LANDMARK SPINNING INDUSTRIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007
1.	Corporate Information
	Landmark Spinning Industries Limited (the Company) was incorporated in Pakistan, as a private Limited Company on October 21, 1991 and was converted into a public limited company on April 30, 1992 under the Companies Ordinance, 1984 and its shares are listed on the Karachi and Lahore Stock Exchanges in Pakistan. The registered office of the company is located at 1st floor, Cotton Exchange Building, I I Chundigar Road, Karachi, Pakistan; while its manufacturing facilities are located at Winder Balochistan, Pakistan. The Principal activity of the Company is trading, manufacturing and sale of yarn.
	The company commenced its commercial operation, from 2001 after reactivation of plant which remained idle for the seven years. However, the company again has suspended its production on November 29, 2002 to forestall the recurring losses on account of electricity breakdowns and frequent Load shedding stop gap arrangement was made to suspend operations for the time being until the market trends becomes conducive for positive results. The management feels that immediately upon the utility provision of gas supplies to winder Balochistan industrial zone by S.S.G.C. Limited, which is in progress, the production will be expected to commence in near future.
2.	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 Accounting 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 such directives take precedence.
3.	Basis of Preparation
	The financial statements have primarily been prepared on the historical cost basis, unless an accounting policy herein states otherwise. The financial statements, except for the cash flow statement, have been prepared under the accrual basis of accounting.
4.	Approval of Financial Statements
	These financial statements were approved by the Board of Directors and authorized for issue on October 08, 2007.
5.	Significant accounting judgments and Estimates
	The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting Policies. Estimates and judgments are continually evaluated and are believed to be reasonable under the circumstances. In process of applying the Company's accounting policies, management has made the following estimates and judgments which are significant to the financial statements.
	Property , Plant and Equipments
	Estimates with respect to residual values and depreciable lives and pattern of flow of economic benefits are based on the recommendation of technical team of the Company. Further, the Company reviews the value of the assets for possible impairment on an annual basis. Any change in the estimates in future years might affect the carrying amounts of the respective items of tangible fixed assets with a corresponding affect on the depreciation charge and impairment.
6.	Significant Accounting Policies
	6.1	Trade and Other Payables
		Liabilities for trade and other amounts payable are carried at cost, which is fair value of the consideration to be paid in the future for the goods or services so received whether billed to the Company or not.
	6.2	Taxation
		Current Year
		Provision in respect of current year's taxation is based on the method of taxation prescribed under the Income Tax Ordinance, 2001, whereby taxable income is determined and tax charged at the current rates of taxation after taking into account tax credits and rebates available, if any, or the minimum tax liability determined under Section 113 of the Income Tax Ordinance, 2001, whichever is higher.
		Deferred
		The Company accounts for deferred taxation on all material timing differences between the tax base and accounting base of an asset or a liability. However, deferred tax is not provided if it can be established with reasonable certainty that these differences would not crystallize in the foreseeable future.
	6.3	Property, Plant and Equipment
	-	Owned
		Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment losses, if any; except for capital works in progress which are stated at cost and  lease hold land which is on straight line basis.
	-	Depreciation
		Depreciation is charged to income using reducing balance method, at the rates specified in the annexed schedule, whereby the cost of asset is written off over its estimated useful life , reflecting the approximate value of the consumption of the respective assets economic benefits. The depreciation method and useful lives of the items of property, plant and equipment are reviewed periodically and altered if circumstances or expectations have changed significantly. Any change is accounted for as a change in accounting estimate by changing the depreciation charge for the current and future periods.
	-	Repairs, renewals and maintenance
		Major repairs and renewals are capitalized . Normal repairs and maintenance are charged as expense when incurred. Gains or losses on disposal or retirement of assets are determined as the difference between the sale proceeds and the carrying amounts of these assets, and are included in the income currently.
	6.4	Stores, Spares and Loose Tools
		These are stated at the lower of cost and net realizable value. The cost of inventory is based on the average cost. Items in transit are stated at cost accumulated up to the date of the balance sheet.
	6.5	Stock-in-Trade
		These are valued as follows :
		Raw Material				:	At lower of average cost or net realizable value.
							Cost of raw material and components represents invoice value plus other charges paid thereon.
		Finished Goods				:	At lower of weighted average cost or net realizable value.
							Cost of finished goods comprises of prime cost and an appropriate portion of production overheads.
		Net Realizable Value signifies the estimated selling price in the ordinary course of business less cost necessary to be incurred in order to make the sale.
	6.6	Trade Debts & Other Receivables
		Trade debts are carried at the original invoice amount, less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. Debts considered bad, if any, by the management are written-off, and provision is made against those considered doubtful. No general provision is made for bad and doubtful debts.
	6.7	Foreign Currency Translation
		Transactions in foreign currencies, if any, are recorded using the rates of exchange prevalent at the date of the transaction. Assets and Liabilities in foreign currencies, if any, are translated into the reporting currency, i.e., Rupees, at the exchange rate prevalent at the balance sheet date, except where foreign exchange contracts are entered into; in which case, the contracted rates are used. Exchange gains and losses, if any, are included/charged into income currently.
	6.8	Deferred Costs  - Unallocated Pre-production Expenses
		The company used to amortize this deferred cost over a period of five years from the year of commencement of commercial production.
	6.9	Borrowing Cost
		Borrowing cost are charged to income in the period in which they are incurred.
	6.10	Provisions
		A provision is recognized in the balance sheet when the company has a legal or constructive obligation, and, as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and that a reliable estimate can be made for the amount of this obligation.
	6.11	Financial Instruments
		All financial assets and liabilities are recognized at the time when the company becomes a party to the contractual provisions of the instrument. Any gain or loss on derecognition of the financial assets and financial liabilities are taken to profit and loss account currently.
		Financial instruments carried on the balance sheet includes investments, deposit, receivables, cash and bank balances, redeemable capital, liabilities against assets subject to finance lease, creditors, running finance and other payables. The particular recognition method adopted is disclosed in the individual policy statements associated with each item.
		Financial assets and liabilities are offset when the company has a legally enforceable right to offset the same and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously.
	6.12	Cash and Cash Equivalents
		For the purpose of the cash flow statement, cash and cash equivalents comprise cash and bank balances.
	6.13	Impairment of Assets
		The carrying amounts of the assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount, whereby the asset is written down and that impairment losses are recognized in the profit and loss account.
	6.14	Related Party Transactions
		All transactions with related parties are carried out by the company at arm's length prices with the exception of loan taken from related parties which is interest / mark up free.
	6.15	Loans, Advances and Other Receivables
		Loans, advances and other receivables are recognized initially at cost, and subsequently at their amortized/ residual cost.
	6.16	Revenue Recognition
		Revenue from Sales is recognized on dispatch of goods to customers.
		Other Income is recognized on Receipt Basis.
	6.17	Employees Benefits
		The company does not operate any employee’s benefits scheme.
	6.18	Contingent Liability.
		A contingent liability is disclosed in the financial statements unless the possibility of an out flow of resources embodying economic benefits is remote.
	6.19	Contingent Assets.
		A contingent asset is disclosed where in inflow of economic benefits is probable.
7.	Tangible Fixed Assets
	Property, Plant and Equipment								#REF!		#REF!
									#REF!		#REF!
	Property, Plant and Equipment - At cost less accumulated depreciation
									2004		2003
									RUPEES
									June 30,		June 30,
									2007		2006
									(Rupees)
8.	Long Term Deposits
	Central Depository Company								25,000		50,000
9.	Unallocated Pre-production Expenses
	Balance at beginning								--		72,082,952
	Less:
		Amortised during the year							--		72,082,953
									--		--
	9.1 These are amortized over a period of five years from the date of commencement of commercial operations.
10.	Loans and Advances - Unsecured, Considered Good
	Advance Income Tax								38,688		271,488
									38,688		271,488
11.	Trade Deposits and Prepayments - Considered good
	Guarantee Margins								474,980		474,980
									474,980		474,980
12.	Cash and Bank Balances
	Cash in Hand								--		--
	Cash at Banks - Current Accounts								73,843		73,794
									73,843		73,794
13.	Trade and Other Payables
	Creditors for Goods								201,115		521,115
	Accrued Liabilities
	Accrued Expenses								1,025,339		943,493
	Others
	With holding tax Payable								267,274		267,274
									1,493,728		1,731,882
14.	Contingencies and Commitments
14.1.	Karachi port trust has filed a suit bearing No.201 of 2001 in Banking Court No.1 against National Bank of Pakistan and other claiming recovery of Rs. 73, 23,546 under section 9 of the Banking Companies   (Recovery of Loan, Advances, Credit and Finance) Act XV of 1997. The ultimate result of the suit can put the Company to bear liability in case of any order / decree is passed by the said Court in favor of K.P.T Landmark Spinning Industries Ltd. has filed litigation as Intervener / Defendant No. 3 in order to Contest the Suit as Party on invalid claim of KPT against the Bank guarantees of Rs. 3,245,000 which expired on 15th May, 1994. The matter is pending adjudication.
14.2.	Certain appeals are pending with the Income tax authorities in respect of various assessment years. The appeals are related to the disallowances of expenses etc. The management feels that the outcome of the appeals will not be against the company.
									June 30,		June 30,
									2007		2006
									(Rupees)								532531
15.	Issued, Subscribed and Paid-up Capital
	No. of Ordinary Shares of Rs. 10/- each
	2007			2006
	12,123,700			12,123,700		Fully Paid in cash			121,237,000		121,237,000			8,558,208.00
	12,123,700			12,123,700					121,237,000		121,237,000
16.	Long term Loan -Secured
	Habib Bank Limited  (LMM)						(Note 16.1 & 16.3)		-		-
	Habib Bank Limited  (DF II) (Markup Frozen)						(Note 16.2 )		-		-
									-		-
	16.1 The outstanding obligation against original financial arrangement was re-scheduled in the financial year 1998-1999 to the extent of Rs. 17,796,622 (principle and part of markup) and had been transferred to Demand Finance I account as reflected at note 16.2
	16.2 Under the rescheduling arrangement of long term and short term finance the bank had created a new lien account by transferring the various obligations aggregating Rs. 90,744,963 to this account. the arrangement carries mark up @ 39 paisa per thousand per day: The Break-up of the account is as follows:
	Balance at beginning								-		56,097,764
	Weiver of Markup/loan during the year /Payments							(16.3)	-		(56,097,764)
									-		-
	Current maturity shown under current liabilities
		Current due							-		-
		Over due							-		-
									-		-
	Balance at end								-		-
	The repayment of this amount has commenced after full repayment of Demand finance I. Further, no mark up is chargeable on this account.
	Under the rescheduling arrangement,  the yearly repayment shall not be less than Rs. 25 million. The yearly repayment had commenced from November 1, 1998 and shell be reckoned from November 1 to October 31 each year. The maximum period of repayment shall be 8 years commencing from November 1, 1998
	The bank has marked lien to the extent of 0.6% on each export bill of M/S Hassan Ali Rice Export Company ( an associated undertaking) to recover the yearly repayment of Rs. 25 million and in case of shortfall the same will be arranged by the company through its own resources. further, in case of adjustments through disposal of assets of industry the same will be treated as over and above the minimum repayment of Rs. 25 million.
	In addition to above, the aforestated facilitated are also secured by personal guarantees of all directors and by equitable mortgage on all the property and assets of the Company.
	16.3. During the last year Habib Bank Limited allotted adjustment in accrued Mark-up amounting to Rs. 56.999 million and the company has obtained nil Balance Certificate from the Habib Bank Limited. The company reflected the same amount to Profit and Loss Account for the year ended June 30, 2006.
									June 30,		June 30,
									2007		2006
									(Rupees)
17.	Long term Loan
	(Unsecured & Interest free)
	From Directors							17.1.	23,427,751		23,427,751
	From Associated Undertakings							17.2.	174,626,782		173,620,715
									198,054,533		197,048,466
	17.1  Maximum balance due at the end of any month during the year is Rs 23,427,751 ( 2006 : Rs 23,427,751 )
	17.2  Maximum balance due at the end of any month during the year is Rs. 174,626,782 ( 2006 :  Rs 173,620,715 )
	17.3  Terms of repayment of these loans have not been executed with the directors and associated undertakings
	17.4 The above loans are unsecured and interest free.
18.	Administrative and General Expenses
	Salaries & Wages								415,610		298,338
	Fees & Subscription								70,150		98,591
	Printing & Stationery								20,400		16,900
	Advertisement Expenses.								25,800		31,600
	Insurance Exp.								74,085		74,085
	Legal and Professional Charges								10,000		20,000
	Oil and Lubricants Consumed								97,820		-
	Auditors' Remuneration								75,000		75,000
	Miscellaneous Expenses								600		1,050
	Depreciation Expenses.							7.1.	7,771		8,807
									797,236		624,371
19.	Finance Cost
	Bank Charges and Commission								3,401		2,252
									3,401		2,252
20.	Taxation
	20.1  The company's income tax assessment have been finalised including and upto Tax year 2006 (accounting year 2005-2006)
	20.2  Management feels that there is no material temporary differences. Accordingly, deferred tax provision is not required.
	20.3.The numerical reconciliation between the average tax rate and the applicable tax rate has not been presented in theses financial statements as the company is not in operational activities as described in note 1 of these financial statements.
21.	Earnings Per Share - Basic
	Profit after Taxation								(800,637)		(15,710,989)
	Weighted Average Number of Ordinary Shares								12,123,700		12,123,700
	Earning Per Share - Basic						Rupees		(0.07)		(1.30)
22.	Related Party Transactions
	Bridge financing								1,006,067		2,441,370
	All transactions were carried out on normal terms and conditions. Reimbursement of expenses were on actual basis. Remuneration and benefits to key management personnel under the terms of their employment.
23.	Plant Capacity and Production
24.	Reason for Suspension of Operation
	The Production remain Suspended during the Period  2006-2007 under review due to repeated power break downs in winder (Balochistan) causing damage to the machinery, beside, unfavorable market conditions, unworkable prices of raw Cotton and to increase overhead Costs. The company is in preparation to commence production activities in near future as and when Gas supplies are made avialable by SSGC in Winder Balochistan.
25.	Going Concern
	The Company has incurred a net loss, after tax, of Rs.800,632/-, during the year ended June 30, 2007, and as of date its Current Liabilities exceed its Current Assets by Rs. 906,217/-, and its total liabilities exceed its Total Assets by Rs. 46,073,356/-. Further, as mentioned in Note 1, the operations of the company are, and have been in recession for a considerable period of time. During the year under review the production remain suspended owing to unfavourable conditions and lack of infratructure facilities at winder Industrial area, especially the non availablity of gas, as prices of fuel, diesal and electricity breakdowns have already caused the unit to bear losses.  Conversely, the Management is hopeful to revive the unit, and start operations in the near future, The Government has plans to Provide Gas Connection at the mills in Winder (Balochistan),and the company also is actively persuading the Government for supply of Gas connection at the factory which is expected to be supplied in near future. Upon the supply of Gas connection, the management would commence commercial operation and ultimately, the shareholders would be benefited in future.
26.	Financial Assets and Financial Liabilities
	The company's income and operating cash flows are substantially independent of changes in the market interest rates. The company presently has no significant interest-bearing assets. The company's exposure to interest rate risk and the effective interest rates on its financial assets and liabilities as of June 30, 2006, are summarized below:
	Effective rates of interest (if any) for the monetary financial liabilities are mentioned in the respective notes to the accounts.
26.1	Credit Risk and Concentration of Credit Risk
	Credit risk is the risk that one party to a financial instrument will fail to discharges an obligation and cause  the other party to incur a  financial loss. The company attempts to control credit risk by monitoring credit exposures and limiting transactions with specific counterparties Concentrations of credit risk arise when a number of counterparties are engaged in similar business activates, or activities in the same geographic region, or have a similar economic features that would cause their ability to meet contractual obligation to be similarly affected by change in economic, political or other condition. Concentrations of credit risk indicate the relative sensitivity of the company performance to developments affecting a particular industry of geographic location.
	The company is not materially exposed to credit risk.
26.2	Foreign Exchange Risk
	Foreign currency risk arises mainly where receivable and payment exist due to transactions with foreign undertakings. The company does not enter into any transactions which may expose it to foreign currency risk.
26.3	Fair value of Financial Instruments
	Fair value is the amount for which an assets could be exchange, or liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently differences can arise between carrying values and the fair value estimates.
	Underlying the definition of fair value is the presumption that the company is a going concern with out any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.
	The estimated fair value of all financial assets and liabilities is considered not significantly different from book value as shown in these financial statements.
26.4	Liquidity risk
	Liquidity risk reflects the company's inability of raising funds to meet commitments. Management closely monitors the company's liquidity and cash flow position. This includes continuous monitoring of daily fund positions, relevant ratios and diversification of the Company's financial assets.
27.	General
i)	Figures have been rounded off to nearest rupee.
		AKBER ALI HASHWANI						AMIN A. HASHWANI
		Chief Executive						Director
Karachi:
Dated: