Pak Suzuki Motors Co Ltd - 2004
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BALANCE SHEET AS AT DECEMBER 31, 2004
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                                                                        2004        2003
                                                            Notes   (Rupees in thousand)
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NON-CURRENT ASSETS
Property, plant and equipment - at book value                3     2,203,452     926,083
Intangible asset                                             4        13,423      26,845
Investments in related parties                               5        28,800      28,800
Long-term loans                                              6         2,073       1,751
Long-term deposits and prepayments                           7         5,978       5,531
Deferred tax asset                                           8       161,000     144,000
CURRENT ASSETS
Stores, spares and loose tools                               9        40,661      23,677
Stock in trade                                              10     3,765,277   2,258,413
Trade debts                                                 11       140,379      74,057
Loans and advances                                          12        25,484      22,755
Trade deposits and prepayments                              13        30,432       7,855
Accrued income on bank deposits                                       55,858      46,941
Other receivables                                           14        19,488      18,056
Investment                                                  15       101,365           -
Sales tax adjustable - considered good                               160,611     357,034
Cash and bank balances                                      16     6,693,996   5,732,752
                                                                  11,033,551   8,541,540
Total assets                                                      13,448,277   9,674,550
Share capital and reserves
Authorised share capital
150,000,000 (2003: 150,000,000) ordinary
 shares of Rs 10/- each                                            1,500,000   1,500,000
Issued, subscribed and paid-up share capital                17       491,312     491,312
Reserves                                                           4,984,406   3,726,863
                                                                   5,475,718   4,218,175
CURRENT LIABILITIES
Bills payable                                                        656,507     350,415
Security deposits                                           19        62,304      58,504
Trade and other payables                                    20     1,486,926     948,235
Advances from customers and dealers                         21     5,288,863   3,178,181
Income tax payable - net                                              51,670     577,175
Provision for customs duties and sales tax                  22       426,289     343,865
                                                                   7,972,559   5,456,375
Commitments                                                 23
Total share holders' equity and liabilities                       13,448,277   9,674,550
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2004
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                                                                        2004        2003
                                                           Notes    (Rupees in thousand)
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Net sales                                                   24    24,461,966  18,484,220
Cost of sales                                               25    22,045,303  15,846,866
Gross profit                                                       2,416,663   2,637,354
Administrative expenses                                     26       178,772     159,080
Selling expenses                                            27        89,105      64,556
Other operating income                                      28       189,485     183,822
Operating Profit                                                   2,338,271   2,597,540
Financial charges                                           29        40,060      37,333
Workers' profits participation fund                       20.1       114,911     128,010
Workers' welfare fund                                       30        43,484      50,594
                                                                     198,455     215,937
Profit before taxation                                             2,139,816   2,381,603
Taxation                                                    31       736,244     811,412
Net Profit for the year                                            1,403,572   1,570,191
Basic earnings per share                                    32         28.57       31.96
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CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004
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                                                                        2004        2003
                                                           Note     (Rupees in thousand)
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Cash flow from operating activities
Cash generated from operations                              33     3,993,400   1,828,008
Financial charges paid                                              (15,115)    (22,528)
Taxes paid                                                       (1,278,749)   (743,656)
Long-term loans and advances                                           (322)       1,014
Long-term deposits and prepayments                                     (447)       1,838
Net cash from operating activities                                 2,698,767   1,064,676
CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditure                                        (1,658,972)   (438,354)
Acquisition of intangible asset                                            -    (40,267)
Sale proceeds on disposals of fixed assets                            14,753      12,568
Purchase of investment                                             (100,000)           -
Mark-up on cash deposits with banks                                  152,618     187,016
Net cash used in investing activities                            (1,591,601)   (279,037)
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid                                                     (145,922)   (147,005)
Net increase in cash and cash equivalents                            961,244     638,634
Cash and cash equivalents
 at beginning of the year                                          5,732,752   5,094,118
Cash and cash equivalents at end
 of the year                                                       6,693,996   5,732,752
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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004
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                                                                                                     Unappropriated
                                                           Notes                                           gain on      Accumulated       Total   Shareholders
                                                                     Share      Share      General   available for           Profit    Reserves         Equity
                                                                  Capital     Premium      Reserve             Sale
                                                                                                        Investments
==============================================================================================================================================================
Balance as at December 31, 2002 as previously reported            491,312     584,002    1,571,818                -             852   2,156,672      2,647,984
Effect of change in accounting policy -
 Final dividend for the year ended December 31, 2002
 declared subsequent to the year-end                        2.3         -           -            -                -         147,394     147,394        147,394
Transfer to general reserve                                             -           -    (768,000)                -         768,000           -              -
Balance at December 31, 2002 - restated                           491,312     584,002      803,818                -         916,246   2,304,066      2,795,378
Effect of change in accounting policy -
Final dividend for the year ended December 31, 2002
 declared subsequent to the year-end                        2.3         -           -            -                -       (147,394)   (147,394)      (147,394)
Transfer to general reserve                                             -           -      768,000                -       (768,000)           -              -
Net profit for the year                                                 -           -            -                -       1,570,191   1,570,191      1,570,191
Balance at December 31, 2003                                      491,312     584,002    1,571,818                -       1,571,043   3,726,863      4,218,175
Balance at December 31, 2003 as previously reported               491,312     584,002    2,994,818                -             649   3,579,469      4,070,781
Effect of change in accounting policy -
Final dividend for the year ended December 31, 2003
 declared subsequent to the year-end                        2.3         -           -            -                -         147,394     147,394        147,394
Transfer to general reserve                                             -           -   (1,423,000)               -       1,423,000           -              -
Balance at December 31, 2003 - restated                           491,312     584,002    1,571,818                -       1,571,043   3,726,863      4,218,175
Effect of change in accounting policy -
Final dividend for the year ended December 31, 2003
 declared subsequent to the year-end                        2.3         -           -            -                -       (147,394)   (147,394)      (147,394)
Transfer to general reserve                                             -           -    1,423,000                -     (1,423,000)           -              -
Net profit for the year                                                 -           -            -                -       1,403,572   1,403,572      1,403,572
Unrealised gain on available for sale investment                        -           -            -            1,365               -       1,365          1,365
Balance at December 31, 2004                                      491,312     584,002    2,994,818            1,365       1,404,221   4,984,406      5,475,718
==============================================================================================================================================================
NOTES TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004
1. COMPANY'S BACKGROUND, OPERATIONS AND LEGAL STATUS

The Company was formed in accordance with the terms of a joint venture agreement concluded between Pakistan Automobile Corporation Limited (PACO) and Suzuki Motor 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 over 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 Stock Exchanges.

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 which since came to an end. The total foreign investment brought in by SMC - Japan since inception stands at Rs. 1,027.28 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1. BASIS OF PREPARATION

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 comprises of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984.

Wherever the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence.

2.2. ACCOUNTING CONVENTION

The financial statements have been prepared under the historical cost convention, except for revaluation of certain financial instruments at fair value and recognition of certain employees' benefits at present value.

2.3. CHANGE IN ACCOUNTING POLICY

During the year, the Securities and Exchange Commission of Pakistan substituted the Fourth Schedule to the Companies Ordinance, 1984, effective from the financial year ending on or after July 5, 2004.

This has resulted in the change in accounting policy pertaining to the recognition or dividends and other appropriations declared subsequent to the year end. Dividends and other appropriations to general reserve are now recognised in the period in which these are declared.

Up until the previous year, dividends declared and appropriations made after the balance sheet date but before the financial statements were authorised for issue, were recognised as of the balance sheet date.

The change in accounting policy has been accounted for retrospectively and comparative information has been restated in accordance with the bench mark treatment specified in IAS - 8 (Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies).

Had there been no change in accounting policy, the unappropriated profit brought forward would have been lower by Rs. 1,570.394 million [2003: Rs. 915.394 million] and the liability for proposed dividend and general reserve would have been higher by 147.394 million [2003: Rs 147.394 million] and Rs. 1,423 million [2003: Rs. 768 million) respectively.

The effect of change in accounting policy has been reflected in the comparative balance sheet and the statement of changes in equity. The change in accounting policy has not resulted in any change in the profit for the current period.

2.4. TANGIBLE FIXED ASSETS AND DEPRECIATION

Operating fixed assets are stated at cost less accumulated depreciation. Capital work-in-progress is stated at cost. Items of fixed assets costing Rs 10,000/- or less are not capitalised and charge off in the year of purchase.

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 written off over its lease term.

The full year's depreciation is charged on additions while no depreciation is charged on assets deleted during the year. Maintenance and normal repairs are charged to income as and when incurred. Gain or loss on sale or retirement of fixed assets is included in income currently.

2.5. INTANGIBLE ASSETS

Intangible assets are stated at cost less accumulated amortisation. Cost in relation in intangible asset is amortised using straight line method spread over a period not exceeding three years.

2.6. INVESTMENTS

AVAILABLE FOR SALE

Investments which are not held for trading or held to maturity 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 include in income.

IN RELATED PARTIES

Investments in related parties are accounted for using cost method of accounting as allowed by International Accounting Standard - 28 "Accounting for investment in associates". Provision is made for impairment loss in the value of investments, if any.

2.7. STORES, SPARES AND LOOSE TOOLS

Stores, spares and loose tools, except items-in-transit, are valued at cost calculated on a first-in-first-out 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 items.

2.8. STOCKS

Stocks, except items in-transit, are valued at the lower of cost and net realisable value. Cost is calculated on a first-in-first-out or specific consignment basis, depending upon their categories.

Stocks-in-transit are stated at invoice value plus other charges accrued thereon to the balance sheet date. The Company assumes title to stocks-in-transit after shipments.

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 vehicles 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.

2.9. TRADE DEBTS

Known bad debts are written off and provision is made for impairment losses.

2.10. Provisions are recognised in the balance sheet where the Company has a legal or constructive obligation as a result of past event, and it is probable that outflow of economic benefits will be required to settle the obligation.

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

2.11. IMPAIRMENT

The carrying amounts of the Company's assets except for inventories and deferred tax 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.

2.12. FINANCIAL INSTRUMENTS

All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These are subsequently measured at fair value, amortised cost or cost, as the case may be and the resulting gain or loss, if any, is included in the profit and loss account/equity in the period in which it arises.

2.13. DERIVATIVE FINANCIAL INSTRUMENTS

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.

2.14. EMPLOYEES RETIREMENT 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. 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. Actuarial gains and losses are accounting for in accordance with the minimum recommended approach under International Accounting Standard - 19, 'Employee Benefits'.

2.15. 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 is higher.

Deferred

Deferred tax is recognised using the liability method, on major temporary differences at the balance sheet 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 extent 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 or subsequently enacted at the balance sheet date.

2.16. FOREIGN CURRENCIES

Foreign currency transactions are converted at the rates of exchange ruling on the dates of those transactions. Monetary assets and liabilities expressed in foreign currencies are translated into Pak rupees at the rates of exchange prevailing on the balance sheet date. Exchange gains and losses are included in profit and loss account currently.

2.17. REVENUE RECOGNITION

Revenue is recognised when goods and 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 the 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 dividends has been established.

2.18. ACCOUNTING FOR COMPENSATED ABSENCES

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.

2.19. 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 Transactions 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.

2.20. WARRANTY OBLIGATIONS

The Company accounts for its warranty obligations on accrual basis.

2.21. CASH AND CASH EQUIVALENT

For the purpose of the cash flow statement, cash and cash equivalents consists of cash in hand and at banks net off short-term running finances.
3. PROPERTY, PLANT AND EQUIPMENT - AT BOOK VALUE
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                                                                        2004        2003
                                                          Notes     (Rupees in thousand)
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Operating fixed assets                                     3.1     1,057,949     862,085
Capital work-in-progress                                   3.7     1,145,503      63,998
                                                                   2,203,452     926,083
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3.1. OPERATING FIXED ASSETS

The following is a statement of operating fixed assets:
===============================================================================================================================
                                                                  Acc. Depr.   * Charge for       * Acc.        Book
                               Cost as                  Cost as          at       the year/    depre. as    value as
             Notes            at Jan. 01,Additions/   at Dec. 31,   Jan. 01         (depre.   at Dece. 31, at Dec. 31      Rate
                                  2004   (deletions)       2004        2004    on deletion)         2004        2004          %
===============================================================================================================================
Leasehold land                  57,871            -      55,083      12,728             918       13,204      41,879   60 Years
                                            (2,788)                                   (442)
Buildings on lease hold
Land          3.4 & 3.5
- Factory                      545,476       57,018     602,494     314,989          48,454     363,443*     239,051      10&20
- Office                         2,063            -       2,063       2,063               -        2,063           -         20
- Test Tracks & other building   7,780        5,723      13,503       6,312           1,438        7,750       5,753         10
Plant and machinery           1,513,255     378,216   1,891,471   1,220,519         184,756   1,405,275*     486,196      25&35
Welding guns                    48,074        8,457      56,531      35,371           7,406      42,777*      13,754         35
Waste water treatment plant     44,928            -      44,928      40,844           1,021       41,865       3,063         25
Permanent & special tools      131,242       13,174     144,416     106,951          13,716     120,667*      23,749      35&40
Dies -              3.6        609,273       56,319     665,592     465,034          71,188     536,222*     129,370      35&40
Jigs & fixtures                256,327        8,006     264,333     209,909          20,749     230,758*      33,575      35&40
Electrical installations        17,105       20,523      37,628      14,995           4,527       19,522      18,106         20
Furniture and fittings          10,162          278      10,440       8,810             326        9,136       1,304         20
Vehicles                       110,953       15,469     106,092      63,690          11,519       60,019      46,073         20
                                           (20,330)                                (15,190)
Airconditioners and refrigerate 17,040        3,990      19,722      14,267           1,316       14,457       5,265         20
                                            (1,308)                                 (1,126)
Office equipment                14,061        3,822      17,883      10,349           1,507       11,856       6,027         20
Computers                       24,072        6,472      27,699      20,766           4,785      22,915*       4,784         50
                                            (2,845)                                 (2,636)
2004                          3,409,682     577,467   3,959,878   2,547,597         373,726    2,901,929   1,057,949
                                           (27,271)                                (19,394)
2003                          3,062,787     376,767   3,409,682   2,218,896         349,858    2,547,597     862,085
                                           (29,872)                                (21,157)
===============================================================================================================================
* includes accumulated impairment loss amounting to Rs. 42,772 million (2003: Rs. 42,772 million).

3.2. DEPRECIATION CHARGE FOR THE YEAR HAS BEEN ALLOCATED AS UNDER
========================================================================================
                                                                        2004        2003
                                                         Notes      (Rupees in thousand)
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Cost of goods manufactured                                25.1       353,852     332,250
Selling and administration expenses                         26        19,874      17,608
                                                                     373,726     349,858
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3.3. THE FOLLOWING ASSETS WERE DISPOSED OFF DURING THE YEAR
=============================================================================================================================================================
                                        Accumulated   Net Book Sale     Profit   Mode of          Particulars of buyers &
Particulars                      Cost   depreciation    value  proceeds (loss)   disposal         Insurance Company
=============================================================================================================================================================
Leasehold land                  2,133          339      1,794    2,844   1,050   Negotiation      Muitiple Autoparts           Plot No. 23, Sector 19 Korangi
                                                                                                  Industries                         Industrial Area, Karachi
Leasehold land                    655          103        552      874     322   Negotiation      Bhawalpur                       A-68, Moria Khan Goth, Main
                                                                                                  Engineering                        Shahra-e-Faisal, Karachi
                                4,788          442      2,346    3,718   1,372
VEHICLES
Suzuki Vehicles                 4,796        3,331      1,465    1,942     477   As per company   Company Employees
                                                                                 Policy
Suzuki Baleno Estate Car        1,562        1,194        368      368           Negotiation      Capt Retd Bashir                        Ex-Company employee
                                                                                                  Ahmed
Suzuki Khyber & Bolan             630          475        155      531     376   Tender           M. Saeed Siddiqui           A-133, Block L, North Nazimabad
                                                                                                                                                      Karachi
Suzuki Baleno                     775          546        229      507     278   Tender           Abdul Aziz Juma                A/64 Ahmed Abdul Ghani Mill,
                                                                                                                                             S.I.T.E, Karachi
Suzuki Baleno                     605          382        223      482     259   Tender           Mohammad Muneer                   Flat No. 29, Bantva Memon
                                                                                                                            Complex, North Nazimabad, Karachi
Suzuki Baleno, Margalla,        3,876        2,850      1,026    2,031   1,005   Tender           Saeed Meer                           Naz Motors-Mistri Khan
                                                                                                  Mehran                     Village Mangho Pir Road, Karachi
Suzuki Mehran, Ravi               741          527        214      490     276   Tender           Ghulam Murtaza                        Naz Motor-Mistri Khan
                                                                                                                             Village Mangho Pir Road, Karachi
Suzuki Baleno                     685          483        202      515     313   Tender           Mohammad Arif                 B/30, Sector 11-C 1, Sir Syed
                                                                                                                                                Town, Karachi
Suzuki Bolan                      260          199         61      196     135   Tender           Rashid Ayub               B-51, Sector 11-A, North Karachi,
                                                                                                                                                      Karachi
Suzuki Margalla, Mehran           755          562        193      621     428   Tender           Waseem Mirza                A-48, Block 2, G Iqbal, Karachi
Suzuki Mehran, Ravi               270          219         51      180     129   Tender           Faisal Mahmood                            35-W, DHA, Lahore
Suzuki Sedan                      507          430         77      426     349   Tender           Zahid Zafar                      C/o Suzuki Oriental Motors
Toyota Hiace Diesel               229          225          4       60      56   Insurance        National Insurance             NIC Building Rafique Shaheed
                                                                                 Claim            corporation                                   Road, Karachi
Suzuki Bolan                      285          230         55      216     161   Tender           Mohammad Yar                      31-Jala Din Road, Mazang,
                                                                                                                                                       Lahore
Suzuki Cars                     2,219        1,534        685      822     137   Negotiation      Company Employees                Under Executive Car Scheme
TCM Fork Lift Truck             2,135        2,003        132    1,485   1,353   Tender           Mr. Ijaz                          Fine Arcade House No. 1/5
                                                                                                                                          Lee Market, Karachi
                               20,330       15,190      5,140   10,872   5,732
AIRCONDITIONERS & REFIRGERATORS
AC & Refirgerators                184          156         28       28       -   Negotiation      Company Employees
AC & Refrigerators              1,124          970        154       53   (101)   Tender           Abdullah Soomro             Hawa Bai Manzil, Timber Market,
                                                                                                                                                      Karachi
                                1,308        1,126        182       81   (101)
COMPUTERS
Personal Computers              1,663        1,519        144       75    (69)   Negotiation      Company Employees and Printers
Personal Computers              1,182        1,117         65        7    (58)   Tender           Abdullah Soomro               wa Bai Manzil, Timber Market,
                                                                                                                                         Karachi and Printers
                                2,845        2,636        209       82   (127)
2004                           27,271       19,394      7,877   14,753   6,876
2003                           29,872       21,157      8,715   12,568   3,853
=============================================================================================================================================================
3.4. 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 number 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 plot Nos 16 and 21 are registered in the name of Sindh 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 respect 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.

3.5. The immovable assets lying at West Wharf have been impaired by the action of KPT as explained in note 3.4 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.

3.6. Certain dies of book value Rs 6.871 million (2003: Rs 10.932 million) were lying vendor for production of components to be supplied to the Company.

3.7. CAPITAL WORK-IN-PROGRESS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Advance for capital expenditure                                       57,503      14,165
Building                                                             259,107       5,887
Plant and machinery                                                  828,893      43,946
                                                                   1,145,503      63,998
========================================================================================
4. INTANGIBLE ASSETS
========================================================================================
                                                                        2004        2003
                                                         Note       (Rupees in thousand)
========================================================================================
Designing fee for development of a component
Cost at beginning of the year                                         40,267           -
Addition during the year                                                   -      40,267
Cost at end of the year                                               40,267      40,267
Less: Accumulated amortisation at
 beginning of the year                                                13,422           -
Amortisation for the year                                 25.1        13,422      13,422
Accumulated amortisation at end of the year                           26,844      13,422
Book value                                                            13,423      26,845
========================================================================================
4.1.

The above intangible asset is amortised over three years.
5. INVESTMENTS IN RELATED PARTIES -AT COST
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
QUOTED
Suzuki Motorcycles Pakistan Limited an associated company 
 18 million (2003: 18 million) 
 fully paid ordinary shares of Rs 10/- each representing 41% holding.
Market value as at December 31, 2004 Rs. 477 million
 (2003: Rs. 292.5 million)                                            28,800      28,800
UNQUOTED
Arabian Sea Country Club Limited an associated company 
 500,000 (2003: 500,000) full paid ordinary 
 shares of Rs 10/- each                                                5,000       5,000
Equity held 6.45% (2003: 6.45%)
Value based on net assets as at June
 30, 2004 Rs 2.945 million
Less: Provision for impairment
 in the value of investment                                            5,000       5,000
                                                                           -           -
                                                                      28,800      28,800
Automotive Testing & Training Centre
(Pvt.) limited (AT & TC) - an associated company
75,000 (2003: 75,000) fully paid
 ordinary shares of Rs 10/- each                                         750         750
Equity held 4.17% (2003: 5%)
Value based on net assets as at
 June 30, 2004 Rs 0.526 million
Less: Provision for impairment in
 the value of investment                                                 750         750
                                                                           -           -
                                                                      28,000      28,800
========================================================================================
6. LONG-TERM LOANS-CONSIDERED GOOD
========================================================================================
                                                                        2004        2003
                                                          Notes     (Rupees in thousand)
========================================================================================
Loans to employees                                         6.1         3,940       3,947
Less: Receivable within one year                            12         1,867       2,196
                                                                       2,073       1,751
========================================================================================
6.1. These represent loans given to employees, against guarantee of two employees of the Company. These loans are repayable in thirty-six equal monthly installments free of any financial charges.
7. LONG-TERM DEPOSITS AND PREPAYMENTS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Deposits                                                               5,019       5,069
Prepayments                                                              959         462
                                                                       5,978       5,531
========================================================================================
8. DEFERRED TAX ASSETS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
DEBIT BALANCE ARISING ON ACCOUNT OF:
Provision for customs duty and sales tax                             149,500     120,000
Provision for compensatory leave                                       4,000       5,000
Difference between accounting and tax depreciation                     7,500      19,000
                                                                     161,000     144,000
========================================================================================
9. STORES, SPARES AND LOOSE TOOLS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Stores                                                                23,310      17,970
Spares                                                                13,580      13,035
Loose tools                                                           22,736      12,884
                                                                      59,626      43,889
Less: Provision for slow moving and obsolete items                    18,965      20,212
                                                                      40,661      23,677
========================================================================================
10. STOCK IN TRADE
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Raw material and components [including items in transit
Rs 1,497.383 million (2003: Rs 743.763 million)]                   2,896,746   1,959,757
Less: Provision for obsolete items                                     9,485      10,509
                                                                   2,887,261   1,949,248
Work-in-process                                                       73,407      36,109
Finished goods                                                       736,154     237,571
Trading stocks                                                        89,690      60,475
Less: Provision for slow moving and obsolete items                    21,235      24,990
                                                                      68,455      35,485
                                                                   3,765,277   2,258,413
========================================================================================
10.1. Of the aggregate amount, stocks worth Rs 210.794 million (2003: Rs 15.4 million) were in the custody of dealers and vendors.
11. TRADE DEBTS - CONSIDERED GOOD
========================================================================================
                                                                        2004        2003
                                                         Note       (Rupees in thousand)
========================================================================================
Due from Government Agencies                                         122,190      64,369
Others                                                    11.1        18,189       9,688
                                                                     140,379      74,057
========================================================================================
11.1. Includes Rs 1.951 million (2003: nil) receivable from associated company, Arabian Sea Country Club Limited. The maximum aggregate balance at the end of any month is Rs 2.508 million (2003: nil).
12. LOANS AND ADVANCES
========================================================================================
                                                                        2004        2003
                                                            Notes   (Rupees in thousand)
========================================================================================
CONSIDERED GOOD
Current portion of loans to employees                        6         1,867       2,196
ADVANCES TO:
- Employees                                                            2,078       2,105
- Provident fund                                                           -           1
- Gratuity fund                                                            -       3,727
- Suppliers / vendors                                     12.1        21,539      14,726
                                                                      25,484      22,755
Considered doubtful - advances to suppliers / vendors                  8,000      12,000
                                                                      33,484      34,755
Less: Provision for doubtful advances to suppliers / vendors           8,000      12,000
                                                                      25,484      22,755
========================================================================================
12.1. Includes advances to vendors of Rs 4.278 million, which carry mark-up ranging from 14% - 18% per annum.
13. TRADE DEPOSITS AND PREPAYMENTS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Prepayments                                                           28,492       6,925
Trade deposits                                                         1,940         930
                                                                      30,432       7,855
========================================================================================
14. OTHER RECEIVABLES - CONSIDERED GOOD
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Due from Suzuki Motor Corporation, Japan - holding company            11,102       9,816
Due from vendors for material / components supplied                    3,868       3,703
Others                                                                 4,518       4,537
                                                                      19,488      18,056
========================================================================================
14.1. The maximum aggregate amount due from the holding company at the end of any month during the year was Rs 15.094 million (2003: Rs 13.996 million).
15. INVESTMENT - AVAILABLE FOR SALE
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Atlas Income Fund - quoted
196,607 units (2003: nil) having
 a face value of Rs 500 each                                          98,303           -
Amount of premium paid on acquisition                                  1,697           -
                                                                     100,000           -
Gain arising on remeasurement to fair value                            1,365           -
                                                                     101,365           -
========================================================================================
15.1. The above investment is remeasured to fair value using market value as at December 31, 2004.
16. CASH AND BANK BALANCES
========================================================================================
                                                                        2004        2003
                                                   Notes            (Rupees in thousand)
========================================================================================
Cash in hand                                                           3,109       1,615
Cheques in hand                                                            -      66,959
CASH AT BANK:
On deposit                                          16.1 & 16.2    6,538,986   5,527,202
In a special deposit account                        16.2 & 16.3       62,304      58,504
In current accounts                                        16.1       89,597      78,472
                                                                   6,690,887   5,664,178
                                                                   6,693,996   5,732,752
========================================================================================
16.1. The above balance include book overdraft amounting to Rs 110.431 million (2003: Rs 101.383 million).

16.2. The mark-up on funds placed on deposit accounts ranges from 3% to 5.1% (2003: 1% to 3%) per annum.

16.3. The special account is maintained in respect of security deposits (note 19) in accordance with the requirements of Section 226 of the Companies Ordinance, 1984.
17. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
44,284,117 (2003: 44,284,117) Ordinary shares of Rs 10/- each
 fully paid in cash                                                  442,841     442,841
2,800,000 (2003: 2,800,000) Ordinary shares of Rs 10 each fully
 paid-up for consideration other than cash                            28,000      28,000
2,047,135 (2003: 2,047,135) Ordinary shares
 of Rs 10/- each  issued as fully paid bonus shares                   20,471      20,471
                                                                     491,312     491,312
========================================================================================
17.1. At December 31, 2004 Suzuki Motor Corporation, Japan (holding company) held 35,909,838 Ordinary shares of Rs 10/- each (2003: 35,909,838 Ordinary shares).
18. RUNNING FINANCE

The facilities for running finances available from banks amounted to Rs 500 million (2003: Rs 1,668 million). These facilities are secured by hypothecation charge on stocks.

The mark-up rates are base rate plus 150 basis points with a floor of 4.5% per 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. These facilities are for one year and are renewable on agreed terms.
19. SECURITY DEPOSITS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Repayable on demand                                                   59,454      55,654
Other deposits                                                         2,850       2,850
                                                                      62,304      58,504
========================================================================================
The above deposits are not liable to financial charges.
20. TRADE AND OTHER PAYABLES
========================================================================================
                                                                        2004        2003
                                                         Notes      (Rupees in thousand)
========================================================================================
Creditors                                                            699,736     380,544
ACCRUED LIABILITIES:
Accrued expenses                                                     161,022      88,856
Royalties and technical fee payable to Suzuki Motor
Corporation, Japan - holding company                                 198,214     125,479
Mark-up on waiting for delivery of vehicles                           50,836      25,891
Dealers' commission                                                  178,362     134,605
Workers' profit participation fund                        20.1       114,911     128,010
Workers' welfare fund                                                 45,817      52,609
                                                                     749,162     555,450
Gratuity fund                                             .2.1         2,705           -
Unclaimed dividend                                                     2,759       1,287
OTHER LIABILITIES:
Retention money                                                       16,895       4,476
Others                                                                15,669       6,478
                                                                      32,564      10,954
                                                                   1,486,926     948,235
========================================================================================
20.1. WORKERS' PROFIT PARTICIPATION FUND
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Balance at beginning of the year                                     128,010      70,892
Mark-up on funds utilised in
 the company's business                                                   22       3,452
                                                                     128,032      74,344
Allocation for the year                                              114,911     128,010
                                                                     242,943     202,354
Less: Paid during the year                                           128,032      74,344
Balance at end of the year                                           114,911     128,010
========================================================================================
20.2. EMPLOYEES GRATUITY FUND

The latest actuarial valuation was carried out as at December 31, 2004 using the Projected Unit Credit Method, according to which present vale of gratuity obligation and fair value of gratuity assets were Rs 100.972 million and Rs 128.458 million respectively. The rate of 8% was assumed for discount/return on investment and increase in salaries.

20.2.1. AMOUNT RECOGNISED IN THE BALANCE SHEET
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Present value of defined benefit obligation                        (100,972)   (101,231)
Fair value of plan assets                                            128,458     115,772
Un-recognised actuarial gains                                       (30,191)    (10,814)
                                                                     (2,705)     (3,727)
========================================================================================
20.2.2. EXPENSE RECOGNISED IN THE PROFIT AND LOSS ACCOUNT
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Current service cost                                                   6,877       6,837
Interest cost                                                          8,098       8,215
Expected return on plan assets                                      (10,419)    (10,875)
Actuarial gain                                                             -     (1,381)
                                                                       4,556       2,796
========================================================================================
20.2.3. MOVEMENT IN NET (LIABILITY)/ASSET RECOGNISED IN THE BALANCE SHEET
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Opening balance - asset                                                3,727       3,670
Expense recognised in the financial statements                       (4,556)     (2,796)
Contribution (received)/paid during the year                         (1,876)       2,853
                                                                     (2,705)       3,727
========================================================================================
20.2.4. ACTUAL RETURN/LOSS ON PLAN ASSETS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Expected return on plan assets                                        10,419      10,875
Actuarial gain/(loss) on plan assets                                  16,741    (15,792)
Actual return/(loss) on plan assets                                 (27,160)     (4,917)
========================================================================================
21. ADVANCES FROM CUSTOMERS AND DEALERS
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
                                                                   5,288,263   3,178,181
========================================================================================
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 3 months treasury bills of last three months.
22. PROVISION FOR CUSTOM DUTIES AND SALES TAX
========================================================================================
                                                                        2004        2003
                                                     Notes          (Rupees in thousand)
========================================================================================
Provision for custom duties and sales tax             22.1 & 22.4    426,289     343,865
========================================================================================
22.1. Includes Rs 69.455 million (2003: Rs 69.455 million) being provision against various demands raised by the custom authorities on account of alleged short payment of custom duties, additional surcharge on goods overstayed in bond and custom duties on loading for association charges in respect of material imported in prior years.

The company's appeals against the orders passed in above cases are pending in Customs Appellate Tribunal/Sindh High Court. In view of the inherent delays that are associated and the element of uncertainty inherent in legal matters, provisions have been made as a matter of prudence.

22.2. Includes Rs 192.747 million (2003: Rs 110.323 million) being provision for custom duties and sales tax in respect of certain components of Suzuki Baleno imported during the current and last year.

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 consignments of such components have been cleared from custom after payment of custom duty at "auto-parts" rate of duty on the basis of undertaking/bank guarantee given by the Company that the Company would pay the differential amount of duty if the Engineering Development Board (EDB) conforms the interpretation of custom authorities.

EDB has been approached by the custom authorities for clarification. Pending such confirmation by EDB, the Company has worked out the differential amount of duty for which provision has been made in the financial statements as a matter of prudence.

22.3. Includes Rs 164.087 million (2003: Rs 164.087 million) being provision for custom duties and sales tax on discount allowed by SMC Japan in the FOB price of CKD imported during prior years.

Custom authorities have 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.

The company has contended before the custom authorities and is of the view that these are normal trade discounts. The case are decided against the company by the Assistant Collector.

The company's appeal against the decision of Assistant Collector, was dismissed by the Collector Appeals. The Company is in the Process of filing said appeal before the Tribunal.

Apprehending such demand from the custom authorities for the period October 2000 to March 2002 as well, the Company ahs 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 of prudence in view of inherent uncertainties associated in such matters.

22.4. THE MOVEMENT IN PROVISION FOR CUSTOM DUTIES AND SALES TAX IS AS UNDER
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Balance brought forward                                              343,865     298,058
Payment made during the year                                               -     (7,157)
Reversal of provision                                                      -     (3,038)
Provision during the year                                             82,424      56,002
                                                                     426,289     343,865
========================================================================================
23. COMMITMENTS

23.1. Capital expenditure contracted for but not incurred amounted to Rs 195.065 million (2003: Rs 44.88 million).

23.2. The facilities for opening letters of credit as at December 31, 2004 amounted to Rs.1,832 million (2003: Rs 2,205 million) of which the amount remaining unutilised at the year end was Rs 1,005 million (2003: Rs 1,545 million).
24. NET SALES
========================================================================================
                                                                        2004        2003
                                                         Note       (Rupees in thousand)
========================================================================================
MANUFACTURED GOODS:
Turnover                                                  24.1    28,363,754  21,510,749
Less: Sales tax                                                    3,695,611   2,802,070
Discounts                                                                  -          17
                                                                   3,695,611   2,802,087
                                                                  24,668,143  18,708,662
Less:  Commission paid to selling agents                             471,980     367,852
                                                                  24,196,163  18,340,810
TRADING STOCKS:
Turnover                                                             307,183     167,734
Less: Sales tax                                                       41,380      24,324
                                                                     265,803     143,410
                                                                  24,461,966  18,484,220
========================================================================================
24.1.

This includes export sales of Rs 57.720 million (2003: Rs 28.506 million).
25. COST OF SALES
========================================================================================
                                                                        2004        2003
                                                         Note       (Rupees in thousand)
========================================================================================
MANUFACTURED GOODS:
Finished goods at beginning of the year                              237,571     366,712
Cost of goods manufactured                                25.1    22,343,439  15,605,047
Export expenses                                                       13,272       5,500
                                                                  22,594,282  15,977,259
Less: Finished goods at end of the year                              736,154     237,571
                                                                  21,858,128  15,739,688
TRADING STOCKS:
Stocks at beginning of the year                                       34,485      30,882
Purchases during the year                                            220,145     111,781
                                                                     255,630     142,663
Less: Stocks at end of the year                                       68,455      35,485
                                                                     187,175     107,178
                                                                  22,045,303  15,846,866
========================================================================================
25.1. COST OF GOODS MANUFACTURED
========================================================================================
                                                                        2004        2003
                                                          Notes     (Rupees in thousand)
========================================================================================
Raw materials and components at beginning of the year              1,949,248   1,496,107
Purchases during the year                                  1.1    21,800,616  14,912,561
                                                                  23,749,864  16,408,668
Less: Raw materials and components
 at end of the year                                                2,887,261   1,949,248
Raw materials and components consumed                             20,862,603  14,459,420
Stores and spares consumed                                            85,043      62,807
Reversal of provision for
 slow moving and obsolete stores, spares
 and loose tools                                                     (1,247)     (2,205)
Fuel and power                                                        82,403      67,273
Salaries, wages and other benefits                         1.2       290,498     239,763
Rent, rates and taxes                                                  9,085       1,592
Travelling and training                                               20,795       9,479
Insurance                                                             14,938      10,457
Repairs and maintenance                                              106,936      85,712
Royalties and technical fee                                          359,465     223,341
Depreciation and impairment loss                           3.2       353,852     332,250
Amortisation of intangible asset                             4        13,422      13,422
Provision for customs duties and sales tax - net                      82,424      52,964
Refund of pre-shipment inspection charges                               (11)     (5,561)
Conveyance and transportation                                         63,960      52,634
Communications                                                         3,041       2,384
Hired security guards services                                         3,272       3,267
Compensation to vendor and supplier                                   12,800         339
Local development and promotional expenses                             9,937       2,667
Printing and stationery                                                4,015       2,504
Others                                                                 3,506       1,227
                                                                   1,518,134   1,156,316
                                                                  22,380,737  15,615,736
Add: Work-in-process at beginning of the year                         36,109      25,420
                                                                  22,416,846  15,641,156
Less: Work-in-process at end of the year                              73,407      36,109
                                                                  22,343,439  15,605,047
========================================================================================
25.1.1. Purchases are stated net of proceeds from the sale of packing materials Rs 69.474 million (2003: Rs 58.962 million).

25.1.2. Includes Rs 2.723 million (2003: Rs 1.688 million) in respect of defined benefit gratuity fund and Rs 3.108 million (2003: Rs 3.205 million) in respect of defined contributory provident fund.
26. ADMINISTRATIVE EXPENSES
========================================================================================
                                                                        2004        2003
                                                         Notes      (Rupees in thousand)
========================================================================================
Salaries, wages and other benefits                        26.1       102,673      87,762
Travelling and training                                                9,906      10,458
Hired security guards services                                         2,233       2,212
Rent, rates and taxes                                                  5,345       4,417
Utilities                                                              7,366       7,021
Insurance                                                              4,708       4,053
Repairs and maintenance                                                7,376       3,532
Depreciation                                               3.2        19,874      17,608
Auditors' remuneration                                    26.2         1,090       1,138
Legal and professional charges                                         3,756       3,701
Conveyance and transportation                                          7,972       6,137
Entertainment                                                          1,120         564
Printing and stationery                                                3,107       3,918
Communications                                                         4,646       4,556
Directors fees                                                            23          33
Donations - Relief goods for flood affectees of Sindh                      -         994
Reversal of provision for doubtful advances                          (4,000)           -
Others                                                                 1,577         976
                                                                     178,772     159,080
========================================================================================
26.1. Includes Rs 1.833 million (2003: Rs 1.108 million) in respect of defined benefit gratuity fund and Rs 1.910 million (2003: Rs 1.933 million) in respect of defined contributory provident fund.

26.2. AUDITORS' REMUNERATION
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Audit fee                                                                450         450
Fee for half yearly review, special
 certifications and advisory services                                    610         656
Out of pocket expenses                                                    30          32
                                                                       1,090       1,138
========================================================================================
27. SELLING EXPENSES
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Advertising and sales promotion                                       70,941      51,187
Free service and warranty claims                                      15,106      12,143
Royalty of spare parts                                                 3,058       1,226
                                                                      89,105      64,556
========================================================================================
28. OTHER OPERATING INCOME
========================================================================================
                                                                        2004        2003
                                                          Note      (Rupees in thousand)
========================================================================================
Mark-up on cash deposits with banks                                  161,535     170,954
Net profit disposal of fixed assets                        3.3         6,876       3,853
Miscellaneous income                                                  17,721       9,015
Net exchange gain                                                      3,353           -
                                                                     189,485     183,822
========================================================================================
29. FINANCIAL CHARGES
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Mark-up on waiting for delivery of vehicles                           34,423      27,744
Mark-up on running finance                                                 -          16
Mark-up on workers' profit participation fund                             22       3,452
Bank charges                                                           5,615       4,185
Net exchange loss                                                          -       1,936
                                                                      40,060      37,333
========================================================================================
30. WORKERS' WELFARE FUND
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
For the current year                                                  44,500      52,000
For the prior years'                                                 (1,016)     (1,406)
                                                                      43,484      50,594
========================================================================================
31. TAXATION
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
FOR THE YEAR:
- Current                                                            772,000     888,000
- Deferred                                                          (17,000)    (49,140)
                                                                     755,000     838,860
FOR PRIOR YEARS'
- Current                                                           (18,756)    (23,588)
- Deferred                                                                 -     (3,860)
                                                                    (18,756)    (27,448)
                                                                     736,244     811,412
========================================================================================
31.1. RECONCILIATION OF TAX CHARGE FOR THE YEAR
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Accounting profit                                                  2,139,816   2,381,603
Corporate tax rate                                                       35%         35%
Tax on accounting profit at applicable rate                          748,936     833,561
Tax effect of income assessed
 under Presumptive Tax Regime                                          5,047         522
Tax effect of expenses that are not allowable
 in determining taxable income                                         1,017       4,777
Net effect of income tax
 provision relating to prior years                                  (18,756)    (23,588)
Tax effect of adjustments in respect
 of deferred taxation of prior years                                       -     (3,860)
                                                                     736,244     811,412
========================================================================================
32. BASIC EARNINGS PER SHARE (EPS)
========================================================================================
                                                                        2004        2003
========================================================================================
Net profit for the year (Rupees)                                   1,403,572   1,570,191
Number of ordinary shares (in 000's) issued
 and subscribed at the end of the year                                49,131      49,131
                                                                                (Rupees)
Basic earnings per share                                               28.57       31.96
========================================================================================
32.1.

Basic earnings per share has no dilution effect.
33. CASH GENERATED FROM OPERATIONS
========================================================================================
                                                                        2004        2003
                                                         Note       (Rupees in thousand)
========================================================================================
Profit before taxation                                             2,139,816   2,381,603
ADJUSTMENTS FOR NON CASH CHARGES AND OTHER ITEMS:
Depreciation                                                         373,726     349,858
Amortisation of intangible asset                                      13,422      13,422
Provision for custom duties and sales tax                             82,424      52,964
Profit on disposal of fixed assets                                   (6,876)     (3,853)
Mark-up on cash deposits with banks                                (161,535)   (170,954)
Financial charges                                                     40,060      31,212
                                                                     341,221     272,649
Working capital changes                                   33.1     1,512,363   (826,244)
                                                                   3,993,400   1,828,008
========================================================================================
33.1. WORKING CAPITAL CHANGES
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
(INCREASE)/DECREASE IN CURRENT ASSETS:
Stores, spares and loose tools                                      (16,984)     (6,743)
Stock in trade                                                   (1,506,864)   (339,292)
Trade debts                                                         (66,322)    (60,667)
Loans and advances                                                   (2,729)       9,159
Trade deposits and prepayments                                      (22,577)       3,032
Other receivables                                                    (1,432)      14,991
Sales tax adjustable - considered good                               196,423   (356,237)
                                                                 (1,420,485)   (735,757)
INCREASE/(DECREASE) IN CURRENT LIABILITIES
Bills payable                                                        306,092   (979,405)
Security deposits                                                      3,800       2,950
Trade and other payables                                             512,274     253,970
Advances from customers                                            2,110,682     631,998
                                                                   2,932,848    (90,487)
                                                                   1,512,363   (826,244)
========================================================================================
34. 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 related parties, amount due from executives and remuneration of directors and executives are disclosed in the relevant notes to the financial statements.

Other material transactions with related parties are given below:
========================================================================================
                                                                        2004        2003
                                                                    (Rupees in thousand)
========================================================================================
Purchases of components                                           10,324,491   6,999,319
Purchases of fixed assets                                             53,799     162,045
Sales including exports                                               45,183      25,159
Royalties and technical fee                                          362,523     224,567
Sub-assembly revenues and other claims                                 3,921       2,018
========================================================================================
The above transactions with related parties were entered into at arm's length determined in accordance with approved valuation method.
35. PLANT CAPACITY AND ACTUAL PRODUCTION
========================================================================================
                                                                        2004        2003
                                                                       (Number of Units)
========================================================================================
Plant capacity of all models (double shifts basis)                    60,000      50,000
Actual production                                                     66,369      49,155
========================================================================================
The plant capacity was enhanced by hiring additional manpower, adjustment in conveyor speed and additional facilities. By extra hours over the double shift, actual production exceeded the capacity.
36. NUMBER OF EMPLOYEES

The Company had 584 employees at the year-end (2003: 569).
37. REMUNERATION OF EXECUTIVES, DIRECTORS AND CHIEF EXECUTIVE

The aggregate amounts charged in the financial statements for remuneration, including benefits, to the chief executive, directors and executives of the Company are given below:
=========================================================================================================
                                    December 2004                                 December 2004
                                                          Chief                                     Chief
                               Executives Directors   Executive  Executives           Directors Executive
                                                               (Rupees in thousand)
=========================================================================================================
Managerial remuneration             8,412     8,116       3,840      5,470                7,534     4,978
Directors fees                          -        23           -          -                   33         -
Retirement benefits                 1,097       183           -        767                  165         -
Utilities and upkeep                7,425       120          72      4,611                  432       200
Telephone                             588         -           -        402                    -         -
Entertainment                           -         -           -         44                    -         -
                                   17,522     8,442       3,912     11,294                8,164     5,178
Number of persons                      11         4           1          7                    4         1
=========================================================================================================
37.1. The chief executive, directors 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.

37.2. Due to amendment in fourth schedule of Companies Ordinance 1984, number of executives in the corresponding figure, has changed from 137 to 7 and their remuneration from Rs. 66.822 to Rs. 11.294 million.
38. FINANCIAL ASSETS AND LIABILITIES

The following are the financial assets and financial liabilities and have been recognised in the balance sheet at amortised costs because they are not held for trading. These financial assets and financial liabilities may be subject to interest rate / mark-up and credit risk.
===========================================================================================================================================
                                         Interest/Markup bearing                Non Interest bearing
                                          Maturity upto one year 
                                                                       Maturity    Maturity   Sub-Total                               Total
                                                                       Upto one    after one
                                           2004        2003                 year       year        2004        2003        2004        2003
                                                              (Rupees in thousand)
===========================================================================================================================================
Financial Assets
Investments                                   -           -              101,365     28,800     130,165      28,800     130,165      28,800
Loans & advances                              -           -                1,867      2,073       3,940       7,675       3,940       7,675
Deposits                                      -           -                1,940      5,019       6,959       5,999       6,959       5,999
Trade debts                                   -           -              140,379          -     140,379      74,057     140,379      74,057
Accrued income on bank deposits               -           -               55,858          -      55,858      46,941      55,858      46,941
Other receivables                             -           -               17,577          -      17,577      17,535      17,577      17,535
Cash & bank balances                  6,601,290   5,585,706               92,706          -      92,706     147,046   6,693,996   5,732,752
                                      6,601,290   5,585,706              411,692     35,892     447,584     328,053   7,048,874   5,913,759
Financial Liabilities
Bills payable                                 -           -              656,507          -     656,507     350,415     656,507     350,415
Security Deposits                             -           -               62,304          -      62,304      58,504      62,304      58,504
Trade and other payables                      -           -            1,326,198          -   1,326,198     767,616   1,326,198     767,616
Advances from customers               5,288,863   3,178,181                    -          -           -           -   5,288,863   3,178,181
                                      5,288,863   3,178,181            2,045,009          -   2,045,009   1,176,535   7,333,872   4,354,716
===========================================================================================================================================
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.
39. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair value except where it is separately disclosed in the notes to the financial statements.
40. CREDIT RISK AND CONCENTRATION OF CREDIT RISK

Credit risk represents the accounting loss that would be recognised at the reporting date if the counter part fails completely to perform as contracted. The Company does not have any significant exposure to any individual customer or vendor.

To reduce the exposure to credit risk the Company obtains insurance guarantee from the suppliers, security deposits from the dealers and generally retains the title till final recovery of debts.
41. FOREIGN EXCHANGE RISK MANAGEMENT

Foreign currency risk arises mainly where payables exist due to the transactions with foreign undertakings. Payables to be matured after 30 days are covered through foreign exchange contracts.
42. DATE OF AUTHORISATION FOR ISSUE

The financial statements have been authorised for issue by the Board of Directors of the Company in its meeting held on March 25, 2005.
43. CORRESPONDING FIGURES

Corresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of comparison.

Significant reclassifications are as follows:

Tangible fixed assets has been reclassified and shown as property, plant and equipment.

Long term loans, deposits and prepayments has been bifurcated between long term loans and long term deposits and prepayments.

Loan, advances, trade deposits and prepayments within current assets have been bifurcated between loans and advances, and trade deposits and prepayments.

Creditors, accrued and other liabilities has been reclassified and shown as trade and other payables.

Mark-up on waiting for delivery of vehicles has been reclassified from creditors, accrued and other liabilities and shown separately in notes to the financial statements.

Administration and selling expenses has been bifurcated and shown separately.

Remuneration of executives has been restated due to amendment in the definition of executive.

The above changes have been made to comply with the new disclosure requirements arising on account of amendments in the fourth schedule to the Companies Ordinance, 1984.

In addition to the above, comparative information has also been restated in order to comply with the change in accounting policy as explained in note 2.3.
44. STOCK DIVIDEND

In their meeting held on March 25, 2005, the Board of Directors of the Company have proposed to issue Bonus Shares @ 10% (2003: Nil). The approval of the members for the above mentioned issue of bonus shares will be obtained at the Annual General Meeting to be held on April 27, 2005. The above appropriation has not been recognised in these financial statements as explained in note 2.3.
45. GENERAL

Figures in these financial statements have been rounded off to the nearest thousand rupees.

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