Fateh Sports Wear Limited - Annual Reports 2004

FATEH SPORTS WEAR LIMITED

ANNUAL REPORT 2004

BOARD

CHAIRMAN / CHIEF EXECUTIVE

Mr. Rauf Alam

DIRECTORS

Mr. Aftab Alam

Mr. Saeed Alam

Mr. Muhammad Mohsin

Mr. Muhammad Naveed

Mr.FarazAlam

Mrs. Najma Roshan

SECRETARY

Mr. Ghous Muhammad Khan

CHIEF FINANCIAL OFFICER

Mr. Muhammad Ishaque Essani

AUDIT COMMITTEE

Mr. Saeed Alam

(Chairman)

Mr. Muhammad Mohsin

(Member)

Mr. Muhammad Naveed

(Member)

AUDITORS

M/s. Hafizullah & Co.

Chartered Accountants,

Hyderabad.

BANKERS

Muslim Commercial Bank Limited.

Askari Commercial Bank Limited.

Allied Bank of Pakistan Limited.

REGISTERED OFFICE

Mirpurkhas Road,

Hyderabad.

BRANCH OFFICE

7th Floor, Suit #. 706,

Business & Finance Centre,

I.I. Chundrigar Road,

Karachi.

PLANT

Kali Mori,

Hyderabad.

No trading of shares have been carried out by the Chief Executive, Directors, Chief Financial Officer,

Company Secretary, their spouses and minor children;

During the year four (04) meetings of the Board of Directors were held. The attendance of each Director

is as follows:

S.NO. NAME OF DIRECTOR MEETING ATTENDED.

MEETING ATTENDED

1. Mr. RaufAlam

4

2. Mr. AftabAlam

4

3. Mr. Saeed Alam

4

4. Mr. Muhammad Mohsin

4

5. Mr. Muhammad Naveed

4

6. Mr. Faraz Alam

4

7. Mrs. Najma Roshan

• Pattern of Shareholding required under section 236 of the Companies Ordinance, 1984 is annexed;

• Outstanding taxes and levies are given in the relevant notes to the audited financial statements; and

• No material changes and commitments affecting the financial position of the Company have occurred

between the end of the financial year to which these financial statements relate and the date of

directors' report.

Auditors' Observation

1. During the years from 2000-01 to 2002^:03 depreciation at half rates was charged on fixed assts due to

steep fall in the production. However, from the current year depreciation at full rates is computed, and

charged to administration expenses considering it as a period cost. The management is of the view that

carrying amount of fixed assets depends on the useful life of the assets which is subject to its usage and

not the age, provided the asset become obsolete.

2. No provision has been made in the accounts for receivables amounting to Rs.24.887 million since this

amount is recoverable, soon after realization of outstanding debts.

Auditors

The retiring Auditors M/s. Hafizullah & Company, Chartered Accountants, being eligible offer themselves

for reappointment.

Your Directors welcome you on the 21^st Annual General Meeting of your Company and present before you

the audited financial statements and auditors' report for the year ended June 30, 2004.

The management of your Company is continuously making efforts for recovery of the stuck up funds from

abroad thereby to come out of the financial constraints and start production activities. As soon as the funds

are realized the company intends to start its business anew. It is expected that the efforts of the

management will be materialized shortly.

Financial Results

During the year under review there were no operational activities of the Company for want of working

capital. The Company incurred loss of Rs.l 1.395 million mainly due to financial expenses and charge of

depreciation. The accumulated loss carried to balance sheet amounts to Rs.76.029 million.

The accounts of the Company are prepared on going concern basis as the management intends to revive its

production activities after realization of the stuck up funds from abroad. The management will support the

company financially till the recovery of outstanding debts and for revival of its operational activities.

Compliance with the Code of Corporate Governance:

The requirements of Code of Corporate Governance set out by Karachi Stock Exchange in their listing rules,

relevant for the year ended June 30, 2004, have been duly complied with. The Directors confirm the

compliance of Corporate Governance, statement to this effect is annexed.

Corporate and Financial Reporting Framework

• The financial statements, prepared by the management of the Company, presents fairly its state'of

affairs, cash flows and changes in equity;

• Proper books of accounts have been maintained by the Company;

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

accounting estimates are based on reasonable and prudent judgment;

• The International Accounting Standards, as applicable in Pakistan, have been followed in preparation of

financial statements and any departure therefrom has been adequately disclosed;

• The System on internal control is sound in design and has been effectively implemented and monitored;

• There are no significant doubts upon the company's ability to continue as a going concern;

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

the listing regulations;

• Operating and financial data for the last six years is as under;

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

Sales

308,882

297,525

291,646

150,650

10,413

0,565

0

Gross Profit / (Loss)

76,498

76,562

75,672

35,970

-9,335

-1,596

0

Selling & Administration Expenses

36,399

40,827

38,087

28,091

7,290

6,603

3,325

Profit / (loss) before Taxation

7,464

5,833

3,330

-11,605

-50,655

-2,007

-11,395

Profit/(Loss) after Taxation

6,089

3,930

1,483

-13,305

-50,065

-1,723

-11,395

Authorized Capital

50,000

Paid up Capital

20,000

Shareholde's equity

73,045

73,975

73,958

60,653

10,588

8,865

-2,529

Fixed Assets

46,337

43,082

40,801

41,274

39,410

38,460

35,285

Total Assets

443,071

383,637

384,633

368,427

302,892

311,762

285,094

11. The financial statements of the company were duly endorsed by CEO and CFO before approval of

the Board.

12. The directors, CEO and executive do not hold any interest in the shares of the company other

than that disclosed in the pattern of shareholding.

13. The company has complied with all the corporate and financial reporting requirements of the

Code.

14. The Board has already formed an Audit Committee which comprises three members of whom

two (02) are non-executive directors.

15. The meeting of the Audit Committee 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 references of

the committee have been formed and advised to the committee for compliance.

16. The Board has set up an effective internal audit function manned by suitably qualified and

experienced personnel who are conversant with the policies and procedures of the company and

are involved in the internal audit function on a full time basis.

1,7. The statutory auditors of the company have confirmed that they have been given a satisfactory

rating under the Quality Control Review Programme of the Institute of Chartered Accountant of

Pakistan, that they or any of the partners of the firm, their spouses 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 Accountant (IFAC) guidelines on Code of Ethics as adopted by the

Institute of Chartered Accountants of Pakistan.

18. 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 regard.

19. We confirm that all other material principles contained in the Code have been compiled with.

representing minority interests on its Board of Directors. However there is no representation of

non-executive independent directors and minority shareholders on the Board.

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 none of them has

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

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

4. No casual vacancy occurred in the Board till June 30, 2004.

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

by all the directors.

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

policies of the company.

7. All the power of the Board have been duly exercised and decisions on material transactions,

including appointment and determination of remuneration and terms and conditions of

employment of the Chief Executive Officer (CEO) and other executive directors, have been taken .

by the Board.

8. The meeting of the Board were presided over by the Chairman and the Board met at least once

in every quarter. Written notices of the Board Meeting, alognwith agenda and working papers,

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

appropriately recorded and circulated.

9. Officers having position of Chief Financial Officer (CFO), Company Secretary and Head of Internal

Audit were appointed prior to the implementation of the Code of Corporate Governance.

10. The Directors' Report for the period ended June 30, 2004 has prepared in compliance with the

requirements of the Code and fully describes the salient matters required to be disclosed.

4. That we have not received a bank confirmation for balance, which is subjudice as

detailed at note no. 9.1 to the accounts.

a) in our opinion, proper books of accounts 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 accounts and

are further in accordance with accounting policies consistently applied,

except for charge of depreciation at full rate during the year;

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

statements and statements 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, except for paras 2 to 4 above and the adjustments

that may be required, these respectively give a true and fair view of the state of

the Company's affairs as at 30^th June, 2004 and of the Loss, its cash flow and

changes in equity for the year then ended; and

d) in our opinion, no zakat was deductible at source under the Zakat and Ushr

Ordinance, 1980 (XVIII of 1980).

We have audited the annexed balance sheet of Fateh Sports Wear Limited as at

30^th June, 2004 and the related profit and loss account, cash flow statement and

statement of changes in equity together with 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 purpose 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 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;

1. Without qualifying our report we draw your attention to the fact that the company has

incurred loss at Rs. 11.395 million mainly due to depreciation and interest expenses

incurred. The accumulated loss upto June 30, 2004 is Rs. 76.029 milfion. The current

liabilities exceeded current assets by Rs. 37.815 million. The accounts have been

prepared this year also on a going concern basis validity of which depends on the

support from directors of the company towards providing working capital and other

finance in absence of which the basis would not be valid and adjustment would have

to be made for any gain or loss arising on realisation of company's assets.

2. The written down value of fixed assets of the company is in excess and the

accumulated loss is understated by Rs.4.256 miliion as the Company has not fully

charged depreciation from 2000-01 through 2002-03 as mentioned in note 10 to the

accounts.

3. That the company has not made provision for doubtful balances in other receivables

amounting to Rs.24.887 million as mentioned in note 9.2 to the accounts. Had this

provision been made, loss for the year would have increased by Rs.24.887 million.

NOTE

30-06-2004

30-06-2003

RUPEES

CAPITAL & LIABILITIES

SHARE CAPITAL AND RESERVES

Authorized Capital

5,000,000 ordinary shares of Rs. 10/- each

50,000,000

Issued, subscribed and paid up share capital

3

20,000,000

General reserve

4

53,500,000

Accumulated Loss

-76,029,456

-64,634,842

-2,529,456

8,865,158

LONG TERM LIABILITIES

DEFERRED LIABILITIES

Provision for gratuity

5

0

CURRENT LIABILITIES

Short term running finances

6

176,608,971

177,106,874

Creditors, accrued and other liabilities

7

111,009,740

125,7&4,580

Provision for taxation

8

5,000

Contingencies & Commitments

9

0

287,623,711

302,896,454

285,094,255

311,761,612

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

M/s. Fateh Sports Wear Limited as at June 30, 2004 to comply with the Listing

Regulation No. 37 of the Karachi Stock Exchange (Guarantee) Limited, 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 to 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 beset practices contained in the Code of Corporate

Governance for the year ended June 30, 2004.

NOTE

30-06-2004

30-06-2003

RUPEES

Sales

17

0

565,034

Cost of Sale

18

0

2,161,782

Gross Loss

0

-1,596,748

Administration Expenses

19

3,324,846

6,587,045

Selling Expenses

20

0

15,983

3,324,846

6,603,028

Operating Loss

-3,324,846

-8,199,776

Other Income

21

0

37,869,685

Exchange Gain/(Loss)

5,157,755

-4,901,068

1,832,909

24,768,841

Financial Expenses

22

13,148,523

26,697,803

Other Charges

23

79,000

13,227,523

26,776,803

-11,394,614

-2,007,962

Loss before Taxation

-11,394,614

-2,007,962

Taxation

Current

0

5,000

Prior

0

-290,100

0

-285,100

Loss after Taxation

-11,394,614

-1,722,862

Accumulated Loss brought forward

-64,634,842

-62,911,980

Accumulated Loss carried forward

to Balance Sheet

-76,029,456

-64,634,842

Loss per share basic and diluted

-5.7

-0.86

\

Note: The annexed

se accounts.

NOTE

30-06-2004

30-06-2003

RUPEES

PROPERTY & ASSETS

TANGIBLE FIXED ASSETS

Operating fixed assets

10

35,285,420

38,460,200

CURRENT ASSETS

10,783,732

10,785,116

Stores, spare parts and loose tools

11

21,417,706

20,954,500

Stock-in-trade

12

168,839,715

163,681,958

Trade debts

13

1,563,342

4,719,380

Advances, deposits and prepayments .

14

47,159,357

72,953,050

Other receivables

15

44,983

207,408

Cash and bank balances

16

249,808,835

273,301,412

Share

General

Accumulated

Total

Capital

Reserve

(Loss)

Balance at June 30, 2002

20,000,000

53,500,000

-62,911,980

10,588,020

Loss for the year

0

-1,722,862

Balance as at June 30, 2003

20,000,000

53,500,000

-64,634,842

8,865,158

Loss for the' year

0

-11,394,614

Balance as at June 30, 2004

20,000,000

53,500,000

-76,029,456

-2,529,456

Cash Flow Statement

NOTE

30-06-2004

30-06-2003

RUPEES

Cash (used in) / generated from Operating Activities

A

-4,509,476

1,166,311

Markup / interest paid

-243,249

-7,673,151

Markup received from associated company

0

12,512,424

Gratuity paid

0

-1,856,893

Exchange gain

5,157,755

-4,901,068

Taxes refunded

-69,551

1,496,202

4,844,955

-422,486

Net Cash Flow from Operating Activities

335,479

743,828

Cash flow from investing activities

Fixed Capital Expenditure

0

-726,000

Net cash flow from investing activities

0

-726,000

Cash flow from financing activities

Increase / (Decrease) in long term loan

0

Increase / (Decrease) in short term borrowing

-497,904

97,654

Net cash flow from financing activities

-497,904

97,654

Increase / (decrease) in cash & cash equivalent

B

-162,425

115,482

NOTE: A

Cash Generated from operating activities :

Net (loss) before taxation

-11,394,614

-2,007,962

Mark-up charged from associated companies

0

-37,869,685

Depreciation

3,174,780

1,676,273

Stock Written off

0

5,512,240

Mark-up / interest expenses

13,148,523

26,696,393

Exchange gain

-5,157,755

4,901,068

11,165,548

916,289

Operating loss before working capital changes

-229,066

-1,091,673

(Increase) / Decrease in current assets

Stores, spares and loose tools

1,384

0

Stock-in-trade

-463,206

814,608

Trade debtors

-5,157,757

-399,999

Advances, deposits & pre-payments

3,225,589

681,174

Other receivables

25,793,693

322,730

(Decrease) / Increase in current liabilities

'

Creditors, accrued & other liabilities

-27,680,113