Allied Motors Limited. Annual Reports 2003

CONTENTS

Mission Statement

COMPANY INFORMATION

BOARD OF DIRECTOR

K. Asif Rahman

Chairman & Chief Executive

Asif Mahmood

(Alternate Director to Kafeel Jahangir &

Sheheryar Jahangir)

Farouk Majid

Fazlur Rahman

Kafeel Jahangir

Kamal Mahmood

Khalid Mughal

Sheheryar Jahangir

AUDIT COMMITTEE

K. Asif Rahman

Chairman

Fazlur Rahman

Member

Asif Mahmood

Member

Muhammad Zubair

Secretary

COMPANY SECRETARY

Khalid Mughal

AUDITORS

Nasir Javaid Maqsood

Chartered Accountants,

27-B Writers Chambers,

Mumtaz Hasan Road,

Karachi.

REGISTERED OFFICE

D-168, Sind Industrial Trading Estate

Haroonabad,

Karachi-75700

FACTORY

Plot Nos. A 1 - A 50 Hub Industrial Trading Estate,

Hub, District Lasbela (Balochistan)

REGISTRAR

Gangjees Registrar Services (Pvt.) Ltd.

513, Clifton Centre, Khayaban-e-Roomi, Block-5,

Clifton, Karachi-75600

NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that the Twenty first Annual General Meeting of the Shareholders of Allied

Motors Limited will be held on October 28, 2003 at 12:00 noon at the Registered Office of the Company.

situated at D-168, S.I.T.E, Haroonabad, Karachi to transact the following business:

1. To confirm the Minutes of the Twentieth Annual General Meeting Held on November 8, 2002.

2. To receive, consider and adopt the Audited accounts of the Company for the year ended June 30,

2003 together with the Directors' and Auditors' Report thereon.

3. To appoint Auditors of the Company for the year 2003-2004 and to fix their remuneration. The

present Auditors Nasir Javaid Maqsood (Chartered Accountants) retire and, being eligible,

offer themselves for reappointment.

4. To transact any other ordinary business of the Company with permission of the Chair.

BY ORDER OF THE BOARD

Dated : September 26, 2003 Khalid Mughal

Karachi : Company Secretary

NOTES:

1. The Share Transfer Books of the Company will remain closed from October 15, 2003 through

October 28, 2003 (Both Days Inclusives).

2. A member eligible to attend and vote at the Meeting may appoint another member as his/her

proxy to attend and vote instead of him/her. Proxies in order to be effective must be deposited at

Registered Office of the company not later than 48 hours before the time of holding of the meeting.

3. Shareholders are requested to immediately notify change of address, if any, to our Registrar, Gangjees

Registrar Services (Pvt.) Ltd. 513. Clifton, Khayaban-e- Roomi, Block-5, Clifton, Karachi-75600.

4 CDC shareholders are requested to bring their National Identity Cards, Account and Participant's

ID Number, while attending the Meeting for identification.

DIRECTORS' REPORT

Your Directors welcome you to the twenty first Annual General Meeting and place before you the Annual Report

together with the Audited Accounts of the Company for the year ended June 30, 2003.

Financial Results

The Financial results are summarized as under;

2003

2002

(Rupees '000)

Net Sales

26,952

326

Gross Profit / (Loss)

-7,241

-175

Operating loss

-38,354

-12,142

Loss before Taxation

-37,258

-11,945

Loss After Taxation

-37,396

-11,947

Accumulated loss brought forward

-175,717

-163,770

Accumulated loss carried forward

-213,113

-175,717

Earning / (Loss) Per Share

-4.16

-1.33

Reason for Incurring Loss

The only reason for incurring losses is low sales volume and volumes remained low due to the following reasons;

1. Low market acceptability of the product as customers were reluntant to purchase a new brand in presence of

existing well established products.

2. Low advertising budget due to cash flow constraints.

3. Low technical product awareness by mechanics & customers.

4. Due to the fact that this is the first year the Company commenced sales of SHANGHAI 500 tractors after

being dormant for over a decade.

Despite above reasons management is hopeful that the sales volumes are expected to increase in the coming year

because tractors being produced are of international quality which will match competition.

Future Outlook

The Company has been registered with all main Banks and financial institutions like Zari Tarakiati Bank Limited,

United Bank Limited, Bank of Punjab, National Bank of Pakistan, Co-operative societies in Punjab throughout the

Country for sales as all these institutions provide loans to farmers for tractor purchase. Management is fully aware of the

fact that it is not an easy task to introduce, market & sell a new brand in presence of well established brands and

products.

Despite the above fact all sincere and professional efforts are being put in to achieve a respectable market share for which

various sales strategies have been made which includes advertising, price reduction, participation in tenders,

demonstrations, appointment of new dealers, replacing non performing dealers etc.

We also assure our Share-Holders that all our efforts are in the direction to make the project viable for the Company

and would come up to the expectations of our Share Holders in the shortest possible period.

As such no material change and commitments have occurred which affect the financial position of the Company

between the end of financial year ended June 30, 2003 and the Director's Report under review.

Compliance with code of Corporate Governance

The management is fully aware of the compliance with code of corporate governance and steps are being taken for its

effective implementation within allowed time fame. The various statements as required by the Code are given below:

Presentation of Financial Statement

The financial statements, prepared by the management of the Company present fairly its state of affairs, the result of its

operations, cash flow & changes in equity.

Accounting Policies

Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting

estimates are based on these reasonable and prudent judgment.

Books of Accounts

Proper books of accounts have been maintained.

Compliance with International Accounting Standards (IAS)

International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements

and any departure there from has been adequately disclosed.

Internal Control System

The system of internal control is sound in design and has been effectively implemented and monitored.

Going Concern

Please refer note 2.18 of the financial statement.

Best Practice Of Corporate Governance

There has been no material departure from best practices of corporate governance, as detailed in the listing regulations.

Dividends

Due to huge accumulated loss & loss in current year, no dividend is recommended by the Board for the period under

review.

Pattern of Share Holding

The Pattern of Shareholding is given on page 26.

Trading in Company Share

Directors, C.E.O, C.F.O., company secretary and their spouse and minor children have made no transactions of

Company shares during the year.

Corporate Assets Tax

Corporate assets tax of Rs. 155,000 as stated in note 10 is to be adjusted against Income Tax Refund.

Summarised Key Operating and Financial Data Of Last 6 years

Given on page 28.

Board Meeting

During the year five (5) Board Meetings were held, Directors attendence is as under.

Names

No. of meetings

Continuing Directors

attended / held

Mr. K. Asif Rahman (Chairman & CEO)

5/5

Mr. Fazalur Rahman

5/5

Mr. FaroukMajid

5/5

Mr. Kamal Mehmood

5/5

Outgoing Directors

Mr. Hasan Aziz Bilgrami

0/0

Mr. P.K. Shahani

2/3

Mr. Sultan Ahmed

2/2

Incoming Directors

Mr. Kafeel Jahangir

0/4

Mr. Sheheryar Jahangir

0/2

Mr. Khalid Mughal

3/3

Mr. Asif Mehmood

3/3

(Alternate Director to Kafeel Jahangir & Sheheryar Jahangir)

Auditors

The retiring auditors Nasir Javaid Maqsood (Chartered Accountants), being eligible, offer themselves for

reappointment.

Statement of Compliance with best practices of corporate governance

The statement of Compliance with Code of Corporate Governance is annexed herewith.

Management & Labour Relations

Management and labour relations remained cordial throughout the year.

Acknowledgment

The Board would like to place on record its appreciation and thanks to SHANGHAI NEW HOLLAND

AGRICULTURAL MACHINERY CORP. LTD. For their continues support, technical help and advice. The

management appreciates work of senior management, executives and other member of the staff without

whose unstained support it would not have been possible to continue Company operations.

FOR AND BEHALF OF THE BOARD

Dated : September 26,2003 K. Asif Rahman

Karachi Chairman & CEO

STATEMENT OF COMPLIANCE WITH BEST PRACTICES

OF CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in

regulation No. 37 of listing regulations of Karachi Stock Exchange & Chapter XIII of the Lahore Stock

Exchange for the purpose of establishing a framework of good governance, whereby a listed companies

managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in following manner:

1. The Company encourages representation of independent non- executive directors and directors

representing minority interest on its Board of Directors. At Present the Board includes at least 5

(five) independent non-executive directors and no director representing minority shareholders.

2. The directors have confirmed that none of them is serving as a director in more than ten listed

companies, including this Company.

3. All the resident directors of the Company are registered as taxpayers and non of them has defaulted

in payment of any loan to banking company, a DPI or an NBFI or , being a member of stock

exchange, has been declared as defaulter by that stock exchange.

4. Casual vacancies occurmg in the Board were filled up by the directors as follows:

1 Mr.KafeelJahangir

August 16, 2002

2 Mr. Sheheryar Jahangir

January 10, 2003

3 Mr. Khalid Mughal

October 10, 2002

4 Mr. Asif Mehmood

March 3, 2003

(Alternate Director to Kafeel Jahangir & Sheheryar Jahangir)

5 Mr. Hasan Aziz Bilgrami

July 18, 2002

6 Mr.P.K.Shahani

Vacancy due to death

7 Mr. Sultan Ahmed

September 28, 2002

5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been signed

by all the directors and employees of the Company

6. The Board has developed vision/mission statement, overall corporate strategy and significant

policies of the Company. A complete record of particular of significant policies along with the

dates on which they were approved or amended has been maintained.

7. All the powers of the Board have been duly exercised and decision on material transactions,

including appointment and determination of remuneration and terms and conditions of

employment of the CEO and other executive directors, have been taken by the Board.

8. The Meetings of the Board were presided over by the Chairman. The Board met at least once in

every quarter. Written notices of the Board meetings, along with agenda and working papers, were

circulated at least seven days before the meetings. The minutes of the meetings were appropriately

recorded and circulated.

9. The Chief Executive of the Company discussed the duties and responsibilities of the directors of the

company as per the requirements of the Code of Corporate Governance and related handouts were

provided to the directors. The Chief Executive suggested that the members of the Board may

approach him should they feel any necessity to conduct other orientation courses in this regard.

10. The Chief Financial Officer, Company Secretary and Head of Internal Audit were appointed prior

to the implementation of Code of Corporate Governance. However the Board has confirmed theses

appointments. The remuneration and terms & conditions in case of future appointments on these

position will be approved by the Board.

11. The directors' report for this year has been prepared in compliance with the requirement of the Code

and fully describes the salient matters required to be disclosed.

12. The financial statement of the Company were duly endorsed by CEO and CFO before approval of

the Board.

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than

that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirement of the Code.

15. The Board has formed an audit committee. It comprises of two non-executive directors and one

executive director. The Chairman of the Committee is an executive director.

16. Since the formation of the audit committee, its meetings were held at least once every quarter prior to

approval of interim and final results of the Company and as required by the Code. The terms of

reference of the committee have been formed and advised.

17. The Board has set-up an effective internal audit function manned by suitable qualified and

experienced personnel who are conversant with the policies and procedures of the Company.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory

rating under the quality control review program of the Institute of Chartered Accountants of

Pakistan, that they or any of the partners of the firm, their spouse and minor children do not hold

shares of the Company and that the firm and all its partners are in compliance with International

Federation of Accountants (IFAC) guidlines on code of ethics as adopted by Institute of Chartered

Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide other

services except in accordance with the listing regulations and the auditors have confirmed that they

have observed IFAC guidelines in this regards.

20. We confirm that all other material principles contained in the Code have been complied with.

Karachi

September 26,2003

Chairman Director

&CEO

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 Allied Motors

Limited to comply with the Listing Regulation No. 37 of the Karachi Stock Exchange and

listing regulation no. 43 of the 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 provisions 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 and 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, except for the orientation course which were not conducted for the

reason explained in point 9 of the "statement of compliance with the code of corporate

governance" 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

for the year ended June 30,2003

Karachi NasirJavaidMaqsood

Dated: September 26,2003 Chartered Accountants

AUDITOR'S REPORT TO THE MEMBERS

We have audited the annexed balance sheets of Allied Motors Limited as at June 30, 2003 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

standard 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 accounts have been kept by the company as required by the

Companies Ordinance, 1984;

(b) in our opimon-