HASHOO GROUP OF COMPANIES

Introduction To Hashoo Group

Hashoo Group of Companies was established under the leadership of Mr. Sadruddin Hashwani, a dynamic businessman with vision and values. In a period of three decades, he, through his dedication and commitment to the profession, has transformed the Group into a leading business power house of Pakistan. The Group is well known for its forward-looking approach and high standards of quality and integrity. Starting with cotton trading, Hashoo Group of Companies today have in their fold, as owners and operators of chain of Pearl Continental Hotels with presence in all big cities of Pakistan and Marriott Hotels at Karachi and Islamabad. Besides hospitality industry, the Group is engaged in oil / gas exploration and production, information technology, mining, ceramics, pharmaceuticals, tourism, travel and real estate.

The Group dominates in the hospitality industry of Pakistan through Pakistan Services Limited or PSL which owns and manages Pearl Continental and Marriott chain of hotels. In addition to existing hotels, Pearl Continental Hotel Peshawar is being expanded and new hotels are being built in Muzaffarabad and Gwadar, the futuristic port city of Pakistan. Plans are in offing for new deluxe hotel cum convention centre tower in Lahore. Large-scale modernization of existing hotels is also in progress as a part of the continuing efforts to remain at the cutting edge of the hospitality business.

Corporate profile / Information

Pearl continental Hotels, a chain owned and operated by Pakistan Services Limited, sets the international standards for quality hotel accommodation in South Asia. The company manages 5 luxury hotels at Karachi, Lahore, Rawalpindi, Peshawar and Bhurban; comprising 1301 rooms with registered office in Karachi, Pakistan.

Board of DirectorsMr. Sadruddin HashwaniMr. Murtaza HashwaniMs. Sarah Hashwani

Mr. Vazir Ali F.MohammadMr. Syed Sajid Ali

Mr. Syed Aslam AliMr. Shiraz Noordin

Legal Advisor

M/s Liaquat Merchant & Associates

Credit Rating Agency

JCR-VIS Credit Rating Company Limited

Audit CommitteeMr. Sadruddin Hashwani

Ms. Sarah HashwaniMr. Vazir Ali F.Mohammad

Mr. Syed Sajid Ali

Instrument Rating (TFCs)

A-(A-Minus)

Compensation Committee

Mr. Sadruddin HashwaniMs. Sarah Hashwani

Mr. Vazir Ali F.Mohammad

Bankers

Allied Bank LimitedFaysal Bank LimitedHabib Bank LimitedKASB Bank Limited

Mybank LimitedNational Bank of Pakistan

PICIC Commercial Bank LimitedSaudi Pak Commercial Bank Limited

Standard Chartered BankThe Bank of KhyberThe Bank of PunjabUnion Bank Limited

Human Resource andRecruitment CommitteeMr. Sadruddin HashwaniMr. Murtaza Hashwani

Mr. Vazir Ali F.MohammadMr. Shiraz Noordin

Registered OfficeA-9,Mohammad Ali Bogra Road,

Bath Island ,Karachi, Pakistan.Tel:0092-21-5872941-4Fax:0092-21-5879872-4

www.pchotels.comwww.pchotels.biz

www.pchotels.com.pkwww.hashoogroup.com.pk

Chief Financial Officier

Mr.Shiraz Noordin

Auditors

Mr.Anjum Asim Shahid RahmanChartered Accountant

Member ofGrant Thornton

Company Secretary

Mr. Syed Masud Arif

Strategic Objectives

Sustain potential market share through managed Average Daily Rate Continue achieving sales growth to support long term plan. Ensure successful completion of all expansion projects. Reinforce all areas of security risks to company’s assets and guests Seek improvement in employee’s competence and enhancing performance

goals.

Hospitality

The gleam and sparkle of the Pearl welcomes you with open arms. The guiding principle of the Pearl Continental chain of luxury hotels and their array of restaurants in Karachi, Lahore, Rawalpindi, Bhurban and Peshawar is the same: guest is always right.

PC hotels are owned and operated by Pakistan Services Limited which prizes traditional warmth, hospitality and top-class service above everything else. Pakistanis are traditionally very hospitable.

In PC one doesn’t believe in “It is better to try and fail than never to have tried at all”. Whole drills have been developed to ensure that we don’t fall short of expectations. For us the supreme consideration is client’s comforts. It is not just the magnitude of hospitality that is outstanding; the quality is superb as well.

Economic environment

Pakistan’s economy showed steady growth during 2005-06 despites extraordinary upward surge in the oil prices. The holding of economy on its own against this serious handicap and the aftermath of developing earthquake of October 8 th, 2005, which demolished the entire infrastructure in the affected areas of Pakistan and Azad Jammu & Kashmir, is very impressive. With a figure of 6.6% in 2005-06 Pakistan’s economy has grown at an average of about 7% per annum during the last four years, thus joining the ranks of fastest growing economies of the Asian, region the economic growth momentum that Pakistan has sustained for the last four years underpinned by dynamism in industry, agriculture & services sectors and the emergence of a new investment cycle with investment rate reaching new height of 20% of GDP.

There were several remarkable achievements during the FY 2005-2006, which are worth highlighting. The per capita income has increased from $742 (in 2004-2005) to $ 847 showing a gain of 14 % and overall increased of 46% in the last three yrs. The average rate of inflation during the FY06 was 7.9%, 1.4% lower than in FY05. The public debt to GDP ratio, which was 85% in 1999-2000, has declined sharply to 54.7% in 2005-06 _ which amounts to reduction of almost 30% in debt burden in just six years. This performance alone can be taken as a very significant and remarkable achievement of the Government.

Business Review

The present favourable economic scenario has contributed towards the remarkable health of PSL during the year. Taking into account the sustained national economic growth and government policies that are fuelling the growth, the management determined that it was the perfect time to poise the PSL for benefiting from better environment .It has redoubled its efforts to consolidate and strengthen the existing assets of PSL through modernization, expansion wherever possible and addition of new machinery, equipment and systems. The IT infrastructure of the PSL properties is constantly being upgraded. New information highways have been laid in the

properties and these combined with latest hardware and software facilitates rapid exchange of data and information.

Financial Review

The year 2005-2006 has showed a sound and healthy financial picture of your company. Complete focus and concentration have been given to every revenue generating activity and considerable growth is reported in almost every notable sector. Formulation of optimal business practices and their strict execution by the company employees has resulted in:-

29% increase in total revenues. 39% higher gross profit as compared to the last year. Profit after tax goes up to Rs.753 million from Rs.257 million. Earning per share goes up to Rs.23.16 from Rs.7.91.

Room Revenue

Room revenue is the highest revenue generating unit and its contribution counts the most. The hotels have achieved an average occupancy of 72% with average daily room rate of Rs 6726 with increased revenue of Rs 693 million, resulting in 43% increased in terms of percentage as compared to last year.

Food and Beverages Revenue

Another area in which our performance is heavily based is food and beverage revenue and stepping upwards in this area reflects strong company portfolio. Our tradition of not making compromise on quality is very dear to us and that has made us the foremost choice of all quality conscious people. The company capitalizing on this area has recorded a growth of 17% over corresponding period last year and the revenue stays at Rs.1715 million. Liquidity Position

The performance of your company on the ground of cash management has reflected through the liquidity ratio. Current ratio at the year end works out 1.22:1 with net current assets of Rs 325 million.

Future Prospects

During the last four years, Pakistan has excelled various fields. The enlighten moderation approach of our country is being appreciated throughout the world and it has started recognizing Pakistan as their worthy ally. The awareness has gained ground with the world community that their prosperity is inextricably linked to the growth and development of Pakistan. By considering these factors we foresee that due to the increased business activities and consistent growth in the market size, the hotels in Karachi and Lahore will be running out of occupancy, if no expansion is made.

In this regard we are adding two floors in both the wings of our PC hotel Lahore consisting of 80 and 50 rooms respectively. The construction of a separate wing is also under advance level of consideration for about 500 rooms in each PC hotels Lahore and Karachi.

In this present scenario , Pakistan and India are evenly poised to resolve their disputes and being the capital of Azad Kashmir , Muzzaffarabad is expected to complete this year will be a significant addition to the pearl family.

In the year 2004-2005 the company made an investment of US $4.9 million in M/s Hashoo Group Limited , which is engaged to construct a 5 star hotel in Tripoli, Libya. In our efforts to further globalize and gradually move towards our expansion path, during the year a further investment of US $4.9 million has been made in the Hashoo Group limited after generating the approval in annual general meeting. Our company also made and equity investment of US $4.7 million in Pearl Continental hotels in Dubai after getting the approval from SBP.

SWOT ANALYSIS

1. Strengths .The major strengths of Hashoo Group are:-

a. Customer Loyalty . The hotels of the Hashoo Group are mostly relay on their permanent customer who prefers quality of services then the economy. These loyal customers prefer to stay at Marriott and Pearl continental hotels year after year

b. Favourable competitionc. Ownership in one hand/Unity of Commandd. Foreign /diplomatic customers – Constant Customerse. Located at business centres, i.e. Islamabad and Karachif. Strong financial stability. g. Profitabilityh. Strong corporate culturei. Brand imagej. Social status of owners

2. Weaknesses

a. Niche market shareb. Stagnant organization due to lack of competitorsc. Autocratic system of leadership due to limited ownership.d. Limited geographic disposition, i.e., restricted to Major cities

3. Opportunities

a. Price makerb. Market expansion

c. Earthquake 2005

4. Threat

a. Political ramificationb. Emerging competitorsc. Terrorism

FACTORS

1. Sales 2. Share price3. Total assets4. Hotels5. Competitors6. Government7. Single ownership8. Number of customers9. Long term investments10. Long term assets11. Reserves12. Share capital13. Market value per share14. Earning per share15. Capital expenditure16. Gross profit17. Operational profit

Overall Performance of Company

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Sales and services

Net 4173 3225 2563 1932 1933 1885

0

1000

2000

3000

4000

5000

Sales and services Net

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01

Gross Profit 1529 1102 851 580 616 622

0

500

1000

1500

2000

Gross Profit

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 05 -06 04-05 03-04 02-03 01-02 00-01Operating Profit 836 533 370 190 256 296

0

200

400

600

800

1000

Operating Profit

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01

Profit after Taxation 753 257 156 33 85 6

0100200300400500600700800

Profit after Taxation

Am

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2004-05

2003-04

2002-03

2001-02

2000-01

FINANCIAL POSITION

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Reserves 369 369 369 399 399 599

0

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200

300400

500

600

700

Reserves

Am

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mil

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01

Current Liabilities 1463 1239 725 832 1236 1433

0200400600800

1000120014001600

Current Liabilities

Am

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mil

lio

ns) 2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Property,Plant and

Equipment 12201 12136 6531 6432 6350 6239

0

2000

4000

60008000

10000

12000

14000

Property,Plant and Equipment

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mil

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Current Assets 1788 1776 1224 726 616 610

0

500

1000

1500

2000

Current Assets

Am

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mil

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Current Liabilities 1463 1239 725 832 1236 1433

0200400600800

1000120014001600

Current Liabilities

Am

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s 2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Net Current

Assets/Liabilities 325 536 499 -106 -620 -823

-1000

-500

0

500

1000

Net Current Assets/Liabilities

Net current assets/Liabilities

Am

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2004-05

2003-04

2002-03

2001-02

2000-01

Investor Information

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01

Fixed asset turnover ratio 0.4 0.31 0.53 0.4 0.4 0.38

0

0.1

0.2

0.3

0.4

0.5

0.6

Fixed asset turnover ratio

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Dividend per

share 2.5 2.5 0 0 0 0

0

0.5

1

1.5

2

2.5

3

Dividend per share

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Market value 393.55 299.98 123.68 130.78 129.67 126.85

0

100

200

300

400

500

Market value per share

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2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Earning per

share 23.16 7.91 4.79 1.11 2.87 0.19

0

5

10

15

20

25

Earning per share

Am

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s 2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

Factor 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01Capital

expenditure 75 54 103 97 126 79

0

20

40

6080

100

120

140

Capital expenditure

Am

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2004-05

2003-04

2002-03

2001-02

2000-01

CORRELATION

Sales and gross profit:

Sales and services Net(X) Gross Profit(Y)4173 15293225 11022563 8511932 5801933 6161885 622

0.997778336

Sales and operating profit:

Sales and services Net(X)

Operating Profit(Y)

4173 8363225 5332563 3701932 1901933 2561885 296

0.981751879

Sales and market value:

Sales and services Net(X) Market Value(Y)4173 393.553225 299.982563 123.681932 130.781933 129.671885 126.85

0.953790935

Current assets and sales:

Current assets(X)Sales and

services Net(Y)1788 41731776 32251224 2563726 1932616 1933610 1885

0.939240302

Earning per share and dividend per share:

Earning per share(X)Dividend per

share(Y)23.16 2.57.91 2.54.79 01.11 02.87 00.19 0

0.804278793

Capital expenditure and sales:

Capital expenditure(X) Sales (Y)75 417354 3225

103 256397 1932

126 193379 1885

-0.580418166Capital expenditure and reserves:

Capital expenditure(X) Reserves(Y)75 36954 369

103 36997 399

126 39979 599

-0.083918954

Regression Analysis

Sales and Gross profit:

Sales (X) Gross Profit(Y)4173 15293225 11022563 8511932 5801933 6161885 622

Linear equation: y = a + bx

a = -62.391694859682

b = 0 . 365141779004607

Correlation coefficient=r = 0 . 994903365690678

0 4173

1592

0

Gross pro

Sales

Sales and Operating Profit   :

Sales and services Net(X)

Operating Profit(Y)

4173 8363225 5332563 3701932 1901933 2561885 296

Linear equation:

y = a + bx

a = -248.859102607598

b = 0 .252953491683371

r = 0 .981752574301844

0 4173

836

0

O.P(Y)

Sales(X)

Sales and market value:

Sales (X) Market Value(Y)

4173 393.553225 299.982563 123.681932 130.781933 129.671885 126.85

Linear equation:

y = a + bx

a = -115.395975447287

b = 0.120736190759119

r = 0.953791988823572

0 4173

394

0

M.V(Y)

Sales(X)

Reserves and Capital expenditure:

Reserves(X) Capital expenditure(Y)369 75

369 54369 103399 97399 126599 79

Linear equation : y = a + bx

a = 98.0828185170012

b = -2.21630479311757E-02

r = 7.92873443276074E-02

0 599

126

0

C.E(Y)

Rev (X)