| Otsuka Pakistan Limited |
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| Annual
Report 2002 |
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| CONTENTS |
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| COMPANY
INFORMATION |
|
| NOTICE
OF MEETING |
|
| FIVE YEARS AT A GLANCE |
|
| DIRECTORS'
REPORT |
|
| STATEMENT
OF VISION / MISSION & OBJECTIVES |
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| STATEMENT
OF COMPLIANCE WITH |
|
| BEST
PRACTICES OF CORPORATE GOVERNANCE |
|
| BALANCE
SHEET |
|
| PROFIT
AND LOSS ACCOUNT |
|
| CASH
FLOW STATEMENT |
|
| STATEMENT
OF CHANGES IN EQUITY |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN OF SHAREHOLDING |
|
| COMPARISON OF RESULTS |
|
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
Yoshio Tanabe (Chairman) |
|
|
Abid Hussain (Chief
Executive) |
|
|
Meguru Kajiwara |
|
|
Bambang Koestoyo
(Alternate: Hanif Sattar) |
|
|
Mehtabuddin Feroz |
|
|
Junichiro Otsubo
(Alternate: Mohammad Aslam) |
|
|
Nazimuddin Feroz |
|
|
Mohammad Abdullah Feroz |
|
|
| COMPANY
SECRETARY |
Hanif Sattar |
|
|
| AUDIT
SUB COMMITTEE |
Yoshio Tanabe (Chairman) |
|
| OF THE BOARD |
|
Mehtabuddin Feroz
(Member) |
|
|
Abid Hussain (Member) |
|
|
Susumu Uno (Internal
Auditor-by invitation) |
|
|
Hanif Sattar (By
invitation) |
|
|
| LEGAL
ADVISORS |
Hassan & Humayun
Associates |
|
|
| BANKERS |
|
Standard Chartered
Grindlays Bank Limited |
|
|
Bank of Tokyo -
Mitsubishi Ltd. |
|
|
Habib Bank Limited |
|
|
Allied Bank Limited |
|
|
Muslim Commercial Bank
Limited |
|
|
| AUDITORS |
|
A.F. Ferguson & Co. |
|
|
Chartered Accountants |
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| REGISTERED
OFFICE |
30-B, Sindhi Muslim
Co-operative Housing |
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|
Society Karachi - 74400 |
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|
Tel: 4528651 - 4 Fax:
4549857 |
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|
E-mail: oplfin @ khi.
paknet.com.pk |
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|
| FACTORY |
|
No. F/4 - 9 Hub
Industrial Trading |
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|
Estate, Lasbela Distt.
(Balochistan) |
|
|
Tel: (0202) 32363 &
(0202) 33218 |
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|
Fax No. (0202) 33219 |
|
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| SHARE
REGISTRAR |
Noble Computer Services
(Pvt) Ltd., |
|
|
14, Banglore Town Housing
Society |
|
|
Shahrah-e-Faisal Karachi. |
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|
Tel: 4546978 - 4520121 |
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Fax: 4314962 |
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| NOTICE
OF MEETING: |
|
|
| Notice
is hereby given that the Fourteenth Annual General Meeting of Otsuka Pakistan
Limited |
|
| will
be held on Friday, November 1,2002 at 11:00 a.m. at Beach Luxury Hotel,
Karachi to transact |
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| the
following business:- |
|
|
| 1.
To receive and adopt the Audited Accounts for the year ended June 30, 2002,
together with |
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| the
Directors' and Auditors' reports thereon. |
|
|
| 2.
To declare a cash dividend @ 15% for the year ended June 30, 2002, as
recommended by |
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| the Directors. |
|
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| 3.
To appoint auditors and fix their remuneration. |
|
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| 4.
To transact any other business with the permission of the Chair. |
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|
By Order of the Board |
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|
|
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| Karachi:
September 20, 2002 |
|
Hanif Sattar |
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| Notes:- |
|
Company Secretary |
|
|
| 1.
The Share Transfer Books of the Company will remain closed from October 25,
2002 to |
|
| November
1,2002, (both days inclusive). |
|
|
| 2.
A member entitled to attend and vote at the Annual General Meeting may
appoint a proxy |
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| to
attend and vote on his / her behalf. A proxy need not be a member of the
company. |
|
|
| 3.
Instrument of appointing proxy and the power of attorney or other authority
under which it |
|
| is
signed or a notarially certified copy of the power or authority must be
deposited at the |
|
| Registered
Office of the Company at least 48 hours before the time of the Meeting. Form |
|
| of
proxy is enclosed. |
|
|
| 4.
Shareholders are requested to promptly notify Company's Shares Registrar of
any change |
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| in
their addresses. |
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|
| DIRECTORS'
REPORT |
|
|
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| The
Directors are pleased to present the Annual Report of the Company for the
year ended June |
|
| 30, 2002. |
|
|
| Business Review |
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| The
year under review brought significant challenges for your company. Slow down
of trade stocking |
|
| post
September 11, had severely impacted our first half results. Imposition of
sales tax in March |
|
| 2002
proved to be yet another stumbling block. Sales were adversely impacted
during March and |
|
| April
because of restricted purchases by trade and boycott of products on which
sales tax was |
|
| payable.
Donation of around 2 million bottles of IV solutions by a donor agency for
Afghan refugees |
|
| in
Pakistan also impacted our sales volumes. |
|
|
| Net
sales for the year increased by 7% to Rs.341 m. Keeping in view the overall
situation within |
|
| the
country and factors explained above, the increase although below our
expectations was |
|
| satisfactory.
Sales volumes of your company are under continuous pressure because of
intensive |
|
| price
war due to increase in production capacities within the country. |
|
|
| Pretax
profit reduced slightly from Rs.46.1 m to Rs.43.6 m. Compared to first half,
during which |
|
| our
pretax profit was 50% lower than last year, there has been good improvement
in both sales and |
|
| pretax
profit during the second half of the year. |
|
|
| Financial
Results |
|
(Rs. 000) |
|
|
|
|
| Profit
before taxation |
|
43,649 |
|
| Provision
for taxation |
|
16,388 |
|
|
---------- |
|
| Profit
after taxation |
|
27,261 |
|
| Un-appropriated
profit brought forward |
|
2,802 |
|
|
---------- |
|
|
30,063 |
|
| Appropriation: |
|
|
|
| Proposed
dividend |
|
15,000 |
|
| Transfer
to general reserve |
|
15,000 |
|
|
---------- |
|
| Total |
|
30,000 |
|
|
---------- |
|
| Un-appropriated
profit carried forward |
|
63 |
|
|
========== |
|
|
|
|
| Earning
Per Share |
|
| The
earning per share for the year ended June 30, 2002 works to Rs.2.72 per share |
|
|
| Future Outlook |
|
| The
changing situation in Afghanistan has provided an opportunity to your company
to expand its |
|
| market.
We have already registered some of our products in Turkmenistan. Similarly,
efforts are |
|
| being
made to have our products registered in other Central Asian countries. Our
products are |
|
| already
registered in Afghanistan and efforts are underway to establish a
distribution set-up in that |
|
| country. |
|
|
| Your
company is also expanding its products portfolio. Aminoleban, an Amino Acids
injection for |
|
| treatment
of hepatic encephalopathy was launched in May this year. Initial reports
suggest that the |
|
| product
has been well received by the medical profession. More products are in the
pipeline and |
|
| will
be launched gradually, subject to the approval of Ministry of Health. |
|
|
| The
Board therefore, sees a reasonable future for your company. Much will however
depend on |
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| the
overall situation within Pakistan and Afghanistan and the government policies
towards the |
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| pharmaceutical
industry. |
|
|
| Corporate
Governance |
|
| As
required under Corporate Governance, the Directors are pleased to confirm the
following: |
|
|
| a.
That the financial statements, being presented, present fairly its state of
affairs, the result of its |
|
| operating
cash flows and changes in equity. |
|
|
| b.
That proper books of accounts of the company have been maintained. |
|
|
| c.
That appropriate accounting policies have been consistently applied in
preparation of financial |
|
| statements,
accounting estimates are based on reasonable and prudent judgement. |
|
|
| d.
That International accounting standards, as applicable in Pakistan, have been
followed in |
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| preparation
of financial statements. |
|
|
| e.
That the system of internal control is sound in design and has been
effectively implemented and |
|
| monitored. |
|
|
| f.
That there are no significant doubts upon the Company's ability to continue
as a going concern. |
|
|
| g.
That there has been no material departure from the best practices of
corporate governance, as |
|
| detailed
in the listing regulations. |
|
|
| Key
Operating and Financial data |
|
| Key
operating and financial data of last ten years is annexed with this annual
report. |
|
|
| Value
of investments of provident and gratuity funds |
|
| The
following is the value of investments based on respective audited accounts: |
|
|
| Provident Fund |
|
Rs. 9,385,000 |
|
| Gratuity Fund |
|
Rs. 1,500,000 |
|
|
| Board Meeting |
|
| During
the year, three meetings of Board of Directors were held. Attendance by each
Director is |
|
| as follows: |
|
|
| Name
of Director |
|
No. of Meetings attended |
|
| Mr.
Abid Hussain |
|
3 |
|
| Mr.
Mehtabuddin Feroz |
|
3 |
|
| Mr.
Nazimuddin Feroz |
|
3 |
|
| Mr.
Mohammad Abdullah Feroz |
|
2 |
|
| Mr.
Mohammad Aslam (Alternate Director) |
|
3 |
|
| Mr.
Hanif Sattar (Alternate Director) |
|
3 |
|
|
| Pattern
of Shareholding |
|
| The
pattern of shareholding of the Company as at June 30, 2002, is annexed with
this annual report. |
|
|
| Trading
in Shares |
|
| Mr.
Abid Hussain, Chief Executive Officer has sold 36,500 shares out of his
shareholding in the |
|
| company. |
|
|
| Holding
Company |
|
| The
Company is an indirect subsidiary of Messers Otsuka Pharmaceutical Company
Limited, which |
|
| is
incorporated in Japan. |
|
|
| Auditors |
|
| The
present Auditors Messers A.F. Ferguson & Co., Chartered Accountants
retire at the conclusion |
|
| of
the 14th Annual General Meeting and, being eligible, offer themselves for
reappointment. |
|
|
| Acknowledgement |
|
| The
Board wishes to place on record its appreciation for the hard work and
dedication of all the |
|
| employees
of the Company. |
|
|
|
On behalf of the Board |
|
|
|
|
|
Abid Hussain |
|
| Karachi:
September 3, 2002 |
|
Chief Executive Officer |
|
|
| Vision |
|
| Otsuka
people creating new products for better health worldwide. |
|
|
| Mission |
|
| To
provide quality healthcare products while maintaining leadership position in
chosen segments |
|
| by
working efficiently towards customer satisfaction, rapid growth and enhanced
stakeholders value. |
|
|
| Objectives |
|
Focus |
|
| ·
To retain its position of market leader in IV Solutions and Clinical
Nutrition |
|
Medical |
|
| through
continuous education, new product launches and support to the |
|
Profession |
|
| medical
profession and community at large. |
|
& |
|
|
Patients |
|
|
|
|
| ·
To offer world class quality products and support services to our customers |
Patients |
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| at
reasonable prices through resource optimization. |
|
|
|
|
|
|
| ·
To develop and retain efficient network of distributors and suppliers
for |
|
Distributors |
|
| enhancement
of our present level of support services for customer satisfaction. |
& |
|
|
Suppliers |
|
|
|
|
| ·
To provide equal opportunity for growth and development to all its team |
|
|
|
| members
to build a highly motivated and committed team of professionals |
|
Employees |
|
| delivering
world class quality products and services. |
|
|
|
|
|
|
| ·
To contribute in community services for betterment of society and
environment. |
Community |
|
|
|
|
| ·
To generate adequate earnings for meeting current and future needs,
leading |
Shareholders |
|
| to
enhancement of shareholder's value. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Otsuka Pakistan Limited as at June
30, 2002 and |
|
| the
related profit and 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 state that we
have obtained |
|
| all
the information and explanations which, to the best of our knowledge and
belief, were necessary |
|
| for
the purposes of our audit. |
|
|
| It
is the responsibility of the company's management to establish and maintain a
system of internal |
|
| control,
and prepare and present the above said statements in conformity with the
approved |
|
| accounting
standards and the requirements of the Companies Ordinance, 1984. Our
responsibility |
|
| is
to express an opinion on these statements based on our audit. |
|
|
| We
conducted our audit in accordance with the auditing standards as applicable
in Pakistan. These |
|
| standards
require that we plan and perform the audit to obtain reasonable assurance
about whether |
|
| the
above said statements are free of any material misstatement. An audit
includes examining, on |
|
| a
test basis, evidence supporting the amounts and disclosures in the above said
statements. An |
|
| audit
also includes assessing the accounting policies and significant estimates
made by management, |
|
| as
well as, evaluating the overall presentation of the above said statements. We
believe that our |
|
| audit
provides a reasonable basis for our opinion and, after due verification, we
report that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
| (b) in our opinion |
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
| drawn
up in conformity with the Companies Ordinance, 1984, and are in agreement
with |
|
| the
books of account and are further in accordance with accounting policies
consistently |
|
| applied; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company's |
|
| business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the |
|
| year
were in accordance with the objects of the company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to |
|
| us,
the balance sheet, profit and loss account, cash flow statement and statement
of changes |
|
| in
equity together with the notes forming part thereof conform with approved
accounting |
|
| standards
as applicable in Pakistan, and, give the information required by the
Companies |
|
| Ordinance,
1984, in the manner so required, and respectively give a true and fair view
of the |
|
| state
of the company's affairs as at June 30, 2002 and of the profit, its cash
flows and changes |
|
| in
equity for the year then ended; and |
|
|
| (d)
in our opinion, Zakat deductible at source under the Zakat and Ushr
Ordinance, 1980, was |
|
| deducted
by the company and deposited in the Central Zakat Fund established under
section |
|
| 7
of that Ordinance. |
|
|
|
A.F. Ferguson & Co. |
|
| Karachi:
September 3, 2002 |
|
Chartered Accountants |
|
|
|
| Statement
of Compliance with Best Practices |
|
| of
Corporate Governance |
|
|
| The
Company is in process of implementing all facets of the Code of Corporate
Governance issued |
|
| by
the Karachi and Lahore Stock Exchanges (Guarantee) Ltd. and the Board feel
pleasure in stating |
|
| that
provisions of the code, relevant for the year ended June 30, 2002, have been
duly complied |
|
| with. |
|
|
| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF |
|
| COMPLIANCE
WITH BEST PRACTICES OF CODE OF CORPORATE |
|
| GOVERNANCE |
|
|
| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of |
|
| Corporate
Governance prepared by the Board of Directors of OTSUKA PAKISTAN LIMITED. to |
|
| comply
with the Listing Regulations No. 37 of the Karachi Stock Exchange and chapter
XIII of Lahore |
|
| Stock
Exchange (Guarantee) Ltd. where the Company is listed. |
|
|
| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of |
|
| Directors
of the Company. Our responsibility is to review, to the extent where such
compliance can |
|
| be
objectively verified, whether the Statement of Compliance reflects the status
of the Company's |
|
| compliance
with the provisions of the Code of Corporate Governance and report if it does
not. A |
|
| review
is limited primarily to inquires of the Company personnel and review of
various documents |
|
| prepared
by the Company to comply with the Code. |
|
|
| As
part of our audit of financial statements we are required to obtain an
understanding of the |
|
| accounting
and internal control systems sufficient to plan the audit and develop an
effective audit |
|
| approach.
We have not carried out any special review of the internal control system to
enable us |
|
| to
express an opinion as to whether the Board's statement on internal control
covers all controls |
|
| and
the effectiveness of such internal controls. |
|
|
| Based
on our review, nothing has come to our attention which causes us to believe
that the Statement |
|
| of
Compliance does not appropriately reflect the Company's compliance, in all
material respects, |
|
| with
the best practices contained in the Code of Corporate Governance as
applicable to the |
|
| Company
for the year ended June 30, 2002. |
|
|
|
A.F. Ferguson & Co. |
|
| Karachi:
September 3, 2002. |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2002 |
|
|
|
Note |
2002 |
2001 |
|
|
|
(Rupees in thousand) |
|
| SHARE
CAPITAL & RESERVES |
|
| Authorised
capital |
|
| 10,000,000
ordinary shares of Rs 10 each |
|
100,000 |
100,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
3 |
100,000 |
100,000 |
|
| General reserve |
|
|
45,000 |
30,000 |
|
| Unappropriated
profit |
|
|
63 |
2,802 |
|
|
|
---------- |
---------- |
|
|
|
145,063 |
132,802 |
|
|
|
|
| DEFERRED
TAXATION |
|
9 |
983 |
-- |
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
| Short-term
running finances utilised |
|
| under
mark-up arrangements |
|
4 |
18,369 |
10,744 |
|
| Creditors,
accrued and other liabilities |
|
5 |
100,106 |
94,371 |
|
| Taxation |
|
|
-- |
5,040 |
|
|
|
---------- |
---------- |
|
|
|
118,475 |
110,155 |
|
|
|
|
|
| COMMITMENTS |
|
6 |
---------- |
---------- |
|
|
264,521 |
242,957 |
|
|
========== |
========== |
|
|
| TANGIBLE
FIXED ASSETS |
|
| Operating
fixed assets |
|
7 |
63,028 |
53,220 |
|
| Capital
work-in-progress |
|
8 |
1,407 |
5,152 |
|
|
|
---------- |
---------- |
|
|
|
64,435 |
58,372 |
|
| DEFERRED
TAXATION |
|
9 |
-- |
3,014 |
|
| LONG-TERM
LOANS |
|
10 |
2,210 |
1,831 |
|
| LONG-TERM
DEPOSITS |
|
385 |
383 |
|
| CURRENT
ASSETS |
|
| Stores
and spares |
|
11 |
14,556 |
11,842 |
|
| Stock-in-trade |
|
12 |
53,563 |
70,376 |
|
| Trade debts |
|
13 |
114,651 |
91,153 |
|
| Loans
and advances |
|
14 |
4,866 |
2,761 |
|
| Trade
deposits and short-term prepayments |
|
15 |
4,771 |
2,273 |
|
| Taxation
recoverable |
|
|
3,378 |
-- |
|
| Other receivables |
|
16 |
549 |
312 |
|
| Cash
and bank balances |
|
17 |
1,157 |
640 |
|
|
|
---------- |
---------- |
|
|
197,491 |
179,357 |
|
|
---------- |
---------- |
|
|
264,521 |
242,957 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Abid Hussain |
|
Mehtabuddin Feroz |
|
|
Chief Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 2002 |
|
|
|
|
Note |
2002 |
2001 |
|
|
|
(Rupees in thousand) |
|
| Net sales |
|
18 |
341,238 |
320,475 |
|
| Cost
of goods sold |
|
19 |
230,127 |
212,069 |
|
|
|
---------- |
---------- |
|
| Gross profit |
|
|
111,111 |
108,406 |
|
| Administration
and marketing expenses |
|
20 |
62,802 |
59,521 |
|
|
|
---------- |
---------- |
|
| Operating profit |
|
|
48,309 |
48,885 |
|
| Other income |
|
22 |
1,522 |
3,028 |
|
|
|
---------- |
---------- |
|
|
|
49,831 |
51,913 |
|
| Financial charges |
|
23 |
1,900 |
1,429 |
|
| Other charges |
|
24 |
4,282 |
4,434 |
|
|
|
---------- |
---------- |
|
|
|
6,182 |
5,863 |
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
43,649 |
46,050 |
|
| Taxation |
|
25 |
16,388 |
15,418 |
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
27,261 |
30,632 |
|
| Unappropriated
profit brought forward |
|
|
2,802 |
2,170 |
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
|
30,063 |
32,802 |
|
| Appropriation: |
|
|
|
|
| Proposed
dividend Rs 1.50 per share |
|
|
|
|
| (2001:
Rs 1.50 per share) |
|
|
15,000 |
15,000 |
|
| Transfer
to General Reserve |
|
|
15,000 |
15,000 |
|
|
|
---------- |
---------- |
|
|
|
30,000 |
30,000 |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
|
63 |
2,802 |
|
|
|
========== |
========== |
|
| Earnings
per share |
|
26 |
2.72 |
3.06 |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Abid Hussain |
|
Mehtabuddin Feroz |
|
|
Chief Executive |
|
Director |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 2002 |
|
|
|
|
Note |
2002 |
2001 |
|
|
|
|
(Rupees in thousand) |
|
| Cash
flow from operating activities |
|
| Cash
generated from operations |
|
30 |
44,569 |
25,003 |
|
| Mark-up/interest
paid |
|
(1,751) |
(920) |
|
| Mark-up
received |
|
117 |
492 |
|
| Taxes paid |
|
(20,811 ) |
(13,380) |
|
