temporary differences, unused tax losses and tax credits can be utilized.

3.6 Trade and other payables

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

3.7 Trade and other receivables

Trade debts originated by the Company are recognized and carried at original invoice amount less an allowance for any
uncollectible amounts. An estimated provision for doubtful debt is made when collection of the full amount is no longer probable.
Bad debts are written-off as incurred.
3.8 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation less impairement loss (if any) except freehold land
that is stated at cost. Cost of property, plant and equipment consists of historical cost and other directly attributable costs
incurred to bring the assets to their working condition.
Depreciation on property, plant and equipment has been provided by using the reducing balance method at the rates specified in
Note 14. Full month depreciation is charged in the month of addition while no depreciation is charged in the month of disposal.

Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalized.
Gain or loss on disposal of property, plant and equipment, if any, is shown in the profit and loss account.

3.10 Capital work in progress

Capital work in progress in stated at cost less identified impairment loss, if any, and includes the expenditures on material, labour
and appropriate overheads directly relating to the construction, erection or installation of an item of property, plant and
equipment. These costs are transferred to property, plant and equipment as and when related items become available for intended
use.

3.11 Impairment
Carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication
of impairment. If any such indication exists, the asset's recoverable amount is estimated and impairment loss is recognized in the
profit and loss account.

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Annual Report 2016

 3.12 Stores, spares and loose tools
Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil value.
Items in transit are valued at cost comprising invoice value plus incidental charges paid thereon.
Provision for obsolete and slow moving stores and spares is based on management's estimate.
3.13 Stock in trade
These are valued at lower of cost or net realizable value except waste which is valued at net realizable value determined at average
selling price.
Cost is determined as follows:
Raw materials - At weighted average cost.
Work in process - At annual average material cost plus appropriate manufacturing costs.
Finished goods - At average manufacturing cost.
Wastes - At net realizable value.

Net realizable value signifies the estimated selling price at which goods in stock could be currently sold less any further costs that
would be incurred to complete the sale.
Costs in relation to work in process and finished goods represent annual average costs which consist of prime costs and
appropriate manufacturing overheads.
Items in transit are stated at cost comprising invoice value and other incidental charges paid thereon.
3.14 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash
equivalents comprise cash in hand and cash with banks in current accounts.

3.15 Financial instruments

Financial instruments are recognized when the Company becomes a party to the contractual provisions of the instrument. It
ceases to recognize financial assets when it loses control of contractual rights and in case of financial liability when the liability is
extinguished. Any gain or loss on subsequent remeasurement / derecognition is charged to income.

A financial asset and financial liability is offset and the net amount is reported in the balance sheet if the Company has a legally
enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the
liability simultaneously.

3.16 Foreign currency translation

Assets and liabilities in foreign currency are stated in Pak Rupees at the rates of exchange ruling on the balance sheet date or rate
of exchange fixed under contractual agreements. Transactions in foreign currency are translated in translated into Pak Rupees
(functional and presentation) at the exchange rate prevailing on the date of transaction. All exchange differences are included in
the profit and loss account.
3.17 Related party transactions
Transactions with related parties are based on the transfer pricing policy that all transactions between the Company and the
related party or between two or more segments of the Company are at arm's length prices using the comparable uncontrolled
price method except in circumstances where it is in the interest of the Company not to do so.

3.18 Revenue recognition

- Local sales are recorded on dispatch of goods to customers.
- Export sales are recorded at the time of receipt of bill of lading.
3.19 Borrowing costs
Borrowing costs relating to the acquisition, construction or production of a qualifying asset are recognised
as part of the cost of that asset. All other borrowing costs are recognised as an expense in the period
in which these are incurred.

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 GHAZI FABRICS INTERNATIONAL LIMITED

3.20 Dividends

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

3.21 Earning per share (EPS)

Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by adjusting basic EPS by the weighted average number of ordinary shares that would be issued on
conversion of all dilutive potential ordinary shares into ordinary shares and post-tax effect of changes in profit and loss attributable
to ordinary shareholders of the Company that would result from conversion of all dilutive potential ordinary shares into ordinary
shares.

3.22 Changes in accounting policies and disclosures

3.22.1 ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

Standards, amendments and interpretations to existing standards that are not yet effective and have
not been early adopted by the Company:
Effective date
(annual reporting
periods beginning
on or after)
IFRS 5 Non-current Assets Held for Sale and Discontinued July 1, 2016
Operations (Amendments)
IFRS 7 Financial Instruments: Disclosures (Amendments) July 1, 2016
IFRS 11 Joint Arrangements (Amendments) January 1,2017
IFRS 14 Regulatory Deferral Accounts January 1,2016
IFRS 15 Revenue from Contracts with Customers January 1,2018
IFRS 16 Leases January 1,2019
IAS 1 Presentation of Financial Statements (Amendments) January 1,2016
IAS 7 Statement of Cash Flows (Amendments) January 1,2017
IAS 12 Income Taxes (Amendments) January 1,2017
IAS 16 Property, Plant and Equipment (Amendments) January 1,2016
IAS 19 Employee Benefits (Amendments) January 1,2016
IAS 27 Separate Financial Statements (Amendments) January 1,2016
IAS 28 Investment in Associates and Joint Ventures (Amendments) January 1,2016
IAS 34 Interim Financial Reporting (Amendments) January 1,2016
IAS 38 Intangible Assets (Amendments) January 1,2016
IAS 41 Agriculture (Amendments) January 1,2016

3.22.2 The management anticipates that the adoption of the above standards, amendments and
interpretations in future periods, will have no material impact on the financial statements other than the
impact on presentation / disclosures. The Company is yet to assess the full impact of the
amendments.

3.22.3 Further, the following new standards and interpretations have been issued by the International
Accounting Standards Board (IASB), which are yet to be notified by the Securities and Exchange
Commission of Pakistan, for the purpose of their applicability in Pakistan:
IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 9 Financial instruments

3.22.4 The following interpretations issued by the IASB have been waived of by SECP:
IFRIC 4 Determining whether an arrangement contains lease
IFRIC12 Service concession arrangements

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 4 CHANGE IN ACCOUNTING POLICY

4.01 All the accounting policies are applied consistently during the year
5 ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2016 2015 2016 2015
No. of shares Rupees
Ordinary shares of
Rs. 10 each fully
32,635,600 32,635,600 paid in cash 326,356,000 326,356,000

NOTE 2016 2015

Rupees
6 Directors' loan
Loan from directors 6.01 1,255,727,835 1,177,727,835

6.01 These loans are accounted for under Technical Release - 32 “Accounting Directors’ Loan” issued by the Institute of Chartered
Accountants of Pakistan effective for the financial statements for the period beginning on or after January 01, 2016 with earlier
application permitted.

6.02 This loan has been provided by the chief executive and other directors of the Company for the repayment of long term loans and
capital expenditure of the Company. The loan is unsecured and interest free. The terms of repayment have yet not been finalized
due to the subordination loan agreement of Rs. 900 million (2015 : Rs. 900 million) with Habib Bank Limited and United Bank
Limited.

7 LONG TERM FINANCING

Loan from banking companies - Secured
Habib Bank Limited:
- Term finance - III 7.01 - 15,384,612
- Term finance - IV 7.02 18,461,570 43,076,954
18,461,570 58,461,566
United Bank Limited:
- NIDF - VI 7.03 - 9,285,000
- NIDF - VII 7.04 - 43,686,715
- NIDF - VIII 7.05 375,000,000 500,000,000
- NIDF - IX 7.06 100,000,000
475,000,000 552,971,715
493,461,570 611,433,281
Less: Current portion (143,461,540) (224,125,561)
350,000,030 387,307,720
7.01 Term finance - III
Opening balance 15,384,612 46,153,844
Payments made during the year (15,384,612) (30,769,232)
- 15,384,612

Term finance - III was obtained to facilitate balancing, modernization and replacement of spinning units. The loan was payable in
thirteen quarterly installments with a grace period of one year from first draw down of loan with first installment commenced
from November 10, 2012. It carried mark up at three months KIBOR plus 2.50% per annum payable on quarterly basis.

7.02 Term finance - IV

Opening balance 43,076,954 67,692,338
Payments made during the year (24,615,384) (24,615,384)
18,461,570 43,076,954
Term finance - IV was obtained for reprofiling of balance sheet. Loan is payable in thirteen quarterly installments with a grace
period of one year from first draw down of loan with first installment commenced from December 31, 2013. It carries mark up at
three months KIBOR plus 2.50% per annum payable on quarterly basis.

Loans from HBL are secured against first pari passu equitable mortgage of property plant and equipment of the Company valuing
34 Rs. 932 million (2015 : Rs. 932 million) and personal guarantee of chief executive and a director of the Company.

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

7.03 NIDF - VI

Opening balance 9,285,000 27,856,000

Payments made during the year (9,285,000) (18,571,000)
- 9,285,000

This loan was obtained to finance import of machinery of spinning units and was repayable in seven equal half yearly installment
with a grace period of one year from first draw down of loan with first installment commenced from September 2012. It carried
mark up at six months KIBOR plus 1.25% per annum payable on quarterly basis.

7.04 NIDF - VII

Opening balance 43,686,715 87,373,435

Payments made during the year (43,686,715) (43,686,720)
- 43,686,715

This loan was obtained to finance import of machinery of spinning unit and it represents actual withdrawn amount out of Demand
Finance limit for Rs. 135 million and was repayable in twelve equal quarterly installment with a grace period of one year from first
draw down of loan with first installment commenced from September 2013. It carried mark up at six months KIBOR plus 1.25%
per annum payable on quarterly basis.

7.05 NIDF - VIII

Opening balance 500,000,000 423,386,757

Finance obtained/paid during the year (125,000,000) 76,613,243
375,000,000 500,000,000

This loan has been obtained to finance import of machinery. It is repayable in sixteen equal quarterly installments with a grace
period of eighteen months from first draw down of loan with first installment due in September 2015. It carries mark up at six
months KIBOR plus 1.25% per annum payable on quarterly basis.

7.06 Term Finance (NIDF)

Opening balance - -
Finance obtained during the year 100,000,000 -
100,000,000 -

This loan has been obtained for reprofiling of balance sheet of the company. It is repayable in ten equal quarterly installments with
a grace period of eighteen months from first draw down of loan with first installment due in September 2017. It carries mark up at
six months KIBOR plus 1.25% per annum payable on quarterly basis.

Loans from UBL are secured against first pari passu equitable mortgage of property plant and equipment of the Company valuing
Rs. 1,471 million (2015: Rs. 1,471 million) and personal guarantee of chief executive and one director of the Company.

35

Annual Report 2016

 2016 2015
Rupees
8 DEFERRED LIABILITIES

Deferred tax - net 8.01 12,316,996 28,616,070

Staff retirement benefits 8.02 48,589,497 40,328,839
60,906,493 68,944,909

8.01 Deferred tax - net

Credit / (debit) balance arising in respect of:
- Accelerated tax depreciation 67,972,243 68,807,140
- Recognized losses (49,439,265) (36,962,280)
- Staff retirement benefits (6,215,981) (3,228,790)
12,316,996 28,616,070

8.02 Staff retirement benefits

The amounts recognized in the balance sheet are as follows

Present value of defined benefit obligation 48,589,497 40,328,839
48,589,497 40,328,839
Balance sheet liability
Opening balance 40,328,839 40,190,240
Amount recognized during the year 23,519,139 22,322,150
Remeaurements 2,763,405 (9,348,501)
66,611,383 53,163,889
Benefits paid during the year (18,021,886) (12,835,050)
Closing balance 48,589,497 40,328,839
Charge for the defined benefit plan
Service cost 20,622,875 17,907,969
Interest cost 2,896,264 4,414,181
23,519,139 22,322,150
8.03 DEFINED BENEFIT PLAN

(a) General description

The scheme provides for terminal benefits for all its permanent employees who attain the minimum qualifying period at varying
percentages of last drawn basic salary. The percentage depends on the number of service years with the Company. Annual charge
is based on acturial valuation carried on as at June 30, 2016 using Project Unit Credit Method.

(b) Comparison for five years

2016 2015 2014 2013 2012

(Rupees - 000)
PVODBO 47,514 38,179 40,190 45,659 32,371

Experience 2,763 (9,349) (12,836) 9,540 (1,515)

Adjustment

36

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

NOTE 2016 2015

Rupees
9 TRADE AND OTHER PAYABLES
Creditors for:
- Goods supplied 344,975,753 207,620,676
- Services 16,409,230 39,870,597
Accrued liabilities 60,076,627 117,102,644
Advances from customers 11,180,095 21,764,432
Security deposits 166,000 166,000
Worker's profit participation fund 9.1 -
Unclaimed dividend 5,033,316 5,055,600
Tax deducted at source 1,475,947 619,251
439,316,968 392,199,200
9.1 Worker's profit participation fund
Balance at the beginning of the year - 5,167,049
Add: Allocation for the year - -
Add: Interest on funds utilized in Company's business 542,366
- 5,709,415
Less: Payment made during the year 5,709,415
- -

10 ACCRUED INTEREST/ MARKUP

Long term financing 10,623,036 1,634,570
Short term borrowings 362,594 9,865,570
10,985,630 11,500,140

11 SHORT TERM BORROWINGS - From banking companies - Secured

Habib Bank Limited 11.1 467,702,727 475,941,383

United Bank Limited 11.2 472,945,785 544,231,667
940,648,513 1,020,173,051

11.1 These represent utilized portion of short term finance facilities of Rs. 1,415 million (2015 : Rs. 1,415 million) available from Habib
Bank Limited under mark up arrangement. These facilities carry mark up of one month KIBOR plus 1.5% per annum and one
month LIBOR plus 3.5% per annum and shall expire by January 31, 2017. These short term borrowings along with long term
financing are secured by first pari passu equitable mortgage charge on property, plant and equipment of the Company valuing Rs.
932 million (2015 : Rs. 932 million), pledge of cotton and polyester bales, lien on import documents / export contracts and
personal guarantee of the chief executive and director of the Company.

11.2 These represent utilized portion of short term finance facilities of Rs. 1,370 million (2015 : Rs. 1,370 million) available from United
Bank Limited under mark up arrangement. These facilities carry mark up at 1 month KIBOR plus 1.25% - 1.30% per annum and
one month LIBOR plus 3.5%. These borrowings along with long term financing are secured by first pari passu charge on present
and future fixed assets of the Company premises valuing Rs. 1,471 million (2015 : Rs. 1,471 million), pledge of cotton and polyester
bales, lien on import documents / export contracts and personal guarantee of the chief executive and director of the Company.

12 PROVISION FOR TAXATION-Net

Opening balance 15,770,915 38,172,773
Provision for the year 35,228,181 15,770,915
Payments / adjustments against advance tax (15,770,915) (38,172,772)
35,228,181 15,770,915

Income tax return up to and including tax year 2015 has been filed to the tax authorities under the provision of Income Tax Ordinance,
2001.

37

Annual Report 2016

 13 CONTINGENCIES AND COMMITMENTS

Contingencies

13.1 The Company has provided bank guarantee in favour of Sui Northern Gas Pipeline Limited amounting to Rs. 53.865 million (2015 :
Rs. 53.865 million) on account of security deposits against the consumption of natural gas.

13.2 The Company has challanged the recovery of Gas infrastrcure Development Cess-GIDC and filed petition in Lahore High Court
challenging the vires and legality of the levy and demand of GIDC including the retrospective effect. The Court granted stay against
charging of GIDC. Since, the issue is being faced by industry at large, therefore management is of the view that there is no need to
maintain any provision against the liablity. The management is confident that decision of the case will be in its favour. Further, it is
difficult to determine the best monetary estimate as the date of applicability of said Act is in litigation.

13.3 Export bills discounted Rs. 458.466 million (2015 : Rs. 360.490 million)

13.4 Post dated cheques issued in the favour of Collector of Custom against import Rs. 17.391 million (2015 : Rs. 17.391 million)

Commitments

Commitments in respect of irrevocable letters of credit for the import of raw material and spare parts of machinery as at the balance
sheet date amount to Rs. 6.5 million (2015 : Rs. 3.502 million).

38

Annual Report 2016

 14 PROPERTY, PLANT AND EQUIPMENT
Rupees

Cost Accumulated Depreciation Book Value

Rate
Particulars As at As at As at For the As at as at
Additions Disposals % Disposals
July 01, 2015 June 30, 2016 July 01, 2015 year June 30, 2016 June 30, 2016
Owned

Land - freehold 81,282,448 - 81,282,448 - - - - 81,282,448

Buildings on freehold land 306,665,734 88,666,321 395,332,055 5-10 173,743,017 - 9,281,833 183,024,851 212,307,205
Plant and machinery 2,315,784,341 124,599,842 2,440,384,183 10 1,064,966,803 - 132,105,712 1,197,072,515 1,243,311,668
Grid station and generators 18,948,857 - 18,948,857 10 12,174,014 - 677,484 12,851,499 6,097,358
Furniture and fixtures 18,069,289 - 18,069,289 10 11,592,500 - 647,679 12,240,179 5,829,110
Vehicles 74,033,758 2,236,057 (1,462,113) 74,807,702 20 40,905,548 (1,454,586) 6,661,848 46,112,810 28,694,892
Equipment 22,513,666 538,436 23,052,102 10 13,523,351 - 915,996 14,439,347 8,612,755
Electric installations 62,217,176 5,513,147 67,730,323 10 47,286,249 - 1,547,022 48,833,271 18,897,052
Rupees 2016 2,899,515,269 221,553,803 (1,462,113) 3,119,606,960 1,364,191,482 (1,454,586) 151,837,575 1,514,574,471 1,605,032,489

14.1 The depreciation charged for the year has been allocated as under:
2016 2015
Rupees

Cost of sales 143,821,904 144,996,818

Administrative expenses 8,015,671 8,158,688
151,837,575 153,155,506
14.2 Disposal of property, plant and equipment
Rupees
Accumulated Mode of
Particulars Cost Book Value Sale Proceeds Gain / (Loss) Particulars of Purchaser
Depreciation Disposal

Mitsubishi Pajero LOQ-3559 930,700 925,057 5,643 305,000 299,357 Negotiation Mr. Wajid Khan
Toyota Hiace LOF-3426 531,413 529,529 1,884 200,000 198,116 Negotiation Mr. Muhammad Jamil

June 30, 2016 1,462,113 1,454,586 7,527 505,000 497,473

Annual Report 2016

39
GHAZI FABRICS INTERNATIONAL LIMITED
 NOTE 2016 2015
15 CAPITAL WORK IN PROGRESS Rupees

Plant and machinery:

- Opening balance 111,567,833 113,380,720
- Additions during the year 50,322,105 227,605,014
161,889,938 340,985,734
- Transferred to property, plant and equipment (127,679,876) (229,417,901)
34,210,062 111,567,833
Building
- Opening balance 17,445,201 -
- Additions during the year 92,749,996 17,445,201
110,195,197 17,445,201
- Transferred to property, plant and equipment (110,195,197) -
- 17,445,201
34,210,062 129,013,034

16 STORES, SPARES AND LOOSE TOOLS

Stores 16.1 34,287,721 30,899,294

Spares 16.1 52,769,387 57,858,003
Loose tools 6,327,472 960,660
93,384,579 89,717,957

16.1 No identifiable store and spare are held for specific capitalization.
17 STOCK IN TRADE

Raw material 17.1 156,084,679 285,447,661

Work in process 70,423,471 68,118,895
Finished goods 399,925,652 451,338,089
626,433,802 804,904,645

17.1 This includes an amount of Rs. 132.115 million (2015 : Rs. 247.652 million) approximately, which is pledged against short term
finances.

18 TRADE DEBTS
Local debts
(Unsecured - considered good) 29,239,713 20,018,068
Foreign debts
(Secured - considered good) 99,428,000 241,044,394
128,667,713 261,062,462

19 LOANS AND ADVANCES

Employees 607,000 373,622
Suppliers 42,185,048 57,382,081
Income tax deducted at source 76,846,122 79,871,407
Letters of credit 123,189 15,023,520
Other receivables 351,845 1,800,712
120,113,204 154,451,342
20 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS
Security deposit 300,000 300,000
Prepayments - 1,710,414
300,000 2,010,414

40

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

NOTE 2016 2015

Rupees
21 CASH AND BANK BALANCES
Cash in hand 1,877,016 1,506,769
Cash with banks in current accounts 2,278,712 23,499,781
4,155,728 25,006,550
22 SALES - NET
Local:
- Yarn 870,533,039 569,349,386
- Fabric 722,400,558 551,204,700
1,592,933,597 1,120,554,086
Export:
- Yarn 1,397,363,950 1,911,585,924
- Fabric 1,758,378,412 2,022,290,346
3,155,742,362 3,933,876,270
Waste 71,255,780 58,483,698
Doubling income - 792,000
Rebate on export - 1,196,956
4,819,931,739 5,114,903,010
23 COST OF GOODS SOLD
Raw materials consumed 23.01 3,206,231,697 3,373,047,929
Processing charges 34,305,314 67,268,749
Salaries, wages and other benefits 23.02 420,642,045 374,152,852
Fuel and power 521,895,533 548,714,907
Packing materials consumed 81,371,115 82,521,375
Sizing materials consumed 43,127,053 36,988,253
Stores and spares consumed 96,723,712 157,783,619
Repair and maintenance 40,607,270 20,460,384
Insurance 6,717,575 9,738,286
Depreciation 14.1 143,821,904 144,996,818
Other manufacturing expenses 2,701,510 2,104,256
4,598,144,728 4,817,777,428
Opening work in process 68,118,895 75,160,935
Closing work in process (70,423,471) (68,118,895)
(2,304,576) 7,042,040
Cost of goods manufactured 4,595,840,152 4,824,819,468

Opening finished goods 451,338,089 442,468,889

Closing finished goods (399,925,652) (451,338,089)
51,412,437 (8,869,200)
4,647,252,589 4,815,950,268

23.01 Raw material consumed

Opening stock 285,447,661 543,796,522
Purchases 3,054,475,928 3,095,363,486
Cotton cess 6,449,044 3,810,917
Cotton handling charges 15,943,743 15,524,665
3,362,316,376 3,658,495,590
Closing stock (156,084,679) (285,447,661)
3,206,231,697 3,373,047,929

23.02 Salaries, wages and benefits include Rs.14.12 million (2015 : Rs. 13.4 million) on account of staff retirement benefits.

41

Annual Report 2016

 NOTE 2016 2015
Rupees

24 SELLING AND DISTRIBUTION

Salaries, wages and benefits 24.01 3,576,963 3,250,814
Export development surcharge 7,680,697 9,457,561
Commission to selling agents 38,551,840 32,984,603
Carriage and freight - export 59,667,292 111,166,663
- local 20,896,846 1,453,200
Export expenses 19,692,957 23,022,439
Others 53,789 9,016
150,120,384 181,344,296

24.01 Salaries, wages and benefits include Rs.0.75 million (2015 : Rs. 0.71 million) on account of staff retirement benefits.
25 ADMINISTRATIVE AND GENERAL EXPENSES
Salaries, wages and other benefits 25.1 72,158,771 69,795,221
Traveling and conveyance 1,865,023 3,162,188
Repairs and maintenance 7,791,040 1,342,140
Rent, rates and taxes 1,570,579 672,216
Printing and stationery 3,085,114 3,255,396
Insurance 2,819,415 2,937,976
Fees and subscription 1,169,835 1,814,819
Telephone and Postage 3,207,635 3,811,783
Vehicle running and maintenance 10,216,040 4,325,479
Utilities 1,448,942 2,447,033
Advertisement - 159,880
Books and periodicals 131,111 20,993
Entertainment 2,707,779 2,667,976
Miscellaneous expenses 173,871 72,775
Depreciation 14.1 8,015,671 8,158,688
116,360,826 104,644,563

25.1 Salaries, wages and benefits include Rs.8.65 million (2015 : Rs. 8.21 million) on account of staff retirement benefits.
26 OTHER OPERATING CHARGES
Auditors' remuneration
- Statutory audit 1,000,000 1,000,000
- Half yearly review 95,000 95,000
- Certification charges 100,000 100,000
- Out of pocket 25,000 25,000
1,220,000 1,220,000
Legal and professional charges 733,384 1,388,806
1,953,384 2,608,806

27 OTHER OPERATING INCOME

Scrap sales 9,400,605 2,992,230

Gain on disposal of property, plant and equipment 497,473 12,063,808
Miscellaneous - 2,459,403
9,898,078 17,515,441

42

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

NOTE 2016 2015

28 FINANCE COST Rupees

Interest / mark up on:

- Long term financing 43,709,658 82,655,774
- Short term borrowings 64,539,942 69,334,782
108,249,600 151,990,556
Bank charges and commission 21,337,619 21,788,043
Exchange loss 19,850,843 34,555,012
Interest on Workers' profit participation fund - 542,365
149,438,062 208,875,976

29 TAXATION
Taxation:
- Current year 35,228,181 15,770,915
- Prior year 14,944,252 (28,492,998)
- Deferred (16,051,475) 14,706,601
34,120,958 1,984,518

29.1 Numerical reconciliation between the average effective tax rate and the applicable tax rate is not given due to taxable losses and
application of minimum tax.

30 EARNING PER SHARE - Basic

Profit / (Loss) after taxation for the year Rupees (269,363,955) (182,989,976)

Outstanding weighted average ordinary shares No. of shares 32,635,600 32,635,600

(Loss) per share - Basic Rupees (8.25) (5.61)

30.1 Diluted earnings per share

There is no dilution effect on the basic earnings per share of the Company as the Company has no such commitments.

31 CHIEF EXECUTIVE'S DIRECTORS' AND EXECUTIVES' REMUNERATION

Directors 6,300,000 6,300,000
Number of persons 2 2

Executives 19,332,000 21,582,600

Number of persons 18 20

31.1 No remuneration has been paid to chief executive of the Company.

31.2 No meeting fee has been paid to any director of the Company.

NUMBER OF EMPLOYEES
Total number of employees as at June 30, 1,777 1,979
Average number of employees during the year 1,931 2,075

32 TRANSACTIONS WITH RELATED PARTIES

The related parties comprise associated companies, related group companies, directors and key management personnel. Transactions with
related parties and associated companies, other than remuneration and benefits to key management personnel under the terms of their
employment are as follows:
2016 2015
Rupees
Directors
Loan obtained from directors 78,000,000 183,184,008
Payment made during the year - 96,461,578
There were no transactions with key management personnel other than undertaken as per terms of their employment.
Sale and purchase transactions have been carried out on commercial terms and conditions under comparable uncontrolled price method.
43

Annual Report 2016

 33 PLANT CAPACITY AND PRODUCTION
Spinning

No. of spindles installed 51,072 51,072

No. of spindles worked 51,072 51,072
No. of shifts 3 3
Actual production of yarn converted into
20/S count based on three shifts per day Kgs 19,836,256 13,540,175

Weaving
No. of looms installed 192 192
No. of looms worked 192 192
No. of shifts 3 3
Actual production converted to 40 picks
based on three shifts per day Sq. meters 66,059,235 64,917,736

33.1 It is difficult to calculate precisely the production capacity of weaving and spinning unit since it fluctuates widely depending on
various factors such as count of yarn spun, width of fabric woven, spindles / looms speed, twist, maintenance of machinery, power
shutdown and raw materials used etc. It also varies according to the pattern of production adopted in any particular year.

34 FINANCIAL INSTRUMENTS BY CATEGORY

Financial assets as per balance sheet

Long term deposits 13,011,744 13,011,744

Trade debts 128,667,713 261,062,462
Loans and advances 607,000 373,622
Cash and bank balances 4,155,728 25,006,550
146,442,186 299,454,378
Financial liabilities as per balance sheet

Long term financing 1,605,727,865 1,789,161,116

Trade and other payables 426,660,926 369,815,517
Accrued interest/mark-up 10,933,198 11,500,140
Short term borrowings 940,648,513 1,020,173,051
2,983,970,501 3,190,649,823
34.01 Fair values of financial assets and liabilities

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an
arms length transaction.
The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.

35 FINANCIAL INSTRUMENTS
Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and other
price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on having cost effective funding
as well as to manage financial risk to minimize earnings volatility and provide maximum return to shareholders.

Risk management is carried out by the Company’s finance department under policies approved by the Board of Directors.

44

Annual Report 2016

 GHAZI FABRICS INTERNATIONAL LIMITED

(a) Market risk

(i) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates.
The company is exposed to currency risk on the import of raw material and stores and spares and export of goods mainly
denominated in US dollars and on foreign currency debtors and loans. The company's exposure to foreign currency risk for US
dollars is as follows:
2016 2015
Rupees
Foreign trade debts 99,428,000 241,044,394
Foreign currency short term borrowings
- Habib Bank Limited (297,889,895) (297,889,895)
- United Bank Limited (394,613,974) (394,613,974)
Gross balance sheet exposure (593,075,869) (451,459,475)
Outstanding letter of credit (3,515,542) (3,515,542)
Net exposure (596,591,411) (454,975,017)
The following significant exchange rates have been applied at the reporting dates:
USD to PKR 104.29 101.50

The Company manages its currency risk by close monitoring of currency markets. However, the Company does not hedge its
currency risk exposure.
At June 30, 2016, if the Pakistan Rupee had weakened / strengthened by 5% against the US Dollar with all other variables held
constant, post-tax loss / profit for the year have been higher / lower by Rs. 29,829,571 (2015 : 45,145,947) mainly as a result of
foreign exchange losses / gains on translation of foreign debts, foreign currency borrowings.

(ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows
are substantially independent of changes in market interest rates.
At the reporting date, the interest rate profile of the company's significant interest bearing financial instruments was as follows:

(iii) Financial liabilities

2016 2015 2016 2015
Long term financing Percentage Rupees
- Fixed rate 0.00 0.00 - -
- instrument rate 7.90 to 8.90 10.86 to 12.68 493,461,570 611,433,281
Short term borrowings 4.08 to 7.90 3.82 to 11.93 940,648,513 1,020,173,051
1,434,110,083 1,631,606,332
Total yield / mark up rate risk sensitivity gap (1,434,110,083) (1,631,606,332)

(iv) Fair value sensitivity analysis for fixed rate instruments:

The company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore, a
change in interest rates at the reporting date would not affect profit and loss account.

(v) Cash flow sensitivity analysis for variable rate instruments:

A change of 1% in interest rates at the reporting date would have decreased / increased loss for the year by the amount shown
below. This analysis assumes that all other variables, in particular foreign currency rates, remains constants. This analysis is
prepared assuming the amount of liabilities outstanding at balance sheet date were outstanding for the whole year.

45

Annual Report 2016

 Effect on Profit and Loss 1% rate
Increase Decrease
As at June 30, 2016
Cash flow sensitivity - variable rate financial liabilities 14,341,101 (14,341,101)

As at June 30, 2015

Cash flow sensitivity - variable rate financial liabilities 16,316,063 (16,316,063)

(vi) Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices (other than those arising from currency risk or interest rate risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Company is not exposed to equity securities price risk as there is no investment in listed securities.

(b) Credit risk

Credit risk represents the risk of financial loss being caused if counter parties fail to discharge an obligation.

Credit risk arises from deposits with banks, trade debts, loans and advances, deposits and other receivables. The company seeks to
minimize the credit risk exposure through having exposures only to customers considered credit worthy and obtaining securities
where applicable. Where considered necessary, advance payments are obtained from certain parties. The maximum exposure to
credit risk is equal to the carrying amount of financial assets. Out of the total financial assets of Rs. 146,442,186 (2015 : Rs.
299,703,756), the financial assets exposed to credit risk amount to Rs. 142,286,458 (2015 : Rs. 274,697,206).
2016 2015
Rupees

Local debts 29,239,713 20,018,068

Foreign debts 99,428,000 241,044,394
128,667,713 261,062,462

The majority of foreign debtors of the company are situated in Asia, America, and Europe.
The maximum exposure to credit risk for loans and receivables at the reporting date by type of goods are:

Yarn 47,618,235 83,562,674

Fabric 80,857,550 177,110,372
Others 191,928 389,416
128,667,713 261,062,462
The aging of loans and receivables at the reporting date was:

Past due 0-6 months 128,551,912 260,984,143

Past due 6-12 months 115,801 78,319
128,667,713 261,062,462

The Company monitors the credit quality of its financial assets with reference to historical performance of such assets and
available external credit ratings. The carrying values of financial assets which have not impaired are as under:

Long term deposits 13,011,744 13,011,744

Trade debts 128,667,713 261,062,462
Loans and advances 607,000 373,622
Sales tax refundable 55,637,611 55,637,611
Cash and bank balances 4,155,728 25,006,550
202,079,797 355,091,989

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 GHAZI FABRICS INTERNATIONAL LIMITED

The credit quality of receivables can be assessed with reference to their historical performance with no or some defaults in recent
history, however, no losses. The credit quality of Company’s bank balances can be assessed with reference to external credit
ratings as follows:
Short Term Long Term
Bank Rating Agency
Borrowings Loans

United Bank Limited JCR-VIS A-1+ AA+

Habib Bank Limited JCR-VIS A-1+ AAA

(c) Liquidity risk

Liquidity risk represents the risk that the Company will encounter difficulties in meeting obligations associated with financial
liabilities. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities. Due to growing nature of the businesses the Company maintains
flexibility in funding by maintaining committed credit lines available.

The table shows analyses how management monitors net liquidity based on details of the remaining contractual maturities of
financial assets and liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

2016 (Rupees)
Carrying Contractual Six months Six to twelve One to five
Amount cash flows or less months years
Non-Derivative
Financial Liabilities
Long term financing
(from banking companies) 493,461,570 700,634,582 145,242,980 117,756,930 437,634,672
Trade and other payables 439,316,968 439,316,968 439,316,968 - -
Short term borrowings 940,648,513 941,011,106 1,074,792,050 - -
1,873,427,051 2,080,962,656 1,659,351,999 117,756,930 437,634,672

2015 (Rupees)
Carrying Contractual Six months Six to twelve Two to five
Amount cash flows or less months years
Non-Derivative
Financial Liabilities
Long term financing
(from banking companies) 611,433,281 700,634,582 145,245,980 117,756,930 437,634,672
Trade and other payables 329,199,200 392,199,200 392,199,200 - -
Short term borrowings 1,020,173,051 1,030,038,621 1,074,792,050 - -
1,960,805,532 2,122,872,403 1,612,237,230 117,756,930 437,634,672

The contractual cash flows relating to the above financial liabilities have been determined on the basis of markup rates effective as at 30 June,
2016. The rates of mark-up have been disclosed in note 06 to these financial statements.

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 36 Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in orderto
provide returns for shareholders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the cost
of capital. There were no changes to Company's approach to capital management during the year. The Company is not subject to
any externally imposed Capital requirements.

The Company manages its capital structure and makes adjustment to it in the light of changes in economic conditions. To maintain
or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares.

The Company finances its operations through equity, borrowings and management of working capital with a view to maintaining an
appropriate mix between various sources of finance to minimize risk.

37 INFORMATION ABOUT REPORTING SEGMENT

37.1 The following table presents revenue and profit information regarding the Company's operating segments for the year ended June 30,
2016 and 2015 respectively.
Inter - segment
Spinning Weaving Consolidated
Transactions

2016 (Rupees)
Sales 3,570,270,381 1,249,661,358 (1,258,794,174) 3,561,137,565
Cost of Sales: (3,858,533,579) (788,719,010) 1,258,794,174 (3,388,458,415)
Gross profit (288,263,198) 460,942,348 - 172,679,150
Selling and distribution costs (52,061,818) (98,058,566) - (150,120,384)
Administrative and general expenses (68,910,838) (47,449,988) - (116,360,826)
Profit before taxation and un allocated expenses (409,235,854) 315,433,795 - (93,802,060)
Un-allocated expenses:
Other operating expenses (1,953,384)
Other operating income 9,898,078
Finance cost (149,385,631)
Profit before taxation (235,242,997)
Taxation (34,120,958)
Net (Loss) for the year (269,363,955)

2015 (Rupees)
Sales 2,524,112,246 2,590,790,764 (1,125,734,633) 3,989,168,377
Cost of Sales: (3,512,269,424) (1,303,680,845) 1,125,734,633 (3,690,215,635)
Gross profit (988,157,178) 1,287,109,919 - 298,952,741
Selling and distribution costs (62,890,285) (118,454,011) - (181,344,296)
Administrative and general expenses (61,972,270) (42,672,293) - (104,644,562)
Profit before taxation and un allocated expenses (1,113,019,733) 1,125,983,615 - 12,963,883
Un-allocated expenses:
Other operating expenses (2,608,806)
Other operating income 17,515,441
Finance cost (208,875,976)
Profit before taxation (181,005,458)
Taxation (1,984,518)
Net (Loss) for the year (182,989,976)

37.2 All non current assets of the Company as at 30 June 2016 are loacated in Pakistan
37.3 None of the customers of the Company accounts for more than 10% of gross sales of the Company for the year.

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38 AUTHORIZATION OF FINANCIAL STATEMENTS

These accounts have been authorized for issue by the Board of Directors of the Company on October 24, 2016.

39 GENERAL

39.1 Figures have been rounded off to the nearest of rupees;

39.2 Corresponding figures have been rearranged / reclassified, wherever necessary, to facilitate comparison.

CHIEF EXECUTIVE DIRECTOR

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 GHAZI FABRICS INTERNATIONAL LIMITED

PROXY FORM
(27th ANNUAL GENERAL MEETING)

I/We son/daughter/wife

of of being member (s)

of GHAZI FABRICS INTERNATIONAL LIMITED, holder of

ordinary shares of the Company, under Folio No. / Participant’s ID/CDC sub account No.

hereby appoint of failing him/her

of who is/are member(s) of GHAZI FABRICS INTERNATIONAL LIMITED

under Folio No. / Participant’s ID/CDC sub-account No. respectively, as my/our proxy

in my/our absence to attend and vote for me/us and on my/our behalf at the 27th Annual General

Meeting of the Company to be held on November 21, 2016 and/or any adjournment thereof.

As witness my/our hand this day of November, 2016

Signed in the presence of.

Witness
Signature of
shareholder (s) on
Name
revenue stamp
worth Rupees 5/-
Occupation
The signature should agree with the
Address specimen registered with the Company.

IMPORTANT:
1. This Proxy Form, duty completed and signed, must be received at the Registered Office of the Company , at 8-
C, E-III Gulberg III, Lahore Not less than 48 hours before the time of holding the meeting.

2. No person shall act as Proxy unless he/she is a member of the Company, except that a Corporation/Company may
appoint a person who is not a member.

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