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43

BALANCE SHEET COMPOSTION

BALANCE SHEET

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BALANCE SHEET COMPOSTIONAS AT DECEMBER31, 2007

Assets

2007 2006

Assets2007 2006

BALANCE SHEETAS AT DECEMBER 31, 2007

Note December 31, December 31,

2 0 0 7 2 0 0 6

Restated

(Rupees in thousand)

NON-CURRENT ASSETS

Fixed assets

Property, plant and equipment 6 4,358,151 3,877,969

Intangible assets 7 386,779 232,985

Long-term investments 8 5,323 411

Long-term loans 9 18,015 12,125

Long-term deposits and prepayments 10 26,341 25,238Long-term installment sales receivables 11 191,220 142,691

CURRENT ASSETS

Stores, spares and loose tools 12 74,554 66,730

Stock-in-trade 13 9,184,385 9,613,938

Current portion of long-term installment sales receivables 11 356,238 276,020

Trade debts 14 185,739 152,857

Loans and advances 15 154,567 116,363

Trade deposits and prepayments 16 23,569 24,625

Accrued income on bank deposits 49,210 124,075

Other receivables 17 37,020 37,996

Short term investment 18 137,978 126,151

Sales tax and excise duty adjustable 503,134 229,578

Advance income tax 25,062 -

Cash and bank balances 19 5,484,052 8,214,337

16,215,508 18,982,670

TOTAL ASSETS 21,201,337 23,274,089

SHARE CAPITAL AND RESERVESAuthorised share capital

150,000,000 (2006: 150,000,000) ordinary shares of Rs. 10/- each 1,500,000 1,500,000

Issued, subscribed and paid-up share capital 20 823,000 799,433

Reserves 13,154,035 10,391,243

13,977,035 11,190,676

NON-CURRENT LIABILITY

Deferred tax liability 21 99,000 57,939

CURRENT LIABILITIES

Trade and other payables 22 3,173,554 3,402,506

Security deposits 23 75,978 76,628

Deposits against display vehicles 799,006 749,050

Advance from customers 24 2,409,418 6,186,884

Short term borrowing - 756,071

Income tax payable net - 186,740

Provision fo r custom duties , sa les t ax and excise duty 25 667,346 667,595

7,125,302 12,025,474

COMMITMENTS 26

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 21,201,337 23,274,089

The annexed notes from 1 to 45 form an integral part of these financial statements.

Kenichi Ayukawa Masaki Sakai

45

PROFIT AND LOSS ACCOUNT

CASH FLOW STATEMENT

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PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED DECEMBER 31, 2007


2 0 0 7 2 0 0 6

Restated


Turnover 28 50,844,632 48,203,084

Cost of sales 29 46,084,400 42,509,374

Gross profit 4,760,232 5,693,710

Distribution costs 30 427,041 567,210Administrative expenses 31 511,055 472,242

3,822,136 4,654,258

Finance costs 32 143,786 282,605

Other operating income 33 921,011 1,162,916

4,599,361 5,534,569

Workers' profit participation fund 22.1 229,968 276,631

Workers' welfare fund 34 88,130 105,894

318,098 382,525

Profit before taxation 4,281,263 5,152,044

Taxation 35 1,506,731 1,798,193

Profit after taxation 2,774,532 3,353,851

( in Rupees )

Earnings per share - Basic and diluted 36 33.71 41.37



Chairman & Chief Executive Deputy Managing Director

FOR THE YEAR ENDED DECEMBER 31, 2007


2 0 0 7 2 0 0 6

Restated


CASH FLOW FROM OPERATING ACTIVITIES

Cash generated from operations 37 168,476 1,147,300

Finance costs paid (163,155) (199,838)

Taxes paid (1,677,472) (1,839,928)

Long-term loans (5,890) (9,377)

Long-term deposits and prepayments (1,103) (7,928)

Long-term installment sales receivables (48,529) (5,474)

Net cash used in operating activities (1,727,673) (915,245)

CASH FLOW FROM INVESTING ACTIVITIES

Fixed capital expenditure (1,576,842) (1,186,771)

Acquisition of intangible asset (265,293) (175,227)

Sale proceeds on disposal of fixed assets 8,497 29,157

Mark-up on cash deposits with banks 831,076 1,016,011

Net cash used in investing activities (1,002,562) (316,830)

CASH FLOW FROM FINANCING ACTIVITIES

Dividends paid (50) (269,749)

Net decrease in cash and cash equivalents (2,730,285) (1,501,824)

Cash and cash equivalents at beginning of the year 8,214,337 9,716,161

Cash and cash equivalents at end of the year 19 5,484,052 8,214,337




47

STATEMENT OF CHANGES IN EQUITY

NOTES TO THE FINANCIAL STATEMENTS

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Reserves

Revenue

Capital reserves

Unrealised

gain/(loss) on

available for Accumu-

Share Share Merger sale lated Total Shareholders

Note capital premium Reserve General investments profit/(loss) reserves equity


Balance as at January 01, 2006

- as previously reportedP ak S uz uk i M ot or C om pa ny L im it ed ( PS MC ) 5 40 ,4 44 5 84 ,0 02 - 4 ,3 49 ,8 18 1 3, 47 7 2 ,3 38 ,4 03 7 ,2 85 ,7 00 7 ,8 26 ,1 44

Suzuki Motorcycles Pakistan Limited (SMPL) 438,989 5,932 - - (287) (22,898) (17,253) 421,736

979,433 589,934 - 4,349,818 13,190 2,315,505 7,268,447 8,247,880

*Shares of SMPL held by PSMC- Face value

being treated as cancelled (180,000) - - - - - - (180,000)

*Reserves and accumulated losses of SMPL

transferred to Merger Reserve - (5,932) (16,966) - - 22,898 - -

*Difference in face value and carrying value of

investment held by PSMC in SMPL transferred

to Merger Reserve - - 26,545 - - - 26,545 26,545

( 18 0, 00 0) ( 5, 93 2) 9 ,5 79 - - 2 2, 89 8 2 6, 54 5 ( 15 3, 45 5)

Balance as at January 01, 2006 - as restated 799,433 584,002 9,579 4,349,818 13,190 2,338,403 7,294,992 8,094,425

Cash dividend @ 50% - - - - - (270,222) (270,222) (270,222)

Transferred to General Reserve - - - 2,000,000 - (2,000,000) - -

*Transfer of former SMPL pre amalgamation profit

for the year 2006 to Merger Reserve - - 4,359 - - (4,359) - -

Net profit for the year - - - - - 3,353,851 3,353,851 3,353,851

Un re al is ed g ain o n a va il ab le f or sa le i nv es tm en t P SM C - - - - 12 ,67 4 - 12 ,67 4 1 2, 67 4

Unrealised loss on available for sale investment SMPL - - - - (52) - (52) (52)

B al an ce as at De ce mb er 31 , 20 06 - as res ta te d 799,433 584,002 13,938 6,349,818 25,812 3,417,673 10,391,243 11,190,676

B al an ce as a t J an uary 0 1, 2 00 7 7 99 ,4 33 5 84 ,0 02 1 3, 93 8 6 ,3 49 ,8 18 2 5, 81 2 3 ,4 17 ,6 73 1 0, 39 1, 24 3 1 1 , 19 0, 67 6

*Cancellation of SMPL balance shares (258,989) - 258,989 - - - 258,989 -

*Issuance of PSMC shares to SMPL shareholders 12,333 - (12,333) - - - ( 12,333) -

Bonus shares issued @ 50% 270,223 - - - - (270,223) (270,223) -

Transferred to General Reserve - - - 3,100,000 - (3,100,000) - -

Net profit for the year - - - - - 2 ,774,532 2,774,532 2,774,532

U nrea li se d ga in on ava il ab le for s al e i nv es tm en t 1 8 - - - - 1 1, 82 7 - 1 1, 82 7 1 1, 82 7

Balance as at December 31, 2007 823,000 584,002 260,594 9,449,818 37,639 2,821,982 13,154,035 13,977,035

* Represent effects of scheme of

arrangement for amalgamation.





1. COMPANY'S BACKGROUND, OPERATIONS AND LEGAL STATUS

Pak Suzuki Motor Company Limited (the Company / PSMC) was formed in accordance with the terms of a join

venture agreement concluded between Pakistan Automobile Corporation Limited (PACO) and Suzuki Moto

Corporation, Japan (SMC) - the principal shareholder of the Company, for the purposes of assembling

progressive manufacturing and marketing of Suzuki cars, pickups, vans and 4x4s. Under the joint venture

agreement, the net assets of Awami Autos Limited (AAL), a subsidiary of PACO, now liquidated, were taken ove

by the Company in August 1983 in consideration for which shares in the Company were issued to PACO.

The Company was incorporated in Pakistan as a public limited company in August 1983 and started

commercial production in January 1984. The shares of the Company are quoted on Karachi and Lahore Stoc

Exchanges. The registered office of the Company is situated at DSU 13, Pakistan Steel Industrial Estate, Bin

Qasim, Karachi.

In accordance with the terms of a sale agreement dated September 19, 1992 between SMC and PACO, SMC

increased its shareholding to 40% in the Company by purchasing shares from PACO and took over its

management with effect from September 21, 1992. Since then SMC progressively increased its equity to

73.09%.

In July 1996, PACO had disinvested its remaining shareholding. These shares were acquired by SMC in terms

of the joint venture agreement between PACO and SMC - Japan. As on 1st January 2007, Suzuki Motorcycle

Pakistan Limited was amalgamated into the Company as explained in note number 2. Suzuki Motorcycles

Pakistan Limited (SMPL) was incorporated in Pakistan as a public limited company on June 17, 1962 and it

shares were quoted on the Karachi and Lahore Stock Exchanges. SMPL was principally engaged in the

manufacturing, assembling and sale of Suzuki motorcycles and related spare parts, which business has been

transferred to the Company.

2. AMALGAMATION OF ASSOCIATED COMPANY WITH AND INTO THE COMPANY

2.1 During the year, on April 25, 2007, the Board of Directors of the Company and of SMPL, in their separate

meetings approved a scheme of arrangement for amalgamation (the Scheme) in terms of sections 284-287 o

the Companies Ordinance, 1984 (the Ordinance) for the amalgamation of SMPL with and into the Company with

effect from January 1, 2007 (effective date). The Scheme was approved by the shareholders of the Company

and of SMPL in their separate extra-ordinary general meetings held on June 30, 2007 and sanctioned by the

Honourable High Court of Sindh (the Court) on September 17, 2007. A certified copy of the order of the Cour

sanctioning the Scheme under section 284 of the Ordinance was filed with the Registrar of the Companies on

October 1, 2007 (completion date).

2.2 The Scheme envisages the following:-

- SMPL and PSMC shall be amalgamated by transfer to and vesting in PSMC of the SMPL undertaking a

subsisting immediately preceding the day on which the scheme becomes effective.

- As consideration for the transfer to and vesting in PSMC of the SMPL undertaking, PSMC shall issue and allo

its one ordinary share of Rs. 10/- each for every 21 (twenty one) SMPL ordinary shares of Rs. 10/- each held

by each SMPL qualifying shareholder.

- Dissolution of SMPL without winding up.

49

2.3 PSMC issued its 1,233,300 ordinary shares of Rs. 10/- each to SMC J apan and minority shareholders. After the

amalgamation the shares held by SMC Japan stood at 60 154 091 which represented 73 09 % of enhanced

PSMCL as at SMPL a

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amalgamation, the shares held by SMC Japan stood at 60,154,091 which represented 73.09 % of enhanced

paid up capital.

2.4 In view of the effective date of the Scheme, these financial statements have been prepared as that of the

amalgamated company.

3. BASIS OF PREPARATION

3.1 The financial statements have been prepared under the historical cost convention, except for revaluation of

certain financial instruments at fair value.

3.2 The Company has accounted for the effect of the Scheme of the Company with former SMPL using the pooling

of interest method. The Company has not applied International Financial Reporting Standard - 3 Business

Combinations since the amalgamation has been effected between companies under common control which

is excluded from the scope of the said IFRS. The two companies are considered under common control since

both the entities are part of Suzuki Motors Corporation (SMC) which held 73.09% and 43.19% of the share

capital of the Company and former SMPL respectively as at the effective date of the merger. Moreover, SMC

has management control and power to cast the majority of votes at meetings of the board of directors of both

the entities thereby substantiating the fact that both the companies are under common control.

3.3 The pooling of interest method requires that the financial statement items of the combining enterprises for the

period in which the combination occurs and for any comparative periods presented to be included in the

financial statement of the combined enterprise as if they had been combined from the beginning of the earliest

period presented. Any difference between the amount recorded as share capital issued plus any additional

consideration in the form of cash or other assets and the amount recorded for the share capital acquired is

adjusted against equity. Furthermore, a single set of accounting policies is required to be adopted by the

combined enterprise and assets, liabilities and equity of the combining enterprises are adjusted as a result of

conforming the combining enterprises accounting policies and applying those policies to all periods

presented, to the maximum extent possible.

3.4 The details of amounts of assets and liabilities contributed by each company and other relevant information

before elimination, adjustments and restatements are as under:

PSMCL as at SMPL as at

December 31, December 31,

2006 2006


NON-CURRENT ASSETS

Fixed Assets

Property, plant and equipment 3,532,985 418,628

Intangible assets 232,985 -

Long-term investments 154,401 411

Long-term loans 11,728 397

Long-term deposits and prepayments 22,285 2,953

Long-term installment sales receivables - 142,691

Deferred tax assets - 11,061

3,954,384 576,141

December 31, December 31

2006 2006


CURRENT ASSETS

Stores, spares and loose tools 66,730 7,681

Stock-in-trade 9,232,672 381,266

Current portion of long-term installment sales receivables - 276,020

Trade debts 126,292 39,589

Loans and advances 110,986 5,377

Trade deposits and prepayments 20,003 4,622

Accrued income on bank deposits 122,994 1,081

Other assets 372,707 69,058

Cash and bank balances 8,043,617 170,720

18,096,001 955,414

TOTAL ASSETS 22,050,385 1,531,555

SHARE CAPITAL AND RESERVES

Issued, subscribed and paid-up capital 540,444 438,989

Reserves 10,378,589 (12,946)

10,919,033 426,043

NON-CURRENT LIABILITIES

Surplus on revaluation of fixed assets - net - 81,323

Deferred tax liability 69,000 647

69,000 81,970

CURRENT LIABILITIES

Trade and other payables 3,261,996 133,868

Security deposits 76,628 -

Deposits against display vehicles 749,050 -

Advance from customers 6,182,354 4,530Accrued markup - 21,029

Short-term borrowings - 756,071

Income tax payable - net 232,773 -

Provision for custom duties, sales tax and excise duty 559,551 108,044

11,062,352 1,023,542

TOTAL EQUITY AND LIABILITIES 22,050,385 1,531,555

TURNOVER 47,187,945 1,273,808

FINANCE INCOME ON INSTALLMENT SALES - 91,992

OTHER OPERATING INCOME 1,040,792 28,942

NET PROFIT FOR THE YEAR 3,350,437 2,903

4. SI GNIFI CANT ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with approved accounting standards requires the use o

certain critical accounting estimates. It also requires management to exercise its judgement in the process o

applying the Companys accounting policies. Estimates and judgements are continually evaluated and are

based on historic experience and other factors, including expectations of future events that are believed to

be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in

which the estimate is revised and in any future periods affected.

51

In the process of applying the Companys accounting policies, management has made the following estimates

and judgements which are significant to the financial statements:

Capital work-in-progress is stated at cost less impairment, if any, and represent expenditures incurred and

advances made in respect of specific assets during the construction / erection period These are transferred

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and judgements which are significant to the financial statements:

4.1 Staf f retirement benefits

The cost of defined benefit plan (Gratuity) is determined using actuarial valuation. The actuarial valuation

involves making assumptions about discount rates and future salary increases. Due to long term nature of

these plans, such estimates are subject to significant uncertainty. Significant actuarial assumptions have been

disclosed in note 15.2 to the financial statements.

4.2 Property, plant and equipment

The Company reviews appropriateness of the rate of depreciation, useful life and residual value used in the

calculation of depreciation. Further, where applicable, an estimate of the recoverable amount of assets is made

for possible impairment on an annual basis. In making these estimates, Company uses the technical resources

available with the Company.

5. SIGNIFICANT ACCOUNTING POLICIES

5.1 Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as

applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved accounting

standards comprise such International Financial Reporting Standards (IFRSs) 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 (SECP) differ with the requirements

of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of said directives

take precedence.

5.2 Change in accounting policies

5.2.1 Consequent to the amalgamation of the two companies, the management has decided to change the policy for

subsequent measurement of free-hold land and building on free-hold land of former SMPL to ensure

consistency of accounting policies of the combined enterprise. Accordingly, free-hold land and building on

free-hold land are now stated at cost less accumulated depreciation and accumulated impairment losses. Until

last year, these operating assets of the former SMPL were stated at revalued amounts, being the fair value at

the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated

impairment losses. The change in accounting policy has been applied retrospectively.

5.2.2 During the period, the Company has changed its accounting policy in respect of assignment of cost of

components and consumable material, stores, spares and loose tools. The cost was previously assigned using

the first-in, first-out (FIFO) cost formula which has now been changed to weighted average cost formula. The

change in accounting policy has resulted in decrease in the value of inventories as at the year end by Rs. 3.156

million. Since the impact of this said change is not considered material at the financial statements level,

accordingly the Company has accounted for the same prospectively in the financial statements.

5.3 Fixed assets

Property, plant and equipment

Operating fixed assets are stated at cost less accumulated depreciation. Items of fixed assets costing

Rs. 10,000/- or less are not capitalised and charged off in the year of purchase.

advances made in respect of specific assets during the construction / erection period. These are transferred

to specific assets as and when assets are available for use

Depreciation on all operating fixed assets, except leasehold land, is charged to income applying the reducing

balance method whereby the cost of an asset is written off over its estimated useful life. Leasehold land is

depreciated using the straight line method whereby the cost of the leasehold land is w ritten off over its lease

term.

The assets' residual values, useful lives and m ethods are reviewed and adjusted if appropriate, at each financia

year end.

Depreciation on additions is charged for the full month in which an asset is put to use and on deletions up to

the month immediately preceding the deletion.

Useful life is determined by the management based on expected usage of assets, expected physical wear and

tear, technical and commercial obsolescence, legal and similar limits on the use of assets and other similar

factors.

Maintenance and normal repairs are charged to income as and when incurred. Gain or loss on sale o

retirement of fixed assets is included in income currently.

Intangible assets

Intangible assets are stated at cost less accumulated amortisation. Cost in relation to intangible asset is

amortised using straight line method spread over a period not exceeding three years.

5.4 Investments

Available for sale

Investments, which are not classified as (a) held-to-maturity investments or (b) financial assets at fair value

through profit or loss or (c) loan and advances are classified as available for sale.

All investments are initially recognised at cost, being the fair value of the consideration given including

acquisition charges associated with the investment.

"After initial recognition, investment which are classified as available for sale are remeasured at fair value

Unrealised gains and losses, on available for sale investments, are recognised in equity until the investment is

sold, collected or otherwise disposed off, or until the investment is determined to be impaired, at which time

the cumulative gain or loss previously reported in equity is included in income.

5.5 Stores, spares and loose tools

Stores, spares and loose tools, except items-in-transit, are valued at cost calculated on a weighted average

basis. Items in-transit are valued at cost comprising invoice value plus other charges accrued thereon to the

balance sheet date. Provision is made annually in the financial statements for slow moving and obsolete item

5.6 Stock-in-trade

Stocks, except for those in transit, are valued at the lower of cost and net realisable value. Cost is calculated

on a weighted average or specific consignment basis, depending upon their categories. Stocks-in-transit ar

53

stated at invoice value plus other charges accrued thereon to the balance sheet date. The Company assumes

title to stocks-in-transit after shipments.

5.12 Deriv

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p

Vehicles on wheels are taken as work-in-process until they are approved by the quality control department.

After such approval the vehicles are classified as finished goods. The assembled engines are included in raw

material. The cost of assembled engines, work-in-process and finished goods consists of landed cost of

imported materials, average local material cost, factory overhead and direct labour. Cost in relation to CKD

vehicles represents landed cost.

Net realisable value is determined by considering the prevailing selling prices of products in the ordinary

course of business less cost of completion and cost necessary to be incurred in order to make the sale. The

net realisable values are determined on the basis of each line of product. Provision is made annually in the

financial statements for slow moving and obsolete items.

5.7 Trade debts & installment sales receivable

Trade debts are recognised and carried at original value of invoice amount l ess provision for doubtful debts,

Installment sales receivables are recognised at original invoice amount and are subsequently reduced by the

principal portion of installments received. When the recovery of the amount is considered uncertain by the

management, a provision is made for the same. Known bad debts are written-off as incurred. A general

provision @ 3.5% of the balance of installment receivables is maintained to cater for any bad debts.

5 .8 P ro visions

Provisions are recognised in the balance sheet where the Company has a present legal or constructive

obligation as a result of past event, and it is probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be

made. Provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate.

5 .9 Impairment

The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether

there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated

and impairment losses are recognised in the profit and loss account currently.

5.10 Financial instruments

All financial assets and liabilities are recognised at the time when the Company becomes party to the

contractual provisions of the instrument and are derecognised in case of assets, when the contractual rights

under the instrument are realised, expired or surrendered and in case of liability, when the obligation is

discharged, cancelled or expired.

Any gain / loss on the recognition and derecognition of the financial assets and liabilities is taken to income

currently.

5.11 Offsetting of financial assets and financial liabilities

A financial asset and a financial liability is offset and the net amount reported in the balance sheet if the

Company has a legally enforceable right to set-off the recognised amounts and intends either to settle on a

net basis or to realise the asset and settle the liability simultaneously, if any.

In relation to fair value hedges, which meet the conditions for special hedge accounting, any gain or loss from

remeasuring the hedging instrument at fair value is recognised immediately in the profit and loss account. Any

gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the

hedged item and recognised in the profit and loss account.

5.13 Employees benefit schemes

The Company operates an approved contributory provident fund scheme as well as an approved defined

benefit funded gratuity scheme covering all its permanent employees, except that employee of Motorcycle

Division (Formally Suzuki Motorcycles Pakistan Limited) are not entitled for gratuity benefits. Equal monthly

contributions are made to the provident fund by the Company and the employees in accordance with the

provident funds rules. The gratuity benefits are payable to staff on completion of prescribed qualifying period

of service at the time of retirement as laid down in the scheme.

Contributions are payable to the gratuity fund on yearly basis as per actuarial recommendations. Actuaria

gains and losses are accounted for in accordance with the minimum recommended approach under IAS - 19

"Employee Benefits".

The Company accounts for employees' compensated absences on the basis of unavailed earned leave balance

of each employee as at the end of the year.

5.14 Taxation

Current

Provision for current taxation in the financial statements is based on taxable income at the current rate of

taxation after taking into account tax credits and tax rebates available, if any, and under final tax regime of the

Income Tax Ordinance, 2001 on commercial imports or minimum tax at 0.5 percent of turnover, whichever ishigher.

Deferred

Deferred tax is recognised using the liability method, on m ajor temporary differences at the balance sheet date

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes

Deferred tax assets are recognised for all deductible temporary differences to the extent that the temporary

differences will reverse in the future and taxable income will be available against which the deductible

temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the exten

that it is no longer probable that sufficient taxable profit will be available to allow all or part for the deferred

tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when

the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted o

subsequently enacted at the balance sheet date.

5.15 Foreign currency translation

Transactions in foreign currencies are translated into reporting currency at the rates of exchange prevailing

on the dates of transactions. Monetary assets and liabilities expressed in foreign currencies are translated a

55

the rates ruling on the balance sheet date. Non-monetary assets and liabilities are translated using exchange

rates that existed when the values were determined. Exchange differences on foreign currency translations

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are included in income along with any related hedge effects.

5 .16 Revenue recognition

Revenue is recognised when goods are sold and services rendered. Goods are treated as sold when they are

specified and invoiced. Warranty and insurance claims are recognised when the claims in respect thereof are

lodged with the respective parties. Indenting and agency commission is recognised when the shipments are

made by the principal.

Return on bank deposits is accounted for on accrual basis.

Dividend income is recognised when the Company's right to receive such dividend is established.

5.17 Transactions with related parties

The Company enters into transactions with related parties for sale / purchase of goods and these are priced

on arm's length basis using Transactional Net Margin Method. Royalty and fee for technical services are

accounted for at the rates mentioned in the respective agreements, duly registered with the State Bank of

Pakistan.

5.18 Warranty obligations

The Company accounts for its warranty obligations on accrual basis.

5 .19 Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash in hand and at banks

net off book overdrafts and short-term running finances.

5.20 Dividend and appropriation to reserves

Dividend and appropriation to reserves are recognised in the financial statements in the period in which these

are approved, and dividend distribution to shareholders of the company is accounted for as a liability when

the dividend is declared.

5 .21 Borrowing costs

Borrowing costs are recognized as an expense in the period in which these are incurred.

5.22 Accounting standards not yet effective

The following new standards and amendments of approved accounting standards are applicable in Pakistan

from the dates mentioned below against the respective standard or amendment:

IAS 23 (Revised) Borrowing Costs effective from accounting period beginning on or after January 01, 2009

IAS 41 Agriculture effective from accounting period beginning on or after May 22, 2007

In addition, interpretations in relation to certain IFRSs have been issued by the International Accounting

Standards Board that are not yet effective.

The Company expects that the adoption of the above standards, amendments and interpretations will have no

significant impact on the Companys financial statements in the period of initial application.


6. PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 6.1 4,207,347 3,181,770

Capital work-in-progress 6.7 150,804 696,199

4,358,151 3,877,969

6. 1 O perating fixed assets

The following is a statement of operating fixed assets:

Accumulated Accumulated

Cost Cost depreciation Charge for depreciation* Book value

Note as at as at as at the year / as at as at

January 1, Additions / December 31, January 1, (depreciation December 31, December 31, Rate

2 0 0 7 (deletions) 2 0 0 7 2 0 0 7 on deletion) 2 0 0 7 2 0 0 7 %


Lea se hol d l and 44,493 599,314 643,807 12,838 10,729 23,567 620,240 60 & 62.75

L ea se ho ld I mp ro ve me nt s 3 9, 63 7 - 3 9 ,6 37 2 8 ,1 67 3 ,3 27 3 1, 49 4 8 ,1 43 L ea se t er m

Buildings on leasehold 6.4

land

- Factory 968,035 110,960 1,078,995 488,273 64,358 552,631* 526,364 10 & 20

- Office 2,063 - 2,063 2,063 2,063 - 20

- Test Tracks and

other buildings 13,503 - 13,503 9,822 736 10,558 2,945 20

Plant and machinery 6.4 & 6.5 4,076,211 792,311 4,800,618 2,303,583 620,766 2,861,757* 1,938,861 25 & 35

(67,904) (62,592)

Welding guns 122, 624 9 7,910 220,126 72,375 30, 078 102,069* 118,057 35

(408) (384)

Waste water t reatment p lant 44,928 75,294 120,222 43,205 12,830 56,035 64,187 25

Permanent and specia l too ls 238 ,518 85,634 321 ,416 159 ,404 42,742 199 ,473* 121,943 10, 35 & 40

(2,736) (2,673)

D ie s 6. 6 1 ,1 09 ,2 61 1 65 ,3 49 1 ,2 72 ,9 24 7 48 ,8 76 1 60 ,6 69 9 07 ,8 72 * 3 65 ,0 52 3 5 & 4 0

(1,686) (1,673)

Ji gs a nd f ix tu re s 4 18 ,6 74 6 ,9 92 4 20 ,3 85 2 89 ,0 80 4 7, 00 1 3 30 ,8 90 * 8 9, 49 5 3 5 & 4 0

(5,281) (5,191)

E lec tr ic al ins ta l lat io ns 6 .4 & 6 .5 94,003 41,968 135 ,971 41,940 16,767 58,707 77,264 20

Fu rn it ur e a nd f it ti ng s 2 1, 22 2 7 65 16 ,1 24 10 ,4 43 2 ,2 66 7 ,1 56 8 ,9 68 2 0

(5,863) (5,553)

Vehicles 211,931 98,404 293,732 79,030 36,158 104,663 189,069 20

(16,603) (10,525)

Air conditioners and refrigerators 16,279 833 16,955 10,115 1,328 11,318 5,637 20

(157) (125)

Offi ce equi pment 51,531 13,727 63,871 21,888 7,511 28,278 35,593 20

(1,387) (1,121)

Computers 77,074 32,776 106,078 47,115 27,112 70,549* 35,529 50

(3,772) (3,678)

2 0 0 7 7,549,987 2,122,237 9,566,427 4,368,217 1,084,378 5,359,080 4,207,347

(105,797) (93,515)

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Cost Additions / Cost depreciation (depreciation depreciation * Book value

Note as at (deletions) / as at as at on deletion) as a t as at

January 1, (adjustment)** / December 31, January 1, (adjustment)** / December 31, December 31, Rate

2 0 0 6 reclassification*** 2 0 0 6 2 0 0 6 reclassification*** 2 0 0 6 2 0 0 6 %


Leasehold land 45,804 - 44,493 12,350 745 12,838 31,655 60 & 62.75

(1,311) (257)

L ea se ho ld I mpr ov em en ts 39 ,6 37 - 3 9, 63 7 2 4, 57 3 3 ,5 94 2 8, 16 7 1 1, 47 0 L ea se t er m

Buildings on leasehold 6.4

land

- Factory 889,103 78,932 968,035 424,961 63,312 488,273 * 479,762 5, 10 & 20

- Office 2,063 - 2,063 2,063 - 2,063 - 20

- Test Tracks and

other buildings 13,503 - 13,503 8,901 921 9,822 3,681 20

Plant and machinery 6.4 & 6.5 3,408,378 774,529 4,076,210 1,811,188 539,895 2,303,583* 1,772,627 10,20, 25 & 35

(49,102) (46,300)

(57,595) *** (1,200) ***

Wel di ng guns 112,288 10,336 122,624 49,596 22,779 72,375 * 50,249 35

W as te w at er t re at me nt p la nt 4 4, 92 8 - 4 4 ,9 28 4 2, 63 1 5 74 4 3, 20 5 1 ,7 23 2 5

Permanent and special too ls 176 ,978 61,539 238 ,517 131 ,737 27,665 159 ,402* 79,115 35 & 40

Dies 6.6 874,052 190,063 1,109,262 600,847 147,139 748,876 * 360,386 10, 35 & 40

(6,095) ** (178) **

51,242*** 1,068***

J ig s a nd f ix tu re s 4 40, 97 7 9 81 4 18 ,6 74 2 48 ,1 43 7 0, 44 1 2 89 ,0 80 * 1 29 ,5 94 3 5 & 4 0

(29,637) (29,636)

6,353*** 132***

E lec tr ica l instal lat ions 6 .4 & 6 .5 80,318 13,685 94,003 29,920 12,020 41,940 52,063 10 & 20

F ur ni tu re a nd f itt in gs 1 9, 94 5 3 ,3 33 2 1, 22 2 1 0, 14 8 2 ,0 64 1 0, 44 3 10 ,7 79 10 & 2 0

(2,056) (1,769)

Vehicles 180,821 70,395 211,931 79,785 26,128 79,030 132,901 20

(39,285) (26,883)

A ir c on di ti on er s a nd r ef ri ge ra tor s 2 1, 79 0 2 ,0 60 1 6, 27 9 1 5, 58 9 1 ,3 92 1 0, 11 5 6, 16 4 2 0

refrigerators (7,571) (6,866)

O ffice equipment 39, 314 12, 938 51,531 17,694 4,723 21, 888 29,643 10 & 20

(721) (529)

Computers 56,314 23,670 77,075 32,350 17,591 47,117 * 29,958 33 & 50

(2,909) (2,824)

2 0 0 6 6,446, 213 1 ,2 42 ,461 7,549,987 3,542,476 940,984 4,368,217 3,181,770

(132,592) (115,064)

(6,095) ** (178) **

-*** -***

*Includes accumulated impairment loss amounting to Rs. 43.363 million (2006: Rs. 43.363 million)


6.2 Depreciation charge for the year has been allocated as under:

Cost of goods manufactured 29.1 1,006,377 884,017

Administrative expenses 31 78,001 56,967

1,084,378 940,984

6.3 Particulars of operating fixed assets having written down value (WDV) exceeding Rs. 50,000 disposed of during the year are as follows:

Accumu-

lated

deprecia- Sales Gain / Mode of

Particulars Cos t tion WD V proce eds (loss) disposal Particulars of buyers / insurance compan y


Plant & Machinery

Paint Container (Portable)

with Accessories 3,311 3,163 148 - (148) Scrapped

Paint Booth Extens ion 29, 715 28, 583 1, 132 - (1, 132) Scrapped

D I W at er P la nt w it h A cc es so ri es 1 0, 35 7 1 0, 14 9 2 08 - ( 20 8) S cr ap pe d

Equipment for Brake Oil 3,045 2,984 61 - (61) Scrapped

Water Treatment Plant 6,817 4,353 2,464 - (2,464) Scrapped

M il li ng M ac hi ne P ar ks on M 12 00 S eri es 1 30 5 3 7 7 7 0 ( 7) Te nd er Z .S . E ng in ee rin g

Seam Welding Machine 363 262 101 80 (21) Tender Mr. Qamar

D ie se l G en er at or 1 35 K VA - S ie me ns 1 ,1 91 4 56 7 35 5 10 ( 22 5) T en de r B ri gh t S ta r M eh mo od ab ad N o. 4, N ea r B at a S ho e

Electroplating Street No.8, Karachi.

Furniture & Fixture

Parts Storage Racks 1,902 1,798 103 - (103) Scrapped

Vehicles

Suzuki Vehicles (25 Vehicles) 12,466 8, 001 4, 465 5, 208 743 As per Company

Company Employees

Policy

S uz uk i C ul tu s ( 1 V eh ic le ) 5 55 1 41 4 14 5 28 1 14 I ns ur an ce E FU I ns ur an ce 9 64 -9 65 C en tr al C om me rc ia l A re a

Claim Block,2 PECHS, Karachi.

Suzuki Baleno, 729 549 180 336 156 Tender Mr. Shakeel Ahmad Company Employee

Suzuki Mehran, 395 32 363 395 32 Tender EFU 964-965 Central Commerc ial Area

Block,2 PECHS, Karachi.

Suzuki Baleno 677 572 105 300 195 Tender Mr. Shahzad

Office Equipment

A C P ower D ie se l G en er at or Mod el A GB- 22 J 7 02 5 29 1 73 2 15 4 2 T en de r T.S EngineeringWorks IIIB-5 / 8, Nazimabad# 3 Karachi

Aggregate value of items where

W DV is l es s t han R s. 5 0, 00 0 3 3, 44 2 3 1, 88 8 1 ,55 4 8 55 ( 69 9)

2 0 0 7 105,797 93,515 12,282 8,497 (3,785)

2 0 0 6 132,593 115,065 17,528 29,157 11,629

6.4 The buildings on leasehold land at West Wharf are situated at three plots numbered 16, 20 and 21. These plots

are owned by Karachi Port Trust (KPT). The lease tenures of plots numbered 16, 20 and 21 expired on July 31

1998, March 31, 1998 and September 30, 1998 respectively. Except for plot No. 20, lease agreements of plo

Nos. 16 and 21 are registered in the name of Sind Engineering (Private) Limited and Republic Motors (Private

Limited respectively, both subsidiary companies of PACO. Despite persistent efforts, KPT has not issued

mutation letter in respect of plot No. 20 neither have they effected transfer and / or renewed leases in respec

of plot Nos. 16 and 21. On the other hand KPT without any notice, intimation or warning forcibly took

possession of plot Nos. 20 and 21. The Company had filed writ petitions in the Honourable High Court of Sindh

praying for restoration of possession and renewal of leases in favour of the Company. Status quo had been

granted and notices issued to the respondents by the Court in this respect. No formal hearing has been

conducted to-date.

6.5 The immovable assets lying at West Wharf have been impaired by the action of KPT as explained in note 6.4

above. Such assets included buildings, electric installations and immovable plant. The book value of these

assets was Rs. 14.604 million. This impairment had necessitated charging off the entire book value of these

assets to the said extent and accordingly it was fully charged in the year 1998.

59

6.6 Certain dies of book value Rs. 1.622 million (2006: Rs. 2.803 million) were lying with vendor for production of

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components to be supplied to the Company.


2 0 0 7 2 0 0 6

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6.7 Capital work-in-progress

Advance for capital expenditure 26,642 18,244

Building - 42,895

Plant and machinery 124,162 635,060

150,804 696,199

7. INTANGIBLE ASSETS

Designing fee for development of a component and initial royalty

Cost at beginning of the year 359,536 224,576

Addition during the year 265,293 175,227

Written off during the year - (40,267)

Cost at end of the year 624,829 359,536

Less: Accumulated amortisation at beginning of the year 126,551 101,105

Amortisation for the year 29.1 111,499 65,713

Accumulated amortisation on assets written off - (40,267)

Accumulated amortisation at end of the year 238,050 126,551

Book value 386,779 232,985

Amortisation period 3 years 3 years

7.1 During the year, no amortisation has been charged on the addition to the intangible assets amounting to

Rs. 89.123 million (2006: Rs. 132.9 m illion) as the assets have not yet been put to use.

December 31, December 31,2 0 0 7 2 0 0 6

Restated(Rupees in thousand)

8 . L ONG-TERM INVESTMENTS

Others - available for sale

Unquoted

Arabian Sea Country Club Limited

500,000 (2006: 500,000) fully paid ordinary shares of Rs. 10/- each 5,000 5,000

Equity held 6.45% (2006: 6.45%)

Value based on net assets as at June 30, 2007 Rs. 4.679 million

(2006: Rs. 4.923 million)

Less: Provision for impairment in the value of investment 321 5,000

4,679 -

Automotive Testing & Training Centre (Pvt.) Limited (AT & TC)

125,000 (2006: 50,000) fully paid ordinary shares of Rs. 10/- each 1,250 911

Equity held 6.94% (2006: 6.94%)Value based on net assets as at June 30, 2007 Rs. 0.644 million

(2006: Rs. 1.684 million)

Less: Provision for impairment in the value of investment 606 500

644 411

5,323 411


9. LONG-TERM LOANS - considered good

Loans to employees 9.2, 9.3, 9.4 28,105 17,025

Loans to executives 9.1, 9.5 1,887 2,471

29,992 19,496

Less: Receivable within one year 15 11,977 7,371

18,015 12,125

9.1 Movement of loans to executives

Opening balance 2,471 -

Disbursement during the year - 2,800Repayment during the year (584) (329)

1,887 2,471

9.2 Rs. 27.50 million (2006: Rs. 18.391 million) given to employees, against personal guarantees of any two

employees of the Company or against balance of provident funds. These loans are repayable in thirty six equa

monthly installments free of any finance cost.

9.3 Rs. 2.372 million (2006: Rs. 1.074 million) given to employees, against personal guarantees of any two

employees of the Company markup is charged @ 15% after the recovery of first ten installments.

9.4 Rs. 0.119 million (2006: Rs. 0.031 million ) given to employees for purchase of motorcycle. As security, the

Company retains the title and register the document in its name. Markup is charged @ 9% - 10%.

9.5 The maximum aggregate amount due from executives at the end of any month during the year was Rs. 1.887

million (2006: Rs. 2.800 million).


2 0 0 7 2 0 0 6Restated


10. LONG-TERM DEPOSITS AND PREPAYMENTS

Deposits 20,504 19,413

Prepayments 5,837 5,825

26,341 25,238

11. LONG-TERM INSTALLMENT SALES RECEIVABLES secured

Installment sales receivables 11.4 & 11.5 671,164 517,241

Less: Provi sion for doubtful recei vables 11.3 (19,856) (15,186)

651,308 502,055

Less: Unearned finance income (103,850) (83,344)

547,458 418,711

Less: Current Maturity (356,238) (276,020)

191,220 142,691

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13. STOCK-IN-TRADE

Raw material and components [including items in transit

Rs. 2,049.816 million (2006: Rs. 1,456.731 million)] 6,592,411 5,623,366

Less:

Provision for slow moving and obsolete items

Provision at beginning of the year 36,606 499

Provision for slow moving and obsolete items 9,405 36,107

46,011 36,606

6,546,400 5,586,760

Work-in-process 88,091 128,151

Finished goods 2,311,661 3,200,131

Trading stocks [Including items in transit

Rs. 36,014 million (2006: Rs.12.239 million)] 264,724 707,551

Less:


Provision at beginning of the year 8,655 18,942

Provision / (Reversal) for slow moving and obsolete items 17,836 (10,287)

26,491 8,655

238,233 698,896

9,184,385 9,613,938

13.1 Of the aggregate amount, stocks worth Rs.1,661.999 million (2006: Rs. 3,283.351 million) were in the custody

of dealers and vendors.

13.2 Raw material and components, work-in-process, finished goods and trading stocks have been written down by

Rs. 73.427 million, Rs. 1.728 million, Rs. 24.690 and Rs. 1.242 million (2006: Rs. 39.400 million, Rs. 0.89

million, Rs. 42.572 million and Rs. 1.560 million) to arrive at the net realizable value of Rs. 798.530 million

Rs. 46.660 million, Rs. 541.845 million and Rs. 1.889 million (2006: Rs. 1,562.661 million, Rs. 80.195 millionRs. 1,491.679 million and Rs. 1.911 million) respectively. The write downs have been recognised as an expense



14. TRADE DEBTS - unsecured

Considered good

- Due from Government Agencies 44,618 6,504

- Others 141,121 146,353

185,739 152,857

Considered doubtful 4,538 4,217

Less:

Provision for doubtful debts (4,538) (4,217)

- -

185,739 152,857

Note December 31, December 31, December 31, December 31,2 0 0 7 2 0 0 6 2 0 0 7 2 0 0 6

Restated Restated(Rupees in thousand) (Rupees in thousand)

Less than one year 11.2 439,021 347,225 356,238 276,020

One to five year 232,143 170,016 211,076 157,877

Less: Provision for

doubtful receivables (19,856) (15,186) (19,856) (15,186)

212,287 154,830 191,220 142,691

651,308 502,055 547,458 418,711

11.2 Includes an overdue portion of installment sales receivables of Rs. 13.665 million (December 31, 2006:

Rs. 13.172 million).

11.3 The movement in provision against doubtful debts during the year is as follows:



Balance at beginning of the year 15,186 15,137

Provision made during the year 4,670 1,164

Amount written-off during the year - (1,115)

19,856 15,186

11.4 Represents balances receivable under various installment sale agreements in equal monthly installments. As a

security, the Company retains the title and registers the documents of such motorcycles in its name. Such

documents are transferred in the name of customers after the entire dues are realised. Overdue rentals are

subject to an additional surcharge.

11.5 Mark-up on installment sales receivables ranges from 20% to 38.5% (2006: 14% to 37%) per annum.


Restated


12.STORES, SPARES AND LOOSE TOOLS

Stores 25,688 30,798

Spares 45,966 36,262Loose tools 27,992 24,148

99,646 91,208

Less:


Provision at beginning of the year 24,478 15,424

Provision for slow moving and obsolete items 614 9,054

25,092 24,478

74,554 66,730

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15. LOANS AND ADVANCES - considered good

Current portion of loans to employees 11,277 6,671

Current portion of loans to executives 700 700

9 11,977 7,371

Advances to:

- Suppliers / vendors 15.1 138,728 100,816

- Gratuity fund 15.2.1 3,819 6,896

- Provident fund - 207

- Employees 43 1,073

154,567 116,363

15.1 Includes advances to vendors of Rs. 28.239 million (2006: Rs. 5.372 million), which carry mark-up ranging from

10% - 15% per annum (2006: 10% - 15% per annum).

15.2 Employees gratuity fund

The latest actuarial valuation was carried out as at December 31, 2007 using the Projected Unit Credit Method,

according to which present value of gratuity obligation and fair value of gratuity assets were Rs. 144.140

million and Rs. 212.792 million respectively. The rate of 10% (2006: 10%) was assumed for discount/return on

investment and increase in salaries.



15.2.1 Amount recognised in the balance sheet

Present value of defined benefit obligation (144,140) (128,957)

Fair value of plan assets 212,792 181,715

Un-recognised actuarial gains (64,833) (45,862)

3,819 6,896

1 5. 2. 2 Expense recognised in the profit and loss account

Current service cost 9,875 7,971

Interest cost 12,896 9,577

Expected return on plan assets (18,171) (15,159)

Actuarial gain (2,769) (2,731)

1,831 (342)

15.2.3 Movement in net (liability) / asset recognised in the balance sheet

Opening balance - asset 6,896 2,709

(Expense) / income recognised in the financial statements (1,831) 342

Contribution made by the Company during the year 8,754 3,845

Payment made to the Company from the fund (10,000) -

3,819 6,896

15.2.4 Movement in present value of defined benefit obligation

Opening balance - Present value of definedbenefit obligation 128,957 106,417

Current service cost for the year 9,876 7,971

Interest cost for the year 12,896 9,578

benefit paid during the year (8,754) (3,992)

Benefit due but not settled (2,678) -

Actuarial loss on present value of defined benefit obligation 3,843 8,983

144,140 128,957


15.2.5 Movement in fair value of plan assets

Opening balance - Fair value of plan assets 181,715 151,593

Expected return on plan assets 18,171 15,159

Contribution during the year 8,754 3,846

Benefit paid during the year (8,754) (3,992)

Benefit due but not settled (2,678) -

Payment made to the Company from the fund during the year (10,000) -

Actuarial loss on plan assets 25,584 15,109

212,792 181,715

15.2.6 Principal actuarial assumption used are as follows

Valuation discount rate 10%per annum 10%per annum

Expected rate of eligible salaries increase in future years 10%per annum 10%per annum

Expected rate of return on plan assets 10%per annum 10%per annum

15.2 .7 Actual return on plan assets

Expected return on plan assets 18,171 15,159

Actuarial gain on plan assets 25,583 15,109

Actual return on plan assets 43,754 30,268

15.2.8 Comparison for past years

As at December 31 2007 2006 2005 2004 2003


Present value of defined

benef it obl igat ion 144,140 128,957 106,417 100,972 101,231

Fai r value of plan assets 212,792 181,715 151,593 128,458 115,772

Deficit / (surplus) (68,652) (52,758) (45,176) (27,486) (14,541)

Experience adjustment

on plan liabilities 3,843 8,984 (3,824) (2,636) (2,098)

Experience adjustment

on plan assets 25,583 15,109 10,187 16,741 (15,793)

29,426 24,093 6,363 14,105 (17,891)



15.29 Major categories / composition of plan assets are as follows

Defence Saving Certificate (Include accrued interest less Zakat) 59,062 180,856

Mutual Funds (Income based) 150,355 -

Cash at bank 6,053 1,075

Less: Payable as at December 12, 2007 (2,678) (216)

212,792 181,715

16. TRADE DEPOSITS AND PREPAYMENTS

Trade deposits 4,297 6,499

Prepayments 19,272 18,126

23,569 24,625

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. ISSUED, SUBSCRIBED AND PAID

-UP SH

ARE CAPITAL

Fully paid ordinary shares of Rs. 10/- each

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17. OTHER RECEIVABLES - considered good

Due from Suzuki Motor Corporation, Japan 17.1 16,609 17,790

Due from vendors for material / components returned 10,392 5,012

Others 10,019 15,194

37,020 37,996

17.1 The maximum aggregate amount due from the holding company at the end of any month during the year was

Rs. 17.869 million (2006: Rs. 28.926 million).

Note December 31, December 31,2 0 0 7 2 0 0 6


18. SHORT TERM INVESTMENT - available for sale

Atlas Income Fund - quoted

240,562 (2006: 215,764) units having a face value of Rs. 500 each 100,000 100,000

Add: Unrealised gain arising on remeasurement to fair v alue

Opening balance 26,151 13,477

Unrealised gain on remeasurement during the year 11,827 12,674

37,978 26,151

137,978 126,151

19. CASH AND BANK BALANCES

Cash in hand 6,267 4,215

Cash at bank:

On deposit 19.1 - 19.2 5,369,987 8,144,840

In a special deposit account 19.2 - 19.3 75,978 76,628

In current accounts 19.1 31,820 (11,346)

5,477,785 8,210,122

5,484,052 8,214,337

19.1 The above balances are net of book overdraft amounting to Rs. 115.911 million (2006: Rs. 54.887 mil lion).

19.2 The mark-up on funds placed on deposit accounts ranges from 8.1% to 11% (2006: 7.25% to 11%) per annum.

19.3 A special account is maintained in respect of security deposits (note 23) in accordance with the requirements

of Section 226 of the Companies Ordinance, 1984.

December 31, December 31, Note December 31, December 31,2 0 0 7 2 0 0 6 2 0 0 7 2 0 0 6

Restated Restated(Number of shares) (Rupees in thousand)

Issued for cash

Opening balance

44,284,117 44,284,117 PSMC 442,841 442,841

25,898,958 43,898,958 Former SMPL 258,989 438,989

70,183,075 88,183,075 701,830 881,830

Cancellation of shares -

(25,898,958) (18,000,000) Former SMPL 20.2 (258,989) (180,000)

44,284,117 70,183,075 442,841 701,830

- Shares issued under the

scheme of arrangement

1,233,284 for amalgamation 12,333 -

Issued for consideration

2,800,000 2,800,000 other than cash PSMC 28,000 28,000

Issued as bonus shares

6,960,261 6,960,261 Opening Balance - PSMC 69,603 69,603

27,022,189 - Issued during the year - PSMC 270,223 -

33,982,450 6,960,261 339,826 69,603

82,299,851 79,943,336 823,000 799,433

20.1 At December 31, 2007 Suzuki Motor Corporation, Japan (holding company) held 60,154,091 Ordinary share

of Rs. 10/- each (2006: 39,500,821 Ordinary shares) in Pak Suzuki .

20.2 These shares represent shares of former SMPL held by PSMC. These have been cancelled against face value

of investment.

20.3 Capital Risk Management

The Company's objective when managing capital are to safeguard the Company's ability to continue as a going

concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an

optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may regulate the amount of dividends paid

to shareholders, issue new shares and other measures commensurating to the circumstances.



21. DEFERRED TAX LIABILITY

Deferred taxation comprise of:

Difference between accounting and tax depreciation 356,000 325,408

Provision for custom duty and sales tax (228,000) (227,388)

Provision for compensated absences (9,000) (7,689)

Provision for warranty claims (11,000) (9,661)

Provision for doubtful debts (8,000) (6,791)

Others (1,000) (15,940)

99,000 57,939

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.1 Includes Rs. 52.153 million (2006: Rs. 52.153 million) being provision against demand raised by the Custom

Authorities on account of alleged short payment of custom duties. The Companys appeal against the order

passed in above case is pending at Sindh High Court. In view of the inherent delays that are associated and

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22. TRADE AND OTHER PAYABLES

Creditors 626,115 725,304

Bills payable 656,408 709,028

Accrued liabilities:

Accrued expenses 526,833 575,897

Royalties and technical fee payable to Suzuki Motor

Corporation, Japan - holding company 338,104 312,118

Mark-up on waiting for delivery of vehicles 105,694 125,063

Dealers' commission 542,391 526,979

Workers' profit participation fund 22.1 229,955 276,631

Workers' welfare fund 88,000 107,000

1,830,977 1,923,688

Retention money 18,199 12,140

Unclaimed dividend 3,107 3,157

Others 38,748 29,189

60,054 44,486

3,173,554 3,402,506

22.1 Workers' profit participation fund

Balance at beginning of the year 276,631 10,793

Mark-up on funds utilised in the Company's business - 842

276,631 11,635

Allocation for the year 229,968 276,631

506,599 288,266

Less: Paid during the year 276,644 11,635

Balance at end of the year 229,955 276,631

23. SECURITY DEPOSITS

Dealership deposits 69,353 64,403

Deposits against contractual obligation 6,625 12,225

75,978 76,628

23.1 The above deposits are not liable to finance cost.

2 4. AD VA NCES FROM CUSTOMERS 2,409,418 6,186,884

Mark-up is payable for delayed period if the delivery is made after sixty days from the date of booking. The

rate of mark-up varies from month to month subject to weighted average rate of last three months treasury

bills.



25. PROVISION FOR CUSTOM DUTIES, SALES TAX AND EXCISE DUTY

Provision for cus tom dut ies and sales tax 25.1 - 25.6 607,377 607,377

Provision for sales tax 25.7 59,969 31,923

Provision for excise duty 25.8 - 28,295

667,346 667,595

p p g g y

the element of uncertainty inherent in legal matters, provision has been made as a matter of prudence.

25.2 Includes Rs. 110.323 million (2006: Rs. 110.323 million) being provision for custom duties and sales tax in

respect of certain components of Suzuki Baleno imported during prior years. Based on clause (iii) of SRO No

436(1) dated June 18, 2001, the Custom Authorities have interpreted that CBU rate of duty is applicable on

such components. The Company had disputed the contention before the custom authorities. The matter wa

referred to EDB for clarification which is still pending. The Company had worked out the differential amount o

duty and provision was made because it is a present obligation that probably require an out flow of resources

25.3 Includes Rs. 164.087 million (2006: Rs. 164.087 million) being provision for custom duties and sales tax on

discount allowed by SMC Japan in the FOB price of CKD i mported during prior years. Custom Authorities hav

interpreted such discount as being special in nature and in consequence had issued Demand cum Show Cause

Notice to the Company demanding custom duties and sales tax aggregating to Rs. 57 million relating to

imports during the period from August 1999 to September 2000. Apprehending such demand from the

Custom Authorities for the period October 2000 to March 2002 as well, the Company has worked out an

amount of Rs. 107.087 million being alleged short payment of custom duties and sales tax in respect of

discount availed by the Company and accordingly made a provision in the financial statements as a matter o

prudence in view of inherent uncertainties associated in such matters.

The Company, however, considered it a normal trade discount and contended before the Custom Authoritie

filing the case with the Assistant Collector, Collector Appeals and then to the Appellate Tribunal, which were al

decided against the Company. The Company then appealed to the High Court of Sindh, which was decided in

favors of the Company via order dated June 14, 2006. However, the Custom Authorities have filed a counte

appeal in the Honourable Supreme Court of Pakistan. Therefore, the Company decided to m aintain the above

provision in the financial statements, as a matter of prudence.

25.4 Include a provision of Rs. 88.073 million (2006: Rs. 88.073 million) for differential amount of custom dutyrelated to A-max parts imported during the period from July to September 2006. The differential amount

represents custom duty at the rate of 50% on A-max parts less custom duty actually paid by the Company as

applicable to CKD. Effective July 01, 2006, Tariff Base System replaced mandatory deletion programme

According to the system A-max parts have been subjected to higher rate of custom duty i.e. at the rate of 50%

A-max parts refer to those parts which have been localized by any of the automobile assemblers. The amoun

has been paid subsequent to year end.

25.5 Includes Rs. 86.323 million (2006: Rs. 86.323 million) for custom duty & sales tax against royalty. Revenue

Receipts Auditors Government of Pakistan conducted an audit in the year 2001 and alleged that the

Company short paid Rs.120 million on account of custom duties and sales tax against royalty during the period

from July 1997 to February 1999. According to clause 2(d) of Section 25 of the Custom Act 1969, payment in

the nature of royalty without which goods cannot be legitimately imported and sold or used in Pakistan are to

be included in value for i mport purpose. Subsequent to audit observation the Company paid Rs. 33.677 million

after reconciliation with Collector of Custom. Despite reconciliation, Deputy Collector Customs has

adjudicated to pay balance amount of Rs. 86.323 million. Though the Company disputes calculation of the

amount, provision has been made, as a matter of prudence in view of the inherent uncertainties in such

matters.

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25.6 Includes Rs. 106.417 million (2006: Rs. 106.417 million) which represents provision for additional custom duty

and sales tax on CKD for motorcycles imported during July 2004 to December 2006. Former SMPL had not

achieved deletion target set by Engineering Development Board. As per deletion programme, if targeted

27. FIN

AN

CING FACILITIE

S

HABIB BANK LIMITED

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deletion is not achieved, higher rate of custom duty is applicable on short fall of deletion. Former SMPL had

made the provision for additional custom duty and sales tax on short fall on deleted components imported

during the above period.

25.7 Represents sales tax on transport and transit insurance charges reimbursed to the Company by the customers.

Sales tax authorities have issued notice to pay Rs. 16.553 million for sales tax on transport and transit

insurance charges reimbursed to the Company by customers during January 2004 to December 2005.

Apprehending similar demand for the period January 2006 to December 2007, the Company has extended

provision upto December 2007. The Company contests that its prices are ex-factory. For the facilitation of

customers, it arranges transport and transit insurance for out-station customers. These activities ab-initio are

not leviable to sales tax. The charges recovered by the Company are actual reimbursements. Therefore, theCompany pleades that it is not liable to pay sales tax on transport and transit insurance charges. However, the

Company has made provision as a matter of prudence in view of inherent uncertainties in such matters. Sales

tax authorities have not yet decided the matter.

25.8 Company admitted levy of 5% Federal excise duty on royalty.



25.9 The movement in provision for custom duties, sales tax and excise duty is as under:

Balance brought forward 667,595 385,392

Provision made during the year

- Custom duties - 221,985

- Sales tax 31 28,046 31,923- Federal excise duty - 28,295

Payment made during the year for Federal excise duty (14,937) -

Reversal of provision for Federal excise duty (13,358) -

667,346 667,595

26. COMMITMENTS

26.1 Capital expenditure contracted for but not incurred amounting to Rs. 259.219 million (2006: Rs. 212.126

million).

26.2 The facilities for opening letters of credit as at December 31, 2007 amounted to Rs. 2,885 million (2006:

Rs. 2,770 million) of which the amount remaining unutilised at the year end was Rs. 2,192 million (2006:

Rs. 1,288 million).

26.3 Counter guarantees issued by the Company against guarantees issued by various commercial banks on behalf

of the Company amounted to Rs. 245.806 million (2006: Rs. 104.612 million).

The facility for running finance / bank guarantee available to Company Rs. 271 million (2006: Rs. 500 million)

The facility is secured by registered joint pari passu hypothecation charge over stocks and book debts. The

mark-up rate is base rate plus 200 basis points (2006: Base rate plus 150 basis points with a floor of 4.5% pe

annum). Base rate is one month Karachi Inter Bank Offer Rate (KIBOR). Base rate is to be reset on monthly basis

as prevailing on last working day of every month. The facility is for one year and is renewable on agreed terms

The facility availed at the balance sheet date was Rs. Nil (2006: Rs. Nil).

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.

The facility for running finance available to Company Rs. 385 million (2006: Rs. 370 million). The facility is

secured by registered joint pari passu hypothecation charge over stocks and book debts. The mark-up rate i

base rate plus 226 basis points (2006: base rate plus 226 basis points). Base rate is six months averageKarachi Inter Bank Offer Rate (KIBOR). The facility is for one year and is renewable on agreed terms. The facility

availed at the balance sheet date was Rs. Nil (2006: Rs. Nil).



28. TURNOVER

Manufactured goods 28.1 48,960,986 45,823,353

Trading stocks 28.2 1,883,646 2,379,731

50,844,632 48,203,084

28.1 Manufactured goods

- Veh ic les 58,295,265 53,663,332

- Spare parts 216,445 238,90928.3 58,511,710 53,902,241

Less: Sales tax 7,625,281 7,017,224

Discounts - 21

Commission paid to selling agents 1,925,443 1,061,643

9,550,724 8,078,888

48,960,986 45,823,353

28.2 Trading stocks

- Veh ic les 1,483,504 2,184,303

- Spare parts 752,615 585,283

28.3 2,236,119 2,769,586

Less: Sales tax 292,454 361,250

Commission paid to selling agents 60,019 28,605

352,473 389,855

1,883,646 2,379,731

28.3 These include export sales of Rs. 97.533 million (2006: Rs. 75.385 mil lion).

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p30. DISTRIBUTION COSTS

Advertising and sales promotion 290,354 434,021

Free service 76,530 75,768Warranty claims 26,959 31,198

Transportation and handling charges 22,009 16,698

Royalty on spare parts 11,189 9,525427,041 567,210

3 1. A DMI NISTRATIVE EXPENSES

Salaries, wages and other benefits 31.1 164,379 152,717

Outsourced job contractor charges 35,422 29,241Travelling and training 31,285 23,032

Hired security guards services 7,894 6,608Rent, rates and taxes 26,345 28,261

Utilities 10,823 8,681

Vehicle running expense 28,943 26,708Insurance 10,888 7,439

Repairs and maintenance 12,681 24,178

Depreciation 6.2 78,001 56,967Auditors' remuneration 31.2 1,981 1,873

Legal and professional charges 13,558 11,910

Conveyance and transportation 14,863 15,446Entertainment 4,117 2,860

Printing and stationery 11,878 10,822

Communication 12,661 10,953Directors' fees 12 22

Donations 31.3 1,456 4

Provision for doubtful advances 4,990 1,542Provision for sales tax 25.9 28,046 31,923

Reversal of provision for impairment in the value of investment (4,912) -Celebration of special event 7,562 9,682Others 8,182 11,373

511,055 472,242

31.1 Includes Rs. 0.660 million (2006: Rs. 0.128 million) in respect of defined benefit gratuity fund and Rs. 3.177

million (2006: Rs. 2.653 million) in respect of defined contributory provident fund.



31.2 Auditors' remuneration

Audit fee 650 775

Code of corporate governance review 50 40

Half-yearly review 385 300

Fee for special certifications and advisory services 771 685

Out of pocket expenses 125 73

1,981 1,873

31.3 No directors and their spouse had any interest in any donee to which donations are made.

p29. COST OF SALES

Manufactured goods:

Finished goods at beginning of the year 3,200,131 1,006,125

Cost of goods manufactured 29.1 43,507,341 42,616,168Export expenses 18,887 20,718

46,726,359 43,643,011

Less: Finished goods at end of the year 2,311,661 3,200,13144,414,698 40,442,880

Trading stocks:

Stocks at beginning of the year 698,896 305,820Purchases during the year 1,209,039 2,459,570

1,907,935 2,765,390

Less: Stocks at end of the year 238,233 698,8961,669,702 2,066,494

46,084,400 42,509,374

29.1 Cost of goods manufactured:

Raw materials and components at beginning of the year 5,586,760 3,944,077Purchases during the year 29.1.1 41,194,295 41,210,487

46,781,055 45,154,564

Less: Raw materials and components at end of the year 6,546,400 5,586,760

Raw materials and components consumed 40,234,655 39,567,804

Stores and spares consumed 164,494 183,961

Provision for slow moving and obsolete stocks 614 9,054Power 154,029 150,462

Vehicle running expenses 11,277 10,968

Salaries, wages and other benefits 29.1.2 291,136 262,198

Outsourced job contractor charges 292,490 285,122Rent, rates and taxes 5,074 5,500

Travelling and training 55,981 36,188Insurance 14,694 15,571

Repairs and maintenance 255,280 189,921

Royalty charges 480,952 444,817Technical fee 211,200 186,511

Depreciation 6.2 1,006,377 884,017

Amortisation of intangible asset 7 111,499 65,713Provision for custom duties and sales tax - net - 174,397

Conveyance and transportation 110,476 118,364

Communication 6,863 7,074Hired security guards services 4,927 4,165

Local development 45,327 19,853

Printing and stationery 7,482 6,156Others 2,454 4,525

3,232,626 3,064,53743,467,281 42,632,341

Add: Work-in-process at beginning of the year 128,151 111,978

43,595,432 42,744,319Less: Work-in-process at end of the year 88,091 128,151

43,507,341 42,616,168

29.1.1 Purchases are stated net of proceeds from the sale of packing materials Rs. 242.743 mill ion (2006: Rs. 165.341 million).

29.1.2 Includes Rs. 1.170 million (2006: Rs. 0.214 million) in respect of defined benefit gratuity fund and Rs. 5.714 milli on (2006:

Rs. 4.975 million) in r espect of defined contributory provident fund.

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32. FINANCE COSTS

Interest on short-term loan from related parties 30,837 37,823

Fee for forward exchange contract 21,820 20,720

Mark-up on waiting for delivery of vehicles 73,431 209,304

Mark-up on workers' profit participation fund - 657

Bank charges 17,698 14,101

143,786 282,605

33. OTHER OPERATING INCOME

Mark-up on cash deposits with banks 756,211 1,033,329

Finance income on installment sales 99,022 91,992

(Loss) / gain on disposal of fixed assets (3,785) 11,629

Gain / (loss) on foreign exchange (net) 2,241 (8,513)

Miscellaneous income 67,322 34,479

921,011 1,162,916

34. WORKERS' WELFARE FUND

For the current year 88,000 107,000

For the prior years' 130 (1,106)

88,130 105,894

35. TAXATION

For the year:

- Current 1,465,000 1,877,366

- Deferred 41,061 (75,833)

1,506,061 1,801,533

For prior years' - current 670 (3,340)

35.1 1,506,731 1,798,193

35.1 Reconciliation of tax charge for the year:Accounting profit 4,281,263 5,152,044

Corporate tax rate 35% 35%

Tax on accounting profit at applicable rate 1,498,442 1,803,215

Tax effect of income assessed under Final Tax Regime (1,862) (9,035)

Tax effect of expenses that are not allowable in

determining taxable income 11,200 1,186

Net effect of income tax provision relating to prior years 670 (3,340)

Tax effect of reversal of provision for impairment in investment (1,719) -

Tax effect of adjustments in respect of deferred taxation - 6,167

1,506,731 1,798,193

36. EARNINGS PER SHARE (EPS) - BASIC AND DILUTED

Net profit for the year 2,774,532 3,353,851

Number of shares (in '000)

Weighted average number of ordinary shares in issue during the year 82,300 81,067

Rupees

Basic earnings per share 33.71 41.37

36.1 Basic earnings per sharehas no dilution effect.

37. CASH GENERATED FROM OPERATIONS

Profit before taxation 4,281,263 5,152,044

Adjustments for non cash charges and other items:

Depreciation 1,084,378 940,984

Amortisation of intangible asset 111,499 65,713

Provision for custom duties, sales tax and excise duty 14,688 282,203

Loss/(gain) on disposal of fixed assets 3,785 (11,629)

Reversal of provision for impairment in the value of investment (4,912) -

Mark-up on cash deposits with banks (756,211) (1,033,329)

Finance costs 143,786 282,605

597,013 526,547

Working capital changes 37.1 (4,709,800) (4,531,291)

168,476 1,147,300

37.1 Working capital changes

Decrease in current assets:

Stores, spares and loose tools (7,824) (12,591)

Stock in trade 429,553 (4,245,938)

Current portion of long-term installment sales receivables (80,218) 4,295

Trade debts (32,882) 922

Loans and advances (38,204) (42,668)

Trade deposits and prepayments 1,056 2,234

Other receivables 976 (6,621)

Sales tax adjustable (273,556) (229,578)

(1,099) (4,529,945)

Decrease in current liabilities:

Trade and other payables (209,533) 1,018,664Security deposits (650) 9,449

Deposits against display units 49,956 172,913

Advance from customers (3,777,466) (1,179,540)

Short term borrowing (756,071) 36,911

Sales tax payable - (59,743)

Provision for custom duty (14,937) -

(4,708,701) (1,346)

(4,709,800) (4,531,291)

38. TRANSACTIONS WITH RELATED PARTIES

Related parties of the Company include Suzuki Motor Corporation Japan (holding company) and related

group companies, local associated companies, staff retirement funds, directors and executives. The Company

in the normal course of business carries out transactions with various related parties. Amount due from and to

othe relevant notes to the financial statements. Other material transactions with related parties are given

below:

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. REMUNERATION OF EXECUTI

VES

, DIRECTOR

S AND CHIEF EXECUTIVE

The aggregate amounts charged in the financial statements for remuneration including benefits to the

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The aggregate amounts charged in the financial statements for remuneration, including benefits, to the

directors, chief executive and executives of the Company are given below:

2 0 0 7 2 0 0 6

Chief Chief

Executive Directors Executives Executives Directors Executives


Directors fees - 12 - - 22 -

Managerial remuneration 4,392 7,488 28,573 5,532 8,980 18,041

Bonus 1,680 2,670 7,430 1,408 2,247 5,183

Retirement benefits - 264 1,534 - 398 1,4516,072 10,434 37,537 6,940 11,647 24,675

Number of persons 1 4 19 2 6 13

40.1 The directors, chief executive and certain executives of the Company are provided with free use of company

maintained cars. Medical facility is also provided as per Company's policy.

40.2 Executive means an employee whose annual basic salary exceed five hundered thousand as defined in the

Companies Ordinance, 1984.

41. FINANCIAL ASSETS AND LIABILITIES

41.1 YIELD / MARK-UP RATE RISK EXPOSURE

Yield / mark-up rate risk is the risk that the value of the financial instrument will f

2007 SUZUKI LR

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Transcript of 2007 SUZUKI LR