Contents

Company information------02

Directors' report to the shareholders ------03

Auditor's report to Members ------04

Balance sheet ------05

Profit and loss account ------06

Statement of comprehensive income ------07

Cash flow statement ------08

Statement of changes in equity ------09

Notes to the financial statements ------10

1 CHENAB LIMITED Company information

Chief Executive Officer Mian Muhammad Latif Directors Mian Muhammad Javaid Iqbal Mr. Muhammad Naeem Mr. Muhammad Faisal Latif Mr. Muhammad Farhan Latif Mr. Muhammad Zeeshan Latif Mst. Shahnaz Latif Bankers/Financial Institutions (In Company InformationAlphabetic Order) . Limited. AlBaraka Bank () Limited. (ABBL) Limited. Citibank, N.A. Limited. First Credit & Investment Bank Limited First Punjab Modaraba. . Habib Metropolitan Bank Limited. KASB Bank Limited. National Bank of Pakistan. NIB Bank Limited Orix Leasing (Pakistan) Limited. Pak Oman Investment Company Ltd. Pak Kuwait Investment Company (Pvt.) Ltd. Pak Libya Holding Company (Pvt.) Ltd. Saudi Pak Industrial & Agricultural Investment Company (Pvt.) Ltd. SILK Bank Limited. Standard Chartered Bank (Pakistan) Limited Summit Bank Limited. The . Company Secretary/ Chief Financial Officer Mr. Muhammad Arshad Audit Committee Mr. Muhammad Farhan Latif - Chairman Mr. Muhammad Zeeshan Latif - Member Mst. Shahnaz Latif - Member

Auditors Avais Hyder Liaquat Nauman Chartered Accountants Legal Advisor Ch. Shahid Mehmood (Advocate) Registered Office Registered Office N i s h a t a b a d , F a isalabad. Tel:041-8754472-8 Fax:041-8752400, 8752700 E-mail Address [email protected] Website Address www.chenabgroup.com Works - Spinning Unit - Toba Tek Singh. -Weaving Unit - Kharianwala, Distt., Sheikhupura. -Weaving Unit - Shahkot, Distt., Nankana Sahib. -Processing & Stitching Units - Nishatabad, .

2 CHENAB LIMITED DIRECTORS’ REPORT TO THE SHAREHOLDERS

The directors’ take the opportunity in placing before you the un-audited/reviewed financial statements together with notes for the half year ended December 31 2013.

SALES AND SERVICES REVENUE

Sales revenue of Rs.886.170 million and revenue from services of Rs.173.705 million aggregating to Rs.1,059.170 million was earned during the period under report as compared to the sales and services revenue of Rs.1097.776 million achieved during the same period of the preceding year.

FINANCIAL RESULTS AND REASONS FOR LOSS

During the period under report, the company has sustained financial loss of Rs.214.138 million as compared with financial loss of Rs.342.801 million in the preceding period as hang over of the continuing energy crisis.

The working capital of the company has liquefied owing to these perennial losses whereas the banks are not extending requisite financial assistance for smooth restoration of its operational activities on optimum level.

FUTURE OUTLOOK

(i) Presently, demand for Pakistani textile products has emerged in the international market yet in view of grant of GSP plus status by European Union to Pakistani exporters commencing from January, 2014, this demand is likely to increase tremendously in view of these developments yet this opportunity can be availed only if the Government of Pakistan provides a comprehensive package for the revival of value added textile industry alongwith interruption free requisite supply of electricity/gas to utilize optimum level of production capacity coupled with help from financial institutions in providing additional working capital and restructuring financial facilities on economical rate of mark up and suitable moratorium in the repayment of long term loan.

(ii) In case of this company, the situation has not yet normalised in view of hang over of the impending crisis which is likely to take time to settle down.

AUDITORS’ OBSERVATIONS

(i) Due to adverse market circumstances, the company has not been able to comply with terms of certain loan agreements and consequently certain banks and financial institutions have filed cases for recovery and winding up of the company which the management is defending apart from approaching them for amicable decision.

The litigation has also adversely affected to process of negotiations with banks for extension and re-scheduling of credit facilities. Certain lenders have re-structured the credit facilities on soft terms and has provided fresh working capital limit. Other lenders are considering the restructuring requests and it is expected that the remaining liabilities will also be re- structured as requested by the company. The management is confident that the litigations banks/financial institutions will be finalized in the best interest of the company considering the negotiation with the lenders.

(ii) The matter of issue of ordinary shares in the event of first default for redemption of preference shares is pending before SECP for want of a verdict from competent court involved in it and one of the investors is pursuing the matter. The matter for second default shall be taken in hand subsequently upon resolution of the matter pertaining to first default.

(iii) The management is following up the recovery of past due trade debts and is confident of their full recovery.

(iv) The management is hopeful that with the assurance of Government of Pakistan given from time to time to improve supply position of electricity/gas operations of the company shall rise to the optimum level further augmented by the coal based self generated energy source.

In view of the above, the management is confident that it will be successful in its efforts and the company will be able to continue as a going concern.

ACKNOWLEDGEMENT

The directors are thankful to the shareholders, financial institutions and customers of the company who have always extended their support in one way or the other to its cause. They also place on record their appreciation of the dedicated services rendered by its employees during this period. Board of Directors For and on behalf of

Date: 28-02-2014 (MIAN MUHAMMAD LATIF) Place: Faisalabad CHIEF EXECUTIVE OFFICE

3 CHENAB LIMITED Auditors’ Report on Review of Interim Financial Information to the Members

Introduction

We have reviewed the accompanying condensed interim balance sheet of Chenab Limited (the company) as at December 31, 2013 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement, condensed interim statement of changes in equity and notes to the accounts for the six months period then ended (here-in-after referred to as the “interim financial information"). Management is responsible for the preparation and presentation of this interim financial information in accordance with the approved accounting standards as applicable in Pakistan. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim profit and loss account and condensed interim statement of comprehensive income for the quarter ended December 31, 2013 and 2012 have not been reviewed, as we are required to review only the cumulative figures for the six months period ended December 31, 2013.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Adverse Conclusion

As described in Note 1.3 to the accounts, the interim financial information has been prepared on going concern basis. The company incurred loss of Rs. 214.14 million (2012 : Rs. 342.80 million) for the period ended December 31, 2013. As at December 31, 2013 its accumulated loss is Rs. 7,159.92 million (June 30, 2013: Rs. 6,960.39 million), shareholders’ equity is negative by Rs. 4,607.07 million (June 30, 2013: Rs. 4,407.55 million) and the company’s current liabilities exceed its current assets by Rs. 7,500.46 million (June 30, 2013: Rs. 7,177.51 million). The company is facing operational and financial problems. There is doubt as to feasibility and ultimate outcome of management’s plans to improve the current situation of the company. In our view, the going concern assumption used in the preparation of this interim financial information is inappropriate, therefore, the company may not be able to realize its assets and discharge its liabilities in the normal course of business.

The company is not providing for mark up since July 2011 in respect of certain long term financing and short term borrowings in view of its requests to the respective lenders to convert all outstanding liabilities into non serviceable loans / loans subject to reduced rate of mark up (Refer Note 4 and 10 to the accounts). Had the mark up been provided, loss for the period would have been increased by Rs. 102.51 million (2012: Rs. 347.77 million) and, negative equity and interest / mark up payable as at December 31, 2013 would have been increased by Rs. 1,426.91 million (June 30, 2013: Rs. 1,324.40 million).

Trade debts of Rs. 2,252.71 million (June 30, 2013: Rs. 2,223.33 million) are past due (Refer Note 6.1). In our opinion, these past due trade debts are impaired but no provision in respect of doubtful debts has been made in the interim financial information. We are unable to determine the amount of provision required with reasonable accuracy and, therefore, its impact on results for the year and equity could not be quantified. Adverse Conclusion

Our review indicates that, as this interim financial information is prepared using the going concern assumption which is inappropriate and no provision in respect of doubtful trade debts and mark up on certain long term financing and short term borrowings has been made in this interim financial information as described in the preceding paragraphs, this interim financial information does not present fairly, in all material respects, the financial position of the company as at December 31, 2013, and of its financial performance and cash flows for the six months period then ended in accordance with the approved accounting standards as applicable in Pakistan for interim financial reporting.

Dated: 28/02/2014 Avais Hyder Liaquat Nauman Place: Faisalabad Chartered Accountants Engagement partner: Hamid Masood

4 CHENAB LIMITED CONDENSED INTERIM BALANCE SHEET AS AT DECEMBER 31, 2013 (Un-audited) (Audited) December 31, June 30, 2013 2013 Note Rupees Rupees SHARE CAPITAL AND RESERVES Authorised capital 120,000,000 ordinary shares of Rs.10/- each 1,200,000,000 1,200,000,000 80,000,000 cumulative preference shares of Rs.10/- each 800,000,000 800,000,000 Issued, subscribed and paid up capital 1,150,000,000 1,150,000,000 Cumulative preference shares 800,000,000 800,000,000 Reserves Capital reserves 526,409,752 526,409,752 Revenue reserves General reserve 76,432,834 76,432,834 Accumulated loss (7,159,916,316) (6,960,392,729) (4,607,073,730) (4,407,550,143) SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT 5,107,909,104 5,122,524,353 NON-CURRENT LIABILITIES Long term financing 2,500,794,479 2,758,868,705 Liabilities against assets subject to finance lease 25,116,234 27,156,234 Deferred liabilities 633,574,340 587,929,519 3,159,485,053 3,373,954,458 CURRENT LIABILITIES Trade and other payables 1,780,411,686 1,842,055,311 Interest / markup payable 1,305,503,717 1,302,358,402 Short term borrowings 3 5,802,440,623 5,746,682,704 Current portion of : Long term financing 2,292,359,986 2,054,105,760 Liabilities against assets subject to finance lease 10,035,654 8,305,654 Provision for taxation - income tax 3,030,228 3,232,808 11,193,781,894 10,956,740,639 CONTINGENCIES 4 - - 14,854,102,321 15,045,669,307

NON-CURRENT ASSETS Property, plant and equipment 5 11,148,144,980 11,253,800,473 Long term deposits 12,636,768 12,636,768 11,160,781,748 11,266,437,241 CURRENT ASSETS

Stores, spares and loose tools 493,937,842 559,754,221 Stock in trade 600,091,451 626,205,881 Trade debts 6 2,396,998,331 2,386,524,814 Loans and advances 49,378,534 50,200,309 Deposits and prepayments 13,804,063 12,756,851 Other receivables 41,735,808 43,246,866 Tax refunds due from Government 73,978,804 83,819,812 Cash and bank balances 23,395,740 16,723,312 3,693,320,573 3,779,232,066 14,854,102,321 15,045,669,307

The annexed notes form an integral part of this condensed interim financial report.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

5 CHENAB LIMITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE HALF YEAR ENDED DECEMBER 31, 2013

Quarter ended December 31, Half year ended December 31, 2013 2012 2013 2012 Note Rupees Rupees Rupees Rupees

Sales 7 505,190,077 579,689,963 1,059,875,405 1,097,776,019 Cost of sales 8 652,373,536 568,479,149 1,259,967,704 1,307,904,128 Gross (loss) / profit (147,183,459) 11,210,814 (200,092,299) (210,128,109)

Other operating income 9 105,786,047 2,530,035 107,084,625 3,956,092 (41,397,412) 13,740,849 (93,007,674) (206,172,017)

Selling and distribution expenses 2,368,832 13,271,782 7,682,805 16,820,080 Administrative expenses 33,960,802 34,060,652 61,970,046 65,459,762 Other operating expense - 73,251 - 73,251 Finance cost 10 12,929,237 24,388,388 48,367,132 54,918,178 49,258,871 71,794,073 118,019,983 137,271,271 (Loss) for the period before taxation (90,656,283) (58,053,224) (211,027,657) (343,443,288)

Provision for taxation 14.1 1,685,969 (3,760,479) 3,111,179 (641,727)

(Loss) for the period (92,342,252) (54,292,745) (214,138,836) (342,801,561)

Loss per share - Basic and diluted (0.80) (0.47) (1.86) (2.98)

The annexed notes form an integral part of this condensed interim financial report.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE HALF YEAR ENDED DECEMBER 31, 2013

Quarter ended December 31, Half year ended December 31, 2013 2012 2013 2012 Rupees Rupees Rupees Rupees

(Loss) for the period (92,342,252) (54,292,745) (214,138,836) (342,801,561)

Other comprehensive income for the period Items that will not be subsequently reclassified to profit or loss: Incremental depreciation on revalued assets for the period 9,534,716 8,329,118 14,615,249 15,291,385

Total comprehensive (loss) for the period (82,807,536) (45,963,627) (199,523,587) (327,510,176)

The annexed notes form an integral part of this condensed interim financial report.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

6 CHENAB LIMITED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE HALF YEAR ENDED DECEMBER 31, 2013 Half year ended December 31, 2013 2012 Rupees Rupees a) CASH FLOWS FROM OPERATING ACTIVITIES (Loss) before taxation (211,027,657) (343,443,288) Adjustments for: Depreciation of property, plant and equipment 106,761,716 109,721,530 Provision for staff retirement gratuity 10,934,950 17,510,854 (Gain) / loss on disposal of operating assets (1,457,025) 73,251 Balances written back - net (101,819,948) - Finance cost 48,367,132 54,918,178 Operating cash flows before working capital changes (148,240,832) (161,219,475) Changes in working capital Decrease / (increase) in current assets Stores, spares and loose tools 65,816,379 100,050,716 Stock in trade 26,114,430 23,702,596 Trade debts (10,473,517) (100,706,018) Loans and advances (3,840,244) (14,862,300) Deposits and prepayments (1,047,212) 387,910 Other receivables 101,470,948 869,767 Tax refunds due from Government 15,384,597 1,860,558 193,425,381 11,303,229 Increase in current liabilities Trade and other payables (59,783,567) 25,150,513 133,641,814 36,453,742 Cash (used in) operating activities (14,599,018) (124,765,733) Income tax paid (4,195,329) (3,555,931) Finance cost (paid) / refunded (7,485,225) 743,464 Staff retirement gratuity paid (3,026,721) (276,907) Net cash (used in) operating activities (29,306,293) (127,855,107)

b) CASH FLOWS FROM INVESTING ACTIVITIES Additions in property, plant and equipment (1,294,198) (4,249,460) Proceeds from disposal of operating assets 1,645,000 315,654 Net cash generated from / (used in) investing activities 350,802 (3,933,806)

c) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of: Long term loans (19,820,000) (15,031,000) Liabilities against assets subject to finance lease (310,000) (1,338,129) Increase in short term bank borrowings - net 55,757,919 138,092,911 Net cash generated from financing activities 35,627,919 121,723,782

Net increase / (decrease) in cash and cash equivalents (a+b+c) 6,672,428 (10,065,131)

Cash and cash equivalents at the beginning of the period 16,723,312 29,706,905

Cash and cash equivalents at the end of the period 23,395,740 19,641,774

The annexed notes form an integral part of this condensed interim financial report.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

7 CHENAB LIMITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) FOR THE HALF YEAR ENDED DECEMBER 31, 2013

Capital reserves Revenue reserves Issued, Book difference Cumulative Premium on Preference subscribed of capital under preference issue of shares General Accumulated Total and paid up scheme of Sub total shares ordinary redemption reserve loss capital arrangement for shares reserve amalgamation ------R u p e e s ------

Balance as at July 01, 2012 as previously reported 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 526,409,752 76,432,834 (6,518,086,525) (3,965,243,939)

Effect of change in accounting policy - Note 2.4 Recognition of cumulative unrecognized actuarial gain for the year ended June 30, 2012 ------12,837,182 12,837,182

Balance as at July 01, 2012 - as restated 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 526,409,752 76,432,834 (6,505,249,343) (3,952,406,757)

Total comprehensive (loss) for the period

(Loss) for the period ------(342,801,561) (342,801,561)

Other comprehensive income Items that will not be subsequently reclassified to profit or loss:

Incremental depreciation on revalued assets for the period ------15,291,385 15,291,385 ------(327,510,176) (327,510,176) Balance as at December 31, 2012 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 526,409,752 76,432,834 (6,832,759,519) (4,279,916,933)

Total comprehensive (loss) for the period

(Loss) for the period ------(150,997,209) (150,997,209)

Other comprehensive income Items that will not be subsequently reclassified to profit or loss:

Incremental depreciation on revalued assets for the period ------15,291,388 15,291,388

Effect of change in accounting policy - Note 2.4 recognition of cumulative unrecognized actuarial gain for the year ended June 30, 2013 ------8,072,611 8,072,611

------(127,633,210) (127,633,210) Balance as at June 30, 2013 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 526,409,752 76,432,834 (6,960,392,729) (4,407,550,143)

Total comprehensive (loss) for the period

Other comprehensive income

Items that will not be subsequently reclassified to profit or loss :

Incremental depreciation on revalued assets for the period ------14,615,249 14,615,249 ------(199,523,587) (199,523,587) Balance as at December 31, 2013 1,150,000,000 800,000,000 120,000,000 63,552,610 342,857,142 526,409,752 76,432,834 (7,159,916,316) (4,607,073,730)

The annexed notes form an integral part of this condensed interim financial report.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

8 CHENAB LIMITED CONDENSED INTERIM FINANCIAL REPORT (UNAUDITED) FOR THE HALF YEAR ENDED DECEMBER 31, 2013 1. STATUS AND ACTIVITIES 1.1 Chenab Limited (the Company) is incorporated as a public limited company under the Companies Ordinance, 1984 (the Ordinance) and is listed on . The principal business of the Company is export of all kinds of value added fabrics, textile made-ups, casual and fashion garments duly processed. The registered office of the Company is situated at Nishatabad, Faisalabad in the province of Punjab. The cloth processing unit is located at Nishatabad, District Faisalabad and stitching units are located at Nishatabad, District Faisalabad. Weaving units are located at Sheikhupura Road, Kharrianwala, District Sheikhupura and Shahkot, District Nankana Sahib. Spinning unit is located at Shorkot Road, District Toba Tek Singh, in the province of Punjab.

1.2 Pursuant to schemes of arrangement approved by the Honourable Lahore High Court, Lahore, assets, liabilities and reserves of Faisal Weaving (Private) Limited, Latif Weaving (Private) Limited and Chenab Finishing (Private) Limited were merged with the Company with effect from December 31, 1998 and assets, liabilities and reserves of Chenab Fibres Limited were merged with the Company with effect from April 01, 2003.

1.3 The Company has incurred loss of Rs. 214.14 million (2012 : Rs. 342.80 million). As at December 31, 2013 the accumulated loss of the Company is Rs. 7,159.92 million (June 30, 2013: Rs. 6,960.39 million), shareholders' equity is negative by Rs. 4,607.07 million (June 30, 2013: Rs. 4,407.55 million) and the current liabilities of the company exceed its current assets by Rs. 7,500.46 million (June 30, 2013: Rs. 7,177.51 million). The Company has not redeemed preference shares on exercise of put options for two consecutive years by holders of preference shares due to tight cash flow situation. The Company has not been able to comply with terms of certain loan agreements. Certain banks and financial institutions have filed cases for recovery and winding up of the Company which the management is defending. The litigation has also adversely affected the process of negotiations with banks for extension and re-scheduling of credit facilities.

Management's efforts for making re-scheduling arrangements with lenders are not so far fully materialised, however the management has been able to reach at agreement with some lenders to partially settle the lease liability, to restructure and convert short term borrowing into long term loan, and obtain financial limits for exports and is hopeful that arrangement with others will also materialise in due course. On the operational side, the management continued toll manufacturing and making efforts to increase the volume of business. The management has also decided to make necessary adjustments in machinery to use coal based boilers and oil heaters as an alternate source of energy. The capacity utilization through alternate energy will be increased to 70% in due course to overcome the core issue of under utilization of its production facilities which the Company is experiencing from the last many years, but unfortunately due to non-availability of working capital facilities and continued load management by the utility suppliers, the desired results could not be achieved and the core issue of higher operating cost due to lower production could not be resolved. The management's effort to regain export market could not materialise due to shortage of working capital and delay in settlements with bankers. The management is negotiating with banks for working capital facilities and successful settlements of overdue loans and hopeful of favourable results. The management is confident that the Company will be able to continue as a going concern.

1.4 This condensed interim financial report is presented in Pak Rupee, which is the Company's functional and presentation currency.

2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Statement of compliance This condensed interim financial report of has been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 ''Interim Financial Reporting'' and provisions of and directives issued under the Companies Ordinance, 1984 (the Ordinance). In case the requirements differ, the provisions of or directives issued under the Ordinance have been followed. This condensed interim financial report is unaudited but subject to limited scope review by the auditors of the Company and are being submitted to the shareholders as required under Section 245 of the Ordinance. 2.2 Application of new and revised International Financial Reporting Standards (IFRSs)

2.2.1 Standards, amendments to standards and interpretations becoming effective in current period:

There are certain amendments to standards that became effective during the period and are mandatory for accounting periods of the Company beginning on or after July 01, 2013 but are considered not to be relevant or not to have any significant effect on the Company's operations and are, therefore, not disclosed in this condensed interim financial report except amendments in IAS - 19 "Employee Benefits" related to immediate recognition of all actuarial gains and losses through other comprehensive income as explained in detail in Note 2.4.

9 CHENAB LIMITED 2.2.2 Standards, amendments to standards and interpretations becoming effective in future:

There are certain other new standards, amendments to standards and interpretations that are mandatory for accounting periods of the Company beginning on or after July 01, 2014 but are considered not to be relevant or not to have any significant effect on the Company's operations and are, therefore, not disclosed in this condensed interim financial report.

2.3 Basis of preparation

This condensed interim financial report has been prepared under the "historical cost convention" except staff retirement gratuity carried at present value and certain property, plant and equipment carried at valuation. This condensed interim financial report does not include all the information required for complete set of financial statements, and should be read in conjunction with the Company's published audited financial statements for the year ended June 30, 2013.

2.4 Accounting policies and methods of computation

The accounting policies and methods of computation adopted in the preparation of this condensed interim financial report are the same as those applied in the preparation of the published audited financial statements for the year ended June 30, 2013 except the following ; Change in accounting policy Staff retirement gratuity The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the elimination of ‘corridor approach’ for actuarial gains and losses permitted under the previous version of IAS 19 and require all actuarial gains and losses to be recognised immediately through other comprehensive income. The amendments have resulted in change to the Company's accounting policy in respect of staff retirement gratuity. The change in accounting policy has been applied retrospectively in accordance with the requirements of IAS-8 "Accounting Policies, Change in Accounting Estimates and Errors".

The effects of retrospective application of the change in accounting policy are as follows :

Staff retirement Accumulated gratuity loss

Balance as at June 30, 2013 as previously reported 111,138,359 (6,981,302,522)

Recognition of cumulative net unrecognised actuarial gain for the year ended June 30, 2012 (12,837,182) 12,837,182 Recognition of unrecognised actuarial gain for the year ended June 30, 2013 (8,072,611) 8,072,611 (20,909,793) 20,909,793 Balance as at June 30, 2013 as restated 90,228,566 (6,960,392,729)

Un-audited Audited December 31, June 30, 2013 2013 Note Rupees Rupees

3. Short term borrowings Secured Under mark up arrangements From banking companies Export finances 5,103,318,650 5,097,204,813 Finance against trust receipts 18,301,847 18,301,847 Running finance 559,176,044 559,176,044 121,644,082 72,000,000 5,802,440,623 5,746,682,704

3.1 The aggregate unavailed short term borrowing facilities available to the Company are Rs. 195.25 million (June 30, 2013: Rs. 271.37 million). Total sanctioned limits are Rs. 5.99 billion (June 30, 2013: Rs. 6.42 billion) out of which Rs. 5.16 billion (June 30, 2013: Rs. 5.58 billion) are expired and renewable.

10 CHENAB LIMITED 4. CONTINGENCIES There is no significant change in contingencies since the date of published audited financial statements for the year ended June 30, 2013 except the followings:

Un-audited Audited December 31, June 30, 2013 2013 Rupees Rupees

Post dated cheques issued in favour of Collector of Customs for release of goods imported for re-export - 13,011,312

Liability of markup not acknowledged in view of Company's request for availing non serviceable grace period on the outstanding liabilities. Mark up has been calculated at the last agreed mark up rates. 1,426,910,451 1,324,397,012

5. Property, plant and equipment

Operating assets 11,148,144,980 11,253,800,473

5.1 Acquisitions / capitalizaiton and disposals of operating assets during the period

Half year ended December 31, 2013 Half year ended December 31, 2012 Acquisitions / Disposals Acquisitions / Disposals capitalization capitalization Rupees Rupees Rupees Rupees

Company owned - at cost Plant and machinery 1,231,698 - 21,618,614 - Electric installations - - 219,425 - Factory equipment - - 115,000 - Furniture and fixture - - 189,800 - Office equipment 62,500 - 62,045 - Vehicles - 187,975 651,496 388,905 1,294,198 187,975 22,856,380 388,905

Un-audited Audited December 31, June 30, 2013 2013 Rupees Rupees 6. Trade debts Considered good Secured Foreign 4,443,004 9,488,578 Unsecured Foreign 1,904,797,047 1,922,613,335 Local 487,758,280 454,422,901 2,392,555,327 2,377,036,236 2,396,998,331 2,386,524,814

6.1 The aging of trade debts is as under:

Not past due 144,284,061 163,190,996 Past due within one year 117,693,298 157,698,393 Past due over one year 2,135,020,972 2,065,635,425 2,252,714,270 2,223,333,818 2,396,998,331 2,386,524,814

The management is taking measures for the recovery of past due trade debts and is in the process of negotiations and settlement with the customers. Considering these factors and the fact that legal recourse for recovery of past due debts is available to the Company, the Company believes that past due trade debts do not require any impairment.

11 CHENAB LIMITED Quarter ended December 31, Half year ended December 31, 2013 2012 2013 2012 Rupees Rupees Rupees Rupees

7. Sales Export Fabrics / made ups / garments 51,455,162 180,813,623 173,330,500 291,211,451 Add: Export rebate / duty drawback 1,020,972 1,076,987 1,375,226 2,265,577 52,476,134 181,890,610 174,705,726 293,477,028 Less: Commission 823,347 1,421,480 2,901,078 2,344,713 Discount - 1,787,294 558,878 3,416,521 823,347 3,208,774 3,459,956 5,761,234 51,652,787 178,681,836 171,245,770 287,715,794 Local Yarn 311,838,661 258,557,762 621,603,254 540,729,278 Fabrics / made ups 45,736,720 78,273,919 93,321,455 153,893,216 Processing, conversion and stitching charges 95,961,909 64,176,446 173,704,926 115,437,731 505,190,077 579,689,963 1,059,875,405 1,097,776,019

8. Cost of sales

Cost of goods manufactured (Note 8.1) 715,968,754 605,487,288 1,254,987,960 1,286,641,101 Finished goods Opening stock 384,706,694 409,913,911 453,281,656 468,185,077 Closing stock (448,301,912) (446,922,050) (448,301,912) (446,922,050) (63,595,218) (37,008,139) 4,979,744 21,263,027 652,373,536 568,479,149 1,259,967,704 1,307,904,128

Quarter ended December 31, Half year ended December 31, 2013 2012 2013 2012 Rupees Rupees Rupees Rupees 8.1 Cost of goods manufactured Raw material consumed (Note 8.1.1) 427,901,726 317,130,701 665,450,452 653,948,832 Salaries, wages and benefits 54,636,143 67,980,032 116,110,893 131,170,588 Staff retirement benefits 3,380,400 6,600,204 7,655,610 13,110,604 Stores and spares 47,731,091 64,373,893 90,772,257 138,181,740 Dyes and chemicals 16,657,156 12,672,246 33,333,950 33,887,483 Packing material 15,241,877 2,360,052 28,662,997 20,654,518 Repairs and maintenance 1,414,873 3,770,809 4,791,884 4,922,618 Fuel and power 97,797,539 66,368,534 169,135,977 131,964,444 Insurance 286,413 459,087 1,048,846 820,696 Depreciation 52,136,121 52,768,358 103,891,843 106,438,209 Other 9,409,121 29,911,951 21,292,163 53,532,891 726,592,460 624,395,867 1,242,146,872 1,288,632,623 Work in process Opening stock 94,859,185 142,331,219 118,323,979 159,248,276 Closing stock (105,482,891) (161,239,798) (105,482,891) (161,239,798) (10,623,706) (18,908,579) 12,841,088 (1,991,522) 715,968,754 605,487,288 1,254,987,960 1,286,641,101

8.1.1 Raw material consumed

Opening stock 47,429,592 17,079,746 54,600,246 22,101,733 Purchases including purchase expenses 426,778,782 317,721,597 657,156,854 649,517,741 474,208,374 334,801,343 711,757,100 671,619,474 Closing stock (46,306,648) (17,670,642) (46,306,648) (17,670,642) 427,901,726 317,130,701 665,450,452 653,948,832

12 CHENAB LIMITED 9. Other operating income Income from assets other than financial assets: Sale of waste material 599,385 653,214 831,402 1,061,092 Rental income 1,909,689 1,876,821 2,976,250 2,895,000 Gain on disposal of property, plant and equipment 1, 457,025 - 1,457,025 - Balances written back - net 101,819,948 - 101,819,948 - 105,786,047 2,530,035 107,084,625 3,956,092 10. Finance cost Interest / mark up on: Long term financing 6,921,901 19,283,035 36,251,730 48,411,384 Liabilities against assets subject to finance lease 975,250 2,029,282 1,784,812 2,029,282 Short term borrowings 4,390,252 1,433,979 7,869,158 2,053,315 Bank charges and commission 641,834 1,642,092 2,461,432 2,424,197 12,929,237 24,388,388 48,367,132 54,918,178

10.1 The Company is facing financial and operational problems. As part of its long term plan to overcome these problems, the management has filed applications to its bankers / financial institutions to reschedule the existing long term finances and short term borrowings along with outstanding mark up thereon (except demand finance VII, own source finances and murabaha finances) and to convert the entire outstanding liabilities into non serviceable loans / loans subject to reduced rate of mark up for a reasonable period of time. The Company is hopeful that its bankers / financial institutions will consider the proposals favorably, therefore no further provision of markup in respect of these long term financing and short term borrowings has been made as the mark up expense amount depends on the outcome of the applications. 11. TRANSACTIONS WITH RELATED PARTIES The Company in the normal course of business carries out transactions with various related parties which comprise of an associated undertaking, directors and key management personnel. Significant transactions with related parties are as under :- Half year ended December 31, 2013 2012 Relationship Nature of transaction Rupees Rupees Associated undertaking Services received - 388,171 Key management personnel Remuneration 2,400,000 4,200,000 12. Overdue loans On the reporting date, the installments of long term financing amounting to Rs. 1,812.179 million (June 30, 2013: Rs. 1,567.757 million) alongwith mark up of Rs. 543.211 million (June 30, 2013: Rs. 543.211 million), lease finances amounting to Rs. 7.035 million (June 30, 2013: Rs. 6.386 million) alongwith mark up of Rs. 1.479 million (June 30, 2013: Rs. 1.349 million) and short term borrowings amounting to Rs. 5,162.32 million (June 30, 2013: Rs. 909.996 million) alongwith mark up of Rs. 729.144 million (June 30, 2013: Rs. 757.798 million) were over due. The Company's requests for restructuring of the overdue loans and related markup and conversion into non serviceable loans / loans subject to reduced rate of mark up for a reasonable period of time are pending with the lenders. 13. DATE OF AUTHORISATION FOR ISSUE

This condensed interim financial report was authorised for issue on February 28, 2014 by the Board of Directors of the Company. 14. GENERAL 14.1 The provision for taxation made in this condensed interim financial report is subject to adjustment in annual financial statements. Deferred tax asset of Rs. 178.43 million (June 30, 2013: Rs. 148.42 million) has not been recognised in this condensed interim financial report in view of uncertain future results. 14.2 There is no unusual item included in this condensed interim financial report which is affecting equity, liabilities, assets, loss, comprehensive loss or cash flows of the Company. 14.3 Figures have been rounded off to the nearest Rupee.

MUHAMMAD NAEEM MIAN MUHAMMAD LATIF (DIRECTOR) (CHIEF EXECUTIVE OFFICER)

13 CHENAB LIMITED