CHAKWAL CEMENT COMPANY LIMITED
ANNUAL REPORT 2004
Company Information
BOARD OF DIRECTORS			Khawaja Mohammad Jawed	(Chief Executive)
			Khawaja Mohammad Jahangir
			Khawaja Mohammad Tanveer
			Khawaja Mohammad Kaleem
			Khawaja Mohammad Nadeem
			Khawaja Mohammad Naveed
			Mr. Mohammad Aman Farooq
			Mr. Stephen Potter
			Mr. Muhammad Abdul Samad	(Nominee NIT)
BOARD AUDIT COMMITTEE			Khawaja Mohammad Jahangir
			Khawaja Mohammad Nadeem
			Mr. Mohammad Aman Farooq
COMPANY SECRETARY			Mr. Muhammad Anwar Sheikh
			M. Com., FCMA
CHIEF FINANCIAL OFFICER			Mr. Khalid Mahmood Bhatti
AUDITORS			M. Hussain Chaudhury & Co.
			Chartered Accountants
BANKERS			Muslim Commercial Bank Limited
			KASB Bank Limited
			Metropolitan Bank Limited
LEGAL ADVISORS			Cornelius Lane & Mufti
			Advocates and Solicitors
REGISTERED OFFICE			7/1, E-3, Main Boulevard,
			Gulberg-III, Lahore-Pakistan
			Tel: (042) 5717510, 5757108
CORPORATE & SHARES			31-F, Near Main Market,
DEPARTMENT			Gulberg-II, Lahore-Pakistan
			Tel: 5755774 Fax: 5755760
PLANT SITE			Karuli Near Kallar Kahar
			District Chakwal - Pakistan
Name of Director			No. of Board Meetings Attended
Khawaja Mohammad Jawed			5
Khawaja Mohammad Jahangir			6
Khawaja Mohammad Tanveer			5
Khawaja Mohammad Kaleem			3
Khawaja Mohammad Nadeem			5
Khawaja Mohammad Naveed			6
Mr. Mohammad Aman Farooq			5
Mr. Stephen Potter			2
Mr. Shamsuddin Khan (Nominee NIT)			4
Directors' Report to the Shareholders
The Directors have pleasure in presenting annual report of the Company for the year ended June 30, 2004 together
with the audited accounts and the Auditors' Report thereon.
The technical inspection of the plant and machinery conducted by the senior engineers of Messrs. F.L. Smidth & Co. was
completed and report of the same was received in the last half of December 2003. The report gives considered view on
mechanical, electrical and physical condition of the machinery and equipment and its suitability for erection. The Inspection
was considered necessary by all the parties concerned to curb the speculation about the condition and suitability of the
plant and machinery. The specialists have confirmed that the plant and equipment is available, well organized and in an
excellent condition without any significant damage due to long term storing.
In view of the changed economic scenario and market dynamics, the cement sector is again vibrant. The demand for
cement has increased as a result of Government spending on the infrastructure and development projects and exports
to Afghanistan resulting in increased capacity utilization of the cement sector. Under the circumstances the directors are
looking for a strategic partner for rehabilitation, completion and management of the project. A few investors have
shown interest in the project and presently negotiations are underway with the potential strategic partner and the
other stake holders for removal of the bottlenecks in the rehabilitation. At the same time discussions have been held
with the key suppliers and contractors for the revival of the project. The foreign lenders have principally decided to
write off a major portion of the loan and interest thereon, subject to repayment of the sum agreed with the company
and strategic partner.
The auditors' observation regarding the ability of the company to continue as a going concern is mitigated by the
explanation given in the notes to the accounts. The directors believe that adequate resources will be available to
complete the project and that the liabilities shall be restructured/rescheduled.
Corporate & Financial Reporting
In compliance with the provisions of the Code, the Board Members are pleased to place the following statement on
record:
*          The financial statements for the year ended June 30, 2004 present fairly its state of affairs, cash flows and
changes in equity;
*          Proper books of account have been maintained;
*          Appropriate accounting policies have been consistently applied in preparation of financial statements for the year
ended June 30, 2004 and accounting estimates are based on reasonable and prudent judgment;
*          International Accounting Standards (IAS), as applicable in Pakistan have been followed in preparation of financial
statements; and there has been no departure there from;
*          The system of internal control is sound in design. The process of monitoring will continue and control strengthened
where ever considered necessary;
*          In the light of explanations discussed in the report, the directors consider that there are no significant 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 listing
regulations;
*          The key financial data of last six years is annexed;
*          There are no outstanding statutory payments on accounts of taxes, duties, levies or charges except those
reflected in note no. 8 and 9 to the accounts;
Statement of Compliance with the Code of Corporate Governance
This statement is being presented to comply with the Code of Corporate Governance contained in the listing regulations
of Karachi, Lahore & Islamabad Stock Exchanges for the purpose of establishing a framework of good governance,
whereby a listed company is managed in compliance with the best practices of corporate governance.
The company has applied the principles contained in the Code in the following manner:
1.           The company encourages the representation of independent non-executive directors on its Board of Directors.
At present the Board includes two independent non-executive directors.
2.            It is confirmed that none of the directors is serving as a director in more than ten listed companies, including this
company.
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, a DPI or an NBFI or, being a member of stock exchange, has been
declared as a defaulter by that stock exchange.
4.           A casual vacancy occurred in the Board on July 10, 2004 was filled up by the directors within 30 days thereof.
5.           The company has prepared a 'Statement of Ethics and Buainess Practices' which has been signed by all the
directors and employees of the company.
6.           The Board has developed a vision statement, overall corporate strategy and significant policies of the company.
A complete record of particulars of significant policies alongwith the date 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 have been taken
by the Board. No remuneration was paid to the Chief Executive and any director during the year.
8.           The meetings of the Board were presided over by the Chief Executive and the Board met at least once in every
quarter. Written notices of the Board meetings, alongwith agenda were circulated at least seven days before
the meetings. The minutes of the meetings were appropriately recorded and circulated.
9.           All the Directors on the Board are fully conversant with their duties and responsibilities as Director of corporate
bodies.
10.         There was no fresh appointment of Chief Financial Officer (CFO), Company Secretary and Internal Auditor.
Remuneration, terms & conditions in case of future appointments on these positions will be approved by the
Board.
11.         The directors' report for the period ended June 30, 2004 has been prepared in compliance with the require-
ments of the Code and fully describes the salient matters required to be disclosed.
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 Code.
15.         The Board has formed an Audit Committee. It comprises three members, all the members are non-executive
directors including the Chairman of the Committee.
16.         The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and
final results of the Company and as required by the Code. The terms of references of the committee have been
formed and advised to the committee for compliance.
Key Financial Data of Last Six Years
PARTICULARS		1999	2000	2001	2002	2003	2004
Issued, Subscribed and Paid Capital		5,624,564	5,624,564	5,624,564	5,624,564	5,624,564	5,624,564
Capital reserve		214,839	214,839	214,839	214,839	214,839	214,839
Long term loan - secured		320,632	124,200	-	45,000	144,262	171,224
Deferred Liabilities		955	1,221	1,477	689,018	1,136,893	1,137,877
Current Liabilities		1,343,568	1,993,393	2,504,452	1,854,875	1,736,764	2,054,320
Operating fixed assets		31,876	31,486	31,153	30,797	30,504	30,465
Capital work in progress - net		7,325,946	7,783,068	8,173,851	8,253,786	8,683,106	9,029,160
Long term Deposits		-	-	-	803	1,126	1,136
Deferred costs		5,259	-	-	-	-	-
Current Assets		141,477	143,663	140,328	142,910	142,586	142,063
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 Chakwal Cement Company Limited, to comply with the Regulation No.37
(Chapter XI) of the Listing Regulations of Karachi Stock Exchange, Clause 49 (Chapter XIII) of the Listing Regulations of
Lahore Stock Exchange and Section 36 (Chapter XI) of the Listing Regulations of Islamabad 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 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, 2004.
Balance Sheet
			Note	2004	2003
				Rupees	Rupees
CAPITAL AND LIABILITIES
Share Capital and Reserves
Authorised capital 750 million				7,500,000,000	7,500,000,000
Issued, subscribed and paid up capital			3	5,624,563,630	5,624,563,630
Capital reserve			4	214,838,692	214,838,692
				5,839,402,322	5,839,402,322
Long Term Loan - Directors			5	171,223,632	144,262,647
Deferred Liabilities			6	1,137,877,257	1,136,892,620
Current Liabilities
Overdue foreign long term loan			7	1,074,800,000	966,600,000
Creditors, accrued and other liabilities			8	979,520,462	770,164,325
				2,054,320,462	1,736,764,325
Contingencies and Commitments			9
				9,202,823,673	8,857,321,914
Auditors' Report to the Members
We   have  audited  the  annexed   balance  sheet  of  CHAKWAL  CEMENT  COMPANY  LIMITED  as  at
June 30, 2004 and the related 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 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, 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, 2004 and of its cash flows
and changes in equity for the year then ended; and
(d)         in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
Without qualifying our opinion, we draw attention to note 1.3 to the financial statements. The Company's current
liabilities exceed its current assets by Rs. 1,912.258 million as at June 30, 2004. These conditions, along with other
matters as set forth in note 1.3, indicate the existence of a material uncertainty which may cast significant doubt about
the Company's ability to continue as a going concern.
Cash Flow Statement for the year ended June 30, 200'
				2004	2003
				Rupees	Rupees
CASH FLOW  FROM  INVESTING ACTIVITIES
Capital work in progress - Net				-28,262,959	-12,096,286
Fixed capital expenditure				-238,270	-
Interest income received				-	101
Net Cash used in Investing Activities				-28,501,229	-12,096,185
CASH FLOW FROM FINANCING ACTIVITIES
Long term loan - Directors				26,960,985	99,263,108
Net Cash from Financing Activities				26,960,985	99,263,108
Decrease in current assets				562,020	197,626
Increase in current liabilities				1,039,900	4,158,578
Long term deposits				-10,000	-
Income tax paid				-183,782	-8,760
Financial charges paid				-12,553	-143,496
Gratuity paid				-	-56,000
Incidental and storage charges paid				-	-91,126,568
Net (Decrease) / Increase in Cash and Cash Equivalents				-144,659	188,303
Cash and cash equivalents at the beginning of the year				483,163	294,860
Cash and Cash Equivalents at the end of the Year				338,504	483,163
as at June 30, 2004
			Note	2004	2003
PROPERTY AND ASSETS				Rupees	Rupees
Tangible Fixed Assets				30,464,363	30,503,588
Operating fixed assets			10	9,029,160,153	8,683,106,273
Capital work in progress - Net			11	9,059,624,516	8,713,609,861
				1,136,280	1,126,280
Long Term Deposits
Current Assets				141,724,373	142,102,610
Advances, deposits, prepayments and other receivables			12	338,504	483,163
Cash and bank balances			13	142,062,877	142,585,773
				9,202,823,673	8,857,321,914
Notes to the Accounts for the year ended June 30, 2004
1.         THE COMPANY AND ITS OPERATIONS
1.1    Chakwal Cement Company Limited was incorporated in Pakistan on May 23, 1993 as a Private Limited
Company and subsequently converted into a Public Limited Company on October 18, 1994 under the
Companies Ordinance, 1984. The Company is listed on all Stock Exchanges of Pakistan. The principal activity
of the Company is to set up an industrial undertaking for the manufacture and sale of cement.
1.2    Profit and loss account for the year ended June 30, 2004 has not been drawn up as the Company has not
commenced its operating activities.
1.3    Going concern
The Company had originally envisaged commencement of commercial production by October 1997. But the
project could not be completed due to certain financial constraints and long delay in clearance of certain
parts of imported plant and machinery lying at the Karachi Port. Resultantly, the Company has not been
able to repay any installments in respect of the foreign currency loan that has become totally due and the
lender has filed a suit for recovery as explained in note 7. These factors along with other matters as stated
in note 9 raise significant uncertainty that the Company will be able to continue as going concern and,								</