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Diamond Industries Limited
ANNUAL REPORT 2002
CONTENTS
DIAMOND INDUSTRIES LIMITED
Corporate Profile
Notice of Annual General Meeting
Directors' Report to the Members
Statement of Compliance with the code of corporate Governance
Review Report to the Members on code of Corporate Governance
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholding
ACCOUNTS OF SUBSIDIARY COMPANY
DIAMOND POLYMERS (PVT) LIMITED
Corporate Profile
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholding
CONSOLIDATED FINANCIAL STATEMENT
DIAMOND INDUSTRIES LIMITED AND SUBSIDIARY
General Information (Subsidiary)
Auditors' Report to the Board of Directors
Consolidated Balance Sheet
Consolidated Profit And Loss Accounts
Consolidated Cash Flow Statement
CORPORATE PROFILE
BOARD OF DIRECTORS:		MR. WAQAR A. .SHAFFI
		Chairman
		MR. MUHAMMAD SAEED
		Chief Executive
		MR. SHARIQ IFTIKHAR
		MR. M. H. PERVEZ
		MR. MALIKAAMIRANWAR
		MR. SOHAIL MALIK
		MR. AMANULLAH GULZAR
COMPANY SECRETARY:		MR.NAZIRAHMAD
AUDITORS:		SALEEMAHSAN & CO.
		Chartered Accountants
LEGAL AD VISORS:		IRTIZA ALI NAQVI & ASSOCIATES .
BANKERS:		ALLIED BANK OF PAKISTAN LIMITED
		FIDELITY INVESTMENT BANK LIMITED
		PICIC COMMERCIAL BANK LIMITED
		PLATINUM COMMERCIAL BANK LIMITED
REGISTERED OFFICE:		PLOT NO. 25, GADOON AMAZAI
		INDUSTRIAL ESTATE, SWABI (N.W.F.P.)
		TEL: 05372 - 70297, 70397, 70597
WORKERS:		PLOT NO. 25, GADOON AMAZAI
		INDUSTRIAL ESTATE. SWABI (N.W.F.P.)
		TEL: 05372 - 70297
		Email: dgi@drm.psw.erom.com.pk.
SHARES DEPARTMENT:		MALIK BAGH, BARADARI ROAD,
		SHAHDARA, LAHORE.
		TEL: 111-111-666,7932001-7
		FAX: 92-42-7925299, TLX: 44590 DRM PK.
		Email: info@diamondfoam.com
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 13th Annual General Meeting of Diamond Industries
Limited will be held on 30th October, 2002 at 2.00 P.M. at Principal Office of the
Company at "Malik Bagh, Baradari Road, Shahdara, Lahore" to transact the following
business:-
1. To confirm the minutes of last annual General Meeting held on 27-12-2001.
2. To receive, consider and adopt the Annual Audited Accounts of the Company
together with the Auditor's and Director's Reports for the period ended June 30,
2002
3. To appoint Auditors and fix their remuneration.
4. To consider any other business with the permission of the Chair.
BY ORDER OF THE BOARD
NAZIR AHMAD
COMPANY SECRETARY
Lahore:09-10-2002
Notes:
1. The share transfer books of the company will remain closed from 23rd October ,
2002 to October 30, 2002 (both days inclusive).
2. A member entitled to attend and vote at this meeting may appoint another
member as proxy. Proxies in order to be effective, must be received at Principal
Office of the company not later than form-eight hours before the time for holding
the meeting and must be duly stamped, signed and witnessed.
3. Members are requested to notify the company with change in their addresses, if
any.
DIRECTORS' REPORT
Dear Shareholders,
The board of directors is pleased to present the 13th Annual Report together with the
Audited Accounts of the Company for the year ended 30th June, 2002.
FINANCIAL RESULTS
The financial results of the company are as under:-
				(In Rs)
- Profit / (Loss) for the year				(32,411,750)
- Prior years' adjustment				2,809,084
				(29,602,666)
- Unappropriated profit/(Loss) B/F				112,626
- Unappropriated profit/(loss) c/fto B/S				83,023,270
REVIEW
There has been change of Chief Executive in the Board of Directors during the year
under review.
No material changes and commitments affecting the financial position of your Company
have occurred between the end of financial year of the company to which this Balance
Sheet relates and the date of the Directors' Report.
The Foam manufacturing unit in Gadoon Amazai remained closed throughout the year as
in the preceding year. The chemical unit at Lahore however remained operational but the
' turnover and results of the business are relatively insignificant and have resulted in a
small gross loss to the company. Further the markup accrued on the Forced Demand
Finance, which was a direct result of illegal and arbitrary encashment of bank guarantees
by the Central Board of Revenue in October, 1999, as explained in preceding report, has
resulted in a heavy operating loss. In order to apprise the esteemed members of the
correct and factual status of our claim of Rs.477million against the Central Board of
Revenue, Government of Pakistan, I briefly state below the following facts.
In spite of very clear interim order dated 19-02.1999 of the Honourable Supreme Court of
Pakistan, The Collector of Customs, Peshawar presented bank guarantees to the tune of
Rs.260.568(M) to our bankers, Allied Bank of Pakistan Limited Shahdara Branch,
Lahore and by exerting unlawful and undue pressure upon the bank, managed to encash
the guarantees on 19-10-1999 and 10-11-1999. Subsequently, on 5th June, 2000, the
Honourable Supreme Court of Pakistan, accepted our appeal and declared all the related
orders of the Central Board of Revenue, unlawful, discriminatory and consequently
quashed the same. The operative past of the judgement is reproduced below for
information and evaluation of our esteemed members. .
Quote; "For the Foregoing reasons, this appeal is accepted decisions already made by the
respondents in the matter of the appellant inclusive of order dated 27.04.2000 of Member
customs, C.B.R. are hereby declared to be without lawful authority and of no legal effect
and quashed. The member C.B.R. is hereby directed to decide afresh the case of the
appellant as regards on time relief of 25% the total duty value of the raw materials on the
basis of the same criteria and the parameters applied in the case ofM/S. Al Khair Gadoon
And M/S. Khyber Plastic Industries and full benefit should be given in the light of the
observations and the facts noted above. As the matter has already been delayed, the
needful shall be done within one month from the receipt of this judgement" Unquote"
Note:- Copy of full text judgement of the Honourable Court can be provided upon
request of any member.
Your Company immediately approached the member customs, C.B.R., who again
ignored the directions of the court and relief was not given as ordered by the Honourable
Court. The Matter was again taken up before the Honourable Supreme Court vide
criminal original number 35/2000 in CA. No.903/1999 and order dated 19-01-2001 was
passed, which is reproduced below:
Quote: "In order to avoid multiplicity of proceedings. Mr. Aitzaz Ahsan is directed to
appear before the learned member customs on 26.01.2001 to present his view point as to
how the judgement of this Court has not been implemented in letter and spirit. The
learned member (customs), after hearing Mr. Aitzaz Ahsan, shall pass such orders,
assigning reasons thereof as he may deem fit in accordance with law." Unquote:
As directed by the Honorable Court, Mr. Aitzaz Ahsan appeared before the member
customs on 26.01.2001 and represented our case in length, however, fresh decision from
the member customs, C.B.R. is still awaited. It appears that the learned member Customs
has opted to defy the orders of the Honourable Supreme Court of Pakistan and has
refrained from passing orders as required. In view of his defiance, your company has
again filed an application before the Honourable Supreme Court of Pakistan, which
outcome is still awaited.
As reported in the preceding report, your company remained actively involved in
quantifying the losses suffered by it due to illegal and unfair trade practice by the
Chairman, office bearers, directors and certain officers of the Karachi and the Lahore
stock exchanges. The Company had made various representations before the Securities &
Exchange Commission of Pakistan and filed various claims against certain members and
the Karachi Stock Exchange. Following claims are of significant importance.
1 The Company had filed a complaint against M/s. First Capital ABN AMRO Equities
(Pak) Limited, presently First Capital Equities (Pvt) Limited, Member Karachi and
the Lahore Stock Exchanges before the SECP for fraudulent handling and withdrawal
of its shares lying with them in the CDC sub account of the Company. The Company
had also requested the SECP not to permit change of name and management of M/s.
First Capital ABN AMRO (Pak) Limited, which request apparently fell to deaf ears
and the SECP allowed the change. However the counter claim filed with the Sind
High Court in suit # 808/2000 is still pending before the Honourable Court.
2 Your Company is also in the process of filing suit for recovery and / or damages
against the Karachi Stock Exchange and the SECP for illegal, ma-la-fide and
fraudulent acts committed by their directors, members and officials during the period
January to June, 2000.
PAYOUT FOR SHAREHOLDERS
As a result of current year losses, directors do not recommend payment of any dividend
to the shareholders of the company.
EARNING PER SHARE
Earnings per share for the year ended 30th June 2002 is Rs (3.60) compared to Rs (3.2.8 )
of last year.
CODE OF CORPORATE GOVERNANCE
Securities and Exchange Commission of Pakistan has formulated a "Code of Corporate
Govemance"(Code). The Company for the year ended 30th June, 2002 has duly complied
with the provisions of the Code.
BOARD MEETINGS
Twenty Board Meetings were held during the year. The attendance of each director at the
meetings of the board of directors is as under-
Directors			Number of
			Board Meetings Attended
Mr. Waqar A. Shaffi ( Chairman)			20
Mr. Muhammad Saeed. ( Chief Executive )			20
Mr. Shariq Iftikhar			20
Mr. M.H. Pervez			20
Mr. Malik Aamir Anwar			16
Mr. Sohial Malik			20
Mr. Amanullah Gulzar . .			20
SUBSIDIARY
Your directors further report the financial results or your subsidiary company namely
M/s. Diamond Polymers (Pvt) Limited Mil-pur Azad Jammu & Kashmir for the year
under review. The events of September 11, 2001 and the prevalent high tensions on the
border characterized the period under consideration. However, besides this tense
situation, cut throat competition in the trade of foam and its products, huge discount war,
rise in the price of imported as well as locally available raw material, increase in
salary/wages, rise in energy and transport charges, the profit of the company is of-course
low as compared to last year profit and the sale itself was also less than expected and
affected upon the profits of the Company but the company has achieved positive results
and maintained its goodwill and quality of its products. The accounts of subsidiary
company are annexed for your reference.
As informed in the preceding year report that exemption granted to your company u/s
126C of Income Tax Ordinance, 1979 was withdrawn on 28th May 2001. In this case our
appeal is fixed for hearing on 16th October, 2002 before Honourable High Court
Muzaffarabad AJK and in the opinion of legal counsel we will succeed in our appeal.
Due to the cancellation of income tax exemptions u/s 126 C, the department has
forcefully demanded and recovered the amount ofRs 30 Million.
Your directors further wish to apprise you of a pending litigation of the company with
CBR Government Of Pakistan in the Supreme Court Of Pakistan in appeal NO. 499 of
2000 whereby your company has challenged the charging of custom duties & sales tax
by the Government of Pakistan on imported raw materials destined for and to be
consumed in Azad Kashmir. As per interim orders of Honourable Court your company is
furnishing bank guarantees favouring the Collector of Customs corresponding to the
amount of duties &'taxes payable, which are fully secured. The balance sheet provides
for this liability which in the opinion of legal advisors of your company will never
accrue. Your directors also inform you that the exemption of sales tax granted for five
years has been expired on 3rd January, 2002 and therefore your company is paying the
sales tax on their supplies.
FUTURE OUT LOOK
Despite all bottlenecks, we always strive for the better outcome and are hopeful to
achieve satisfactory results once the economic environments and political atmosphere
improve. The Board feels that impact of positive developments of debt rescheduling,
record high foreign exchanges reserves and foreign remittances would bring positive
trend in overall economic outlook and eventually result in the improvement of the
economy.
AUDITORS
M/S Javed Chaudhry & Co., Chartered Accountants are appointed as auditors in place of
retiring auditors M/S Saleem Ahsan & Co., Chartered Accountants due to their
unwillingness to continue as auditor for the year ending 30th June, 2003 and fix their
remuneration.
PATTERN OF SHAREHOLDING
The pattern of shareholding under Section 236 of the Companies Ordinance 1984 is
annexed to this report.
ACKNOWLEDGEMENT
On behalf of the board I would like to thank all the Staff and management for their efforts
and contribution.
For and on behalf of the Board
MUHAMMAD SAEED
Chief Executive
Lahore.
7th October, 2002
STATEMENT OF COMPLIANCE WITH
THE CODE OF CORPORATE GOVERNANCE
The Company is in the process of implementing the requirements of the Code of Corporate
Governance issued by the Securities and Exchange Commission of Pakistan and adopted by the
Stock Exchanges. The provisions of the Code relevant for the year ended 30"' June 2002 have
been duly complied with by the Company.
On behalf of Board Of Directors
Muhammad Saeed Lahore:
Chief Executive
07 October, 2002
REVIEW REPORT TO THE MEMBERS ON STATEMENT OE
COMPLIANCE WITH BEST PRACTICES OF CODE
OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of Diamond Industries Limited to
comply with the Listing Regulation No. 37 of the Karachi, Islamabad and Lahore Stock Exchange
where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of
Directors of the Company. Our responsibility is to review, to the extent where such compliance
can be objectively verified, whether the Statement of Compliance reflects the status of the
Company's compliance with the provision of the Code of Corporate Governance and report if it
does not. A review is limited primarily to inquiries of the Company personnel and review of
various documents prepared by the Company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the
accounting and internal control systems sufficient to plan the audit and develop an effective audit
approach. We have not carried out any special review of the internal control system to enable us
to express an opinion as to whether the Board's statement on internal control covers all controls
and the effectiveness of such internal controls.
Based onour review, nothing has come to our attention, which causes us to believe that the
Statement of Compliance does not appropriately reflect the Company's compliance, in all
material respects, with the best practices contained in the Code of Corporate Governance
effective as at 30 June 2002.
Lahore: 07 October, 2002
SALEEM AHSAN & CO.
CHARTERED ACCOUNTANTS
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed Balance Sheet of M/S DIAMOND INDUSTRIES LTD., as at June 30,2002 and the
related Profit & (Loss) Account, Cash Flow Statement and Statement of changes in equity together with the Notes
forming part thereof, for the year then ended and we have obtained all the information and explanations which, to the
best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the company's management to establish and maintain the system of internal control and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirement of the Companies Ordinance, 1984, Our responsibility is to express an opinion on these statements based
on our audit,
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require
that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of
any material misstaement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the above said statements. An audit also includes assessing the accounting policies and significant
estimates made by management, as well as evaluating the overall presentation of the above said statements. We believe
that oure audit provides a reasonable basis for our opinion and, after due verification, we report that:-
(a) The Central Board of Revenue (CBR) has force full encashed the bank guarantee to the company against the
amount payable by the company on account of custom duty. According to management, the encashemnt of
guarantee was made in the presence of valid interim order by Supreme Court of Pakistan, in favor of Diamond
Industries Ltd. Against this issue. Therefore, while recording the liability effect, the management recorded the
same as receivables from CBR of amounting to Rs. 260,568,6837- as mentioned in note # 14 in Notes to the
Accounts. Currently the receivables are in the process of negotaiations with CBR .and hence could not be
verified and confirmed.
(b) In our opinion, proper books of account have been kept by the company as required by the Companies
Ordinance, 1984: