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Lakson Tobacco Company Limited
ANNUAL REPORT 2002
CONTENTS
Company Information
Notice of Meeting
Directors' Report
Statement of Compliance with Best Practices of Corporate Governance
Auditors' Report to the Members
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts
Pattern of Holding of Shares
Subsidiary Company's Accounts
Premier Tobacco Company (Pvt) Limited
Financial Highlights
BOARD OF DIRECTORS
IQBALALI LAKHANI		(Chairman & Chief Executive)
AMIN MOHAMMED LAKHANI
E.A. NOMANI
TASLEEMUDDIN AHMED BATLAY
NAZIR HUSSAIN
AZIZ EBRAHIM
SHAHID AHMED KHAN
RAMZAN ALI HALANI
M.K. NAWAZ
MANSOOR AHMED
ADVISOR
SULTANALI LAKHANI
COMPANY SECRETARY
RAMZAN ALI HALANI
AUDIT COMMITTEE
AMIN MOHAMMED LAKHANI	(Chairman)
AZIZ EBRAHIM
SHAHID AHMED KHAN
AUDITORS
A.F. FERGUSON&CO.
Chartered Accountants
EBRAHIM & CO.
Chartered Accountants
REGISTERED OFFICE
LAKSON SQUARE, BUILDING NO. 2
SARWAR SHAHEED ROAD
KARACHI-74200
FACTORIES
1. E/15, S.l.T.E., KOTRI
DISTT. DADU (SINDH)
2. PLOT NO 20, SECTOR NO. 17
KORANGI INDUSTRIAL AREA, KARACHI
3. QUADIRABAD
DISTT. SAHIWAL
4. VILLAGE: MANDRA
TEH : GUJAR KHAN
DISTT. RAWALPINDI
5. ISMAILA
DISTT. SWABI
Notice of Meeting
NOTICE IS HEREBY GIVEN that the 33rd Annual General Meeting of Lakson Tobacco Company Limited
will be held on Monday November 04, 2002 at 3.00 p.m. at Avar! Renaissance Towers Hotel, Fatima Jinnah
Road, Karachi to transact the following business:
ORDINARY BUSINESS
1.  To receive, consider and adopt the audited financial statements for the year ended June 30, 2002
together with the Directors' and Auditors' Reports thereon.
2.  To declare final dividend in cash @ 85% and by way of issue of fully paid bonus shares @ 20% as
recommended by the Board of Directors, in addition to the interim dividend @ 20% already paid.
3.  To consider to appoint auditors and fix their remuneration.
SPECIAL BUSINESS
4.   To consider, subject to declaration of the final dividend by way of issue of bonus shares as above, to
capitalise a sum of Rs. 71,273,540 by way of issue of 7,127,354 fully paid bonus shares of Rs. 10 each
and if thought fit to pass the following resolution as an ordinary resolution:
"RESOLVED THAT :
i) a sum of Rs. 71,273,540 out of the 'Reserve for issue of bonus shares' be capitalised and applied
in making payment in full 7,127,354 ordinary shares of Rs.10 each and that the said shares be
allotted as fully paid up bonus shares to those members of the Company whose names appear in
the register of members on November 04, 2002 @ 20% i.e. in the proportion of one share for every
five existing shares and that such new shares shall rank pari passu in all respects with the existing
ordinary shares of the Company except that they shall not be eligible for dividend declared for the
year ended June 30, 2002;
ii) in the event of any member holding less than five shares or a number of shares which is not an
exact multiple of five, the fractional entitlements of shares of such members shall be consolidated
into whole new shares and the Directors of the Company be and are hereby authorised to arrange
sale of the shares constituted thereby in such manner as they may think fit and to pay the proceeds
of the sale to such of the members according to their entitlement;
ill) for the purpose of giving effect to the above, the Directors be and are hereby authorised to take
all necessary steps in the matter and to settle any question or difficulties that may arise in regard
to the distribution to the said new shares as they think fit."
5.  To consider to increase the Authorised Capital of the Company from Rs. 450 million to Rs. 1,000
million and if thought fit to pass the following resolution as an ordinary resolution:
"RESOLVED THAT the Authorised Capital of the Company be and is hereby increased from Rs. 450
million to Rs. 1,000 million by creation of 55 million ordinary shares of Rs. 10 each and that consequential
notes be made under clause V of the Memorandum of Association and Article 3 of the Articles of
Association."
The statement under section 160 of the Companies Ordinance, 1984 in the above matters is annexed.
By Order of the Board
RAMZAN ALl HALANI
Director/Company Secretary
Karachi: September 23, 2002
NOTES:
1. The share transfer books of the Company will remain closed from October 26, 2002 to November 04, 2002,
both days inclusive. Transfers received in order at the Company's registered office situated at Lakson
Square, Building No. 2, Sarwar Shaheed Road, Karachi upto October 25, 2002 will be considered in time
to be eligible for payment of the dividend and issue of bonus shares to the transferees.
2.  A member who has deposited his/her shares into Central Depository Company of Pakistan Limited, must
bring his/her participant's ID number and account/sub-account number alongwith original National Identity
Card (NIC) or original Passport at the time of attending the meeting.
3.  A member entitled to attend and vote at the general meeting may appoint another member as his/her proxy
to attend, speak and vote instead of him/her.
4.  Forms of proxy to be valid must be received by the Company at its registered office not later than 48 hours
before the time of the meeting.
5. Members are requested to notify the Company promptly of any change in their addresses.
6.  A form of proxy is enclosed herewith.
STATEMENT UNDER SECTION 160 OF THE COMPANIES ORDINANCE, 1984
1. The Board of Directors has recommended to the members of the Company to declare final cash dividend
@ 85% and by way of issue of fully paid bonus shares @ 20% and thereby capitalise a sum of Rs. 71,273,540
which has been transferred to 'Reserve for issue of bonus shares' out of the profit for the year ended June
30,2002.
2.  At present the Authorised Capital of the Company is Rs. 450 million. The Board of Directors has recommended
to increase the Authorised Capital to Rs. 1,000 million to facilitate further increase in the paid-up capital
as and when required to do so.
The Directors are interested in this business to the extent of their entitlement of bonus shares as shareholders.
The Directors of your Company take pleasure in presenting the thirty-third annual report and audited accounts
for the year ended June 30, 2002.
				2002	2001
				(Rupees in '000)
Profit before taxation				1,072,917	604,914
Taxation				323,894	210,206
Profit after taxation				749,023	394,708
Un-appropriated profit brought forward				412	706
				749,435	395,414
Appropriations:
Interim cash dividend @ Rs. 2.00 (2001 : Nil)
per ordinary share of Rs. 10 each				71,274	-
Proposed cash dividend @ Rs. 8.50
(2001: Rs. 5.50) per ordinary share
of Rs. 10 each				302,913	196,002
				374,187	196,002
Transfer to reserve for proposed issue of
bonus shares in ratio of one share for every
five shares (2001: Nil)				71,274
Transfer to general reserve				303,007	199,000
				748,468	395,002
Un-appropriated profit carried forward				967	412
OPERATING RESULTS
Your Company has continued to maintain a growth momentum during the year under review, in terms of
sales turn over as well as Net Profit. Sales turn over increased by Rs. 772 million registering a 5% increase
over the results of the same period of preceding year. Profit after tax increased by Rs. 354 million mainly
due to stricter financial discipline. In addition to that appreciation of Pak rupee against US $ together with
a reduction of 10.76% in Selling & Distribution expenses and 34.56% reduction in Financial Charges also
contributed to achieve these results. Consequently Net Earnings Per Share stand at Rs. 21.02 as against
Rs. 11.08 of the previous financial year. Establishment expenses registered an increase of 2.82% over the
results of the last year. During the year under review, your Company's contribution to the national exchequer
in the shape of excise duties, sales tax, witholding tax, corporate tax and customs levies also rose to an
all time high of Rs. 10.198 billion as compared to Rs. 9.910 billion of the previous year. The component of
excise duties, sales tax, witholding tax, corporate tax and customs levies paid during the year, was equivalent
to 63.24% of domestic sales turnover for cigarettes.
LEAF TOBACCO
The 2001 tobacco crop was surplus to the industry's requirement and as per practice established by the
Pakistan Tobacco Board, the Company had to pick up additional quantities which were purchased at competitive
prices.
FUTURE OUTLOOK
Your Company will seek to consolidate its position in the face of challenges and the current difficult economic
situation and will strive to further improve its quality and volume and maintain profitability. Effective cost control
measures will be continued with increasing emphasis on expansion of distribution coverage. Your Company
will continue to invest to meet future challenges and market opportunities. However, operating as a highly
taxed industry, your Company's results are in a large measure dependent on government policies towards the
excise duty structure, the deferred payment periods, equitable application of the excise duty regime throughout
the tobacco industry, control of smuggling, tax evasion and counterfeiting of cigarettes.
APPRECIATION
The human factor has always been of critical importance to us. Our brands were built by entrepreneurial
people; they are the results of creativity, courage and vision. To encourage these qualities, we are determined
to keep Lakson tobacco an exciting, challenging and eminent fair place to work. This report is dedicated to
all our employees, as it reflects their commitment to building the Lakson business. Their strength, skills and
ambition can make us the most successful Company in the coming periods.
The report would be incomplete without placing on record the appreciation of your directors for the encouragement
and support which we received from our suppliers, shareholders, banks and financial institutions.
STATEMENTS ON CORPORATE AND FINANCIAL REPORTING FRAME WORK
In relation to the financial statements and controls, the directors would like to confirm the following:
•  The financial statements, prepared by the management of the Company, present fairly its state of
affairs, the result of its operations, cash flows and changes in equity.
•  Proper books of accounts of the Company have been maintained.
•  Appropriate accounting policies have been consistently applied in preparation of financial statements
and accounting estimates are based on reasonable and prudent judgment.
•  International Accounting Standards, as applicable in Pakistan, have been followed in preparation
of financial statements and any departure therefrom has been adequately disclosed.
•  The system of internal controls, which was in place, is being continuously reviewed by internal
procedures. The process of review will continue and any weaknesses in controls will be removed.
•  There are no doubts upon the Company's ability to continue as a going concern.
•  There has been no material departure from the best practices of corporate governance, as detailed
in the listing regulations.
•  Key operating and financial data for last six years in summarized form is annexed.
•  Outstanding taxes and levies:
• Please refer Note Nos. 14.2, 14.3 & 14.4 to the annexed audited accounts.
• Income tax Rs. 99.560 million.
•  The value of investment in provident fund based on last audited accounts is Rs. 209.701 million
(2000: Rs. 207.321 million).
•  The financial statements have been reviewed by the audit committee established by the Company.
•   During the year 3 (three) meetings of the Board of Directors were held. Attendance by each Director
is as follows:
Name of Director		No. of Meetings Attended
Mr. Iqbalali Lakhani		3
Mr. Amin Mohammed Lakhani		2
Mr. E. A. Nomani		3
Mr. Tasleemuddin Ahmed Batlay		3
Mr. Nazir Hussain		3
Mr. Aziz Ebrahim		3
Mr. Shahid Ahmed Khan		1
Mr. Ramzan Ali Halani		3
Mr. M. K. Nawaz		3
Mr. Mansoor Ahmed		3
Directors who were not able to attend some of the meetings were granted leave of absence.
PATTERN OF SHAREHOLDING
A pattern of shareholding in the prescribed form appears at pages 35-37.
AUDITORS
The Auditors M/s. A.F. Ferguson & Co., Chartered Accoutants and M/s.Ebrahim & Co., Chartered Accoutants
retire and offer themselves for re-appointment.
on behalf of the Board of Directors
IQBALALI LAKHANI
Chairman
Karachi: August 26, 2002
Statement of Compliance with Best Practices of Corporate Governance
The Company is in process of implementing all facets of the Code of Corporate Governance issued by the
Karachi and Lahore Stock Exchanges. The Board feel pleasure in stating that provisions of the code, relevant
for the period from May 2, 2002 to June 30, 2002 have been duly complied with.
IQBALALI LAKHANI
Chairman & Chief Executive
Karachi: August 26, 2002
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES
OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate
Governance prepared by the Board of Directors of Lakson Tobacco Company Limited to comply with the Listing
Regulation No. 37 of the Karachi Stock Exchange and Chapter XIII of the Lahore Stock Exchange where the
Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of
the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified,
whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of
the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the
Company personnel and review of various documents prepared by the Company to comply with the Code.
As part of our audit of the financial statements we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not
carried out any special review of the internal control system to enable us to express an opinion as to whether
the Board's statement on internal control covers all controls and the effectiveness of such internal controls.
Based on our review nothing has come to our attention, which causes us to believe that the Statement of
Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best
practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June
30, 2002.
Karachi
Dated : September 02, 2002
A.F. FERGUSON & CO.
Chartered Accountants
EBRAHIM&CO.
Chartered Accountants
Auditors' Report to the Members
We have audited the annexed balance sheet of LAKSON TOBACCO COMPANY LIMITED as at June 30,
2002 and the related profit and loss account, 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 accounts 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, cash flow statement and statement of changes in equity together
with the notes forming part thereof conform with approved accounting standards as applicable in
Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so
required and respectively give a true and fair view of the state of the Company's affairs as at June 30,
2002 and of the profit, its cash flows and changes in equity for the year then ended; and
d)  in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was deducted
by the Company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
Balance Sheet as at June 30, 2002
				2002	2001
			NOTE	(Rupees in '000)
FIXED ASSETS			3	969,418	945,592
LONG TERM INVESTMENT			4	1	1
LONG TERM LOANS			5	1,034	258
LONG TERM DEPOSITS AND PREPAYMENTS			6	47,123	42,169
TOTAL LONG TERM ASSETS				1,017,576	988,020
CURRENT ASSETS
Stores and spares			7	87,139	102,260
Stock in trade			8	1,271,508	1,621,662
Trade debts			9	71,276	118,184
Loans and advances			10	16,340	11,200
Deposits, prepayments and other receivables			11	128,033	110,175
Cash and bank balances			12