| Refrigerators Manufacturing Company Pakistan
Limited |
|
|
|
|
|
| Annual
Report 2000 |
|
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| CONTENTS |
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| Company
Information |
|
| Directors'
Report |
|
| Auditors'
Report |
|
| Balance Sheet |
|
| Profit
& Loss Account |
|
| Statement
of Changes in Equity |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholder |
|
| Notice
of the AGM |
|
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
| Mumtaz
H. Khan - Chairman |
|
| Aftab
A. Khan -- Chief Executive |
|
| Khalifa
M. Aminullah |
|
| Gerban De Jong |
|
| Dr.
Amjad Waheed |
|
| Shamsuddin
Khan |
|
|
| COMPANY
SECRETARY |
|
| Aftab A. Khan |
|
|
| BANKERS |
|
| ANZ
Grindlays Bank Limited |
|
| Union
Bank Limited |
|
| Habib
Bank Limited |
|
| Muslim
Commercial Bank Limited |
|
| Standard
Chartered Grindlays Bank Limited |
|
| The
Hongkong & Shanghai Banking Corporation Limited |
|
|
| AUDITORS |
|
| A.F.
Ferguson & Co. |
|
|
| REGISTERED
OFFICE |
|
| D-98, S.I.T.E. |
|
| Karachi-75730 |
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|
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| DIRECTORS'
REPORT |
|
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| The
Directors would like to present their report together with the audited
accounts of the Company for the year ended 31 |
|
| December 2000. |
|
|
| BOARD
OF DIRECTORS |
|
| Subsequent
to the election of the Board of Directors in the Second Annual General
Meeting held on 20th June 2000. |
|
| Koninklijke
Philips Electronics N.V. transferred its ordinary shares to Portmarnock
International Limited. |
|
|
| Portmarnock
International nominated Mr. Mumtaz Hassan Khan and Mr. Aftab Alam Khan as
Directors of the |
|
| Company
w.e.f. 30th August 2000 in place of Mr. Javed Iqbal and Mr. Nizam A. Shah
(Nominees of Philips Holland). |
|
|
| Mr.
Farrooq Farooqi resigned as Chief Executive of RMCPL w.e.f. 31st December
2000 and to fill the casual vacancy Mr. |
|
| Aftab
Alam Khan was appointed Managing Director of the Company. |
|
|
| Mr.
Gerben De Jong was appointed Director of the Company nominated by Koninklijke
Philips Electronics N.V. w.e.f. |
|
| 1st
February 2001 in place of Mr. L. G. Mees. |
|
|
| The
Board wishes to place on record its appreciation of the valuable services
rendered by the outgoing Directors at a |
|
| particularly
difficult time and welcoming to the new appointees. |
|
|
| LEGAL
APPOINTMENTS |
|
| M/s.
Orr, Dignum & Co. has been appointed as Legal Advisor of RMCPL to deal
with corporate matters. |
|
|
| M/s.
Faisal Mahmood Ghani & Co. has been appointed Legal Advisor to deal with
the CBA matters on behalf of RMCPL. |
|
|
| BUSINESS
REVIEW |
|
| The
Company was facing a serious cash flow problem and despite lengthy
negotiations has been refused an extension of |
|
| credit
facilities by the banks. Two of the main bankers of the Company, namely,
Muslim Commercial Bank and Union Bank |
|
| have
filed recovery and enforcement of security proceedings in Court.
Additionally, the depressed economic conditions and |
|
| the
decrease in consumers' purchasing power have resulted in a very low operating
income and the Company has been unable |
|
| to
service its bank borrowings. Given the financial situation of the Company,
the foreseeable future and the current economic |
|
| conditions
prevalent in the country, the Board of Directors consider it expedient to
have the Company wound up by the |
|
| Court
pursuant to Section 305(a) of the Companies Ordinance, 1984 instead of
accumulating further losses. |
|
|
| Currently
the Company's operations have yielded a very low operating income, being
inadequate to service its bank borrowings. |
|
| This
has been due to lower margins and higher ratio of Fixed Costs, both these
factors were beyond the control of the |
|
| Company
Management. These results are a consequent to the adverse economic conditions
prevailing in the Country, that |
|
| in
turn have led to a deterioration in the consumer purchasing power (over
capacity). In addition, the prevalent costs of debt |
|
| servicing
are very high, a burden that the Company on account of the aforesaid factors,
was not able to sustain. |
|
|
| In
view of the circumstances stated above, it became impossible to operate the
company any further except to liquidate it |
|
| altogether.
The Accounts were delayed because most people familiar with the completion of
the Audit had resigned or were |
|
| terminated.
Despite this the Management was able to finalize the Accounts, within a
reasonable period. |
|
|
| AUDITORS: |
|
| A.
F. Ferguson & Co. have been the Auditors of the Company. |
|
|
| LEGAL
STATUS: |
|
| A
number of petitions have been filed in the High Court of Sindh, NIRC and
Labour Court by Banks, Service Providers, |
|
| CBA
and Customs. These petitions are being dealt with accordingly through Legal
consultants. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Refrigerators Manufacturing Company
Pakistan Limited as at |
|
| December
31, 2000 and the related profit and loss account, statement of changes in
equity and cash flow |
|
| statement
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: |
|
|
| 1.
As more fully explained in note 1.3 to the annexed accounts, the Company is
in the process |
|
| of
being wound-up. Accordingly the annexed accounts, prepared on a going concern
basis |
|
| and
as described in note 2.1, should have been prepared under the liquidation
basis of |
|
| accounting
i.e. incorporating adjustments, where appropriate, of individual assets and |
|
| liabilities
to estimated net realisable values. However, as the Company has not yet |
|
| commenced
the exercise of determining the net realisable values, the effect of
resulting |
|
| adjustments
on the accounts can not be readily identified and easily determined. |
|
|
| 2.
(a) in our opinion, proper books of account have been kept by the Company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
|
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| (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, |
|
| because
of the effects of net realizable values have not been accounted for as
required under the |
|
| liquidation
basis of accounting as referred to in paragraph 1, the balance sheet, profit
and loss |
|
| account,
statement of changes in equity and cash flow statement together with the
notes forming |
|
| part
thereof do not conform with the approved accounting standards as applicable
in Pakistan, and |
|
| do
not give the information required by the Companies Ordinance, 1984, in the
manner so required, |
|
| and
do not respectively give a true and fair view of the state of the Company's
affairs as at |
|
| December
31, 2000 and of the loss, changes in equity and its cash flows 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). |
|
|
|
|
|
|
A.F. Ferguson & Co. |
|
| 22 August, 2001 |
|
Chartered Accountants |
|
|
|
|
| Balance
Sheet As At December 31, 2000 |
|
|
|
Note |
2000 |
1999 |
|
|
|
(Rupees in
thousands) |
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised
capital |
|
| 10,000,000
Ordinary shares of Rs. 10 each |
|
100,000 |
100,000 |
|
|
|
|
========== |
========== |
|
|
|
|
|
| Issued,
subscribed and paid-up capital |
3 |
50,023 |
50,023 |
|
| Reserves |
|
|
76,380 |
76,380 |
|
| Accumulated
loss |
|
|
(246,030) |
(122,565) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(169,650) |
(46,185) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(119,627) |
3,838 |
|
|
|
|
|
|
| Surplus
on Revaluation of Fixed Assets |
8.2 |
66,686 |
66,686 |
|
|
|
|
|
| Deferred
Liabilities |
|
| Staff
retirement benefits |
|
4 |
6,134 |
3,413 |
|
|
|
|
| Current
Liabilities and Provisions |
|
|
| Short-term
finances under mark-up |
5 |
490,410 |
514,230 |
|
| arrangements |
|
|
|
| Creditors,
accrued and other liabilities |
6 |
72,023 |
62,322 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
562,433 |
576,552 |
|
| Contingencies
and Commitments |
|
7 |
|
|
------------------ |
------------------ |
|
|
|
|
515,626 |
650,489 |
|
|
========== |
========== |
|
|
|
| Tangible
Fixed Assets |
|
|
|
| Operating
assets |
|
8 |
116,912 |
119,468 |
|
| Capital
work-in-progress |
|
9 |
22 |
2,312 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
116,934 |
121,780 |
|
|
|
|
|
|
|
| Long-Term
Loans and Advances |
|
10 |
1,768 |
1,451 |
|
| Long-Term
Deposits |
|
|
1,718 |
1,664 |
|
| Deferred
Taxation |
|
11 |
-- |
11,720 |
|
|
|
|
|
|
| Current Assets |
|
| Stores
and spares |
|
12 |
4,447 |
5,315 |
|
| Stock4n-trade |
|
13 |
204,643 |
261,128 |
|
| Trade debts |
|
14 |
130,649 |
200,621 |
|
| Deposits
and short-term prepayments |
15 |
8,398 |
4,458 |
|
| Other
receivables |
|
16 |
20,729 |
21,259 |
|
| Taxation |
|
|
22,497 |
15,847 |
|
| Cash
and bank balances |
|
17 |
3,843 |
5,246 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
395,206 |
513,874 |
|
|
|
|
------------------ |
------------------ |
|
|
|
515,626 |
650,489 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| For
the Year Ended December 31, 2000 |
|
|
|
|
Note |
2000 |
1999 |
|
|
|
|
(Rupees in
thousands) |
|
|
|
|
| Net Sales |
|
18 |
444,040 |
576,099 |
|
| Cost
of goods sold |
|
19 |
382,181 |
466,066 |
|
|
|
|
------------------ |
------------------ |
|
| Gross profit |
|
|
61,859 |
110,033 |
|
| Selling
and administration expenses |
20 |
90,577 |
104,996 |
|
|
|
|
------------------ |
------------------ |
|
| Operating
(1oss)/profit |
|
|
(28,718) |
5,037 |
|
| Other income |
|
21 |
1,264 |
1,383 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(27,454) |
6,420 |
|
|
|
|
|
|
| Financial
charges |
|
22 |
70,843 |
62,003 |
|
| Other charges |
|
23 |
5,954 |
1,337 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
76,797 |
63,340 |
|
|
------------------ |
------------------ |
|
| Loss
before taxation |
|
|
(104,251) |
(56,920) |
|
| Taxation |
|
24 |
19,214 |
1,311 |
|
|
|
|
------------------ |
------------------ |
|
| Loss
after taxation |
|
|
(123,465) |
(58,231) |
|
| Unappropriated
loss |
|
|
(122,565) |
(64,334) |
|
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss carried forward |
|
(246,030) |
(122,565) |
|
|
========== |
========== |
|
| Loss
per share - basic and diluted |
25 |
(24.68) |
(11.64) |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN EQUITY |
|
| For
the Year Ended December 31, 2000 |
|
|
|
|
|
Share |
Revenue
Reserves |
|
Unappropriated |
Total |
|
|
Capital |
General |
Self |
Total |
profit |
|
|
|
|
Insurance |
|
|
|
|
RUPEES IN THOUSANDS |
|
|
| Balance
as at December 31, 1998/January 1, 1999 |
50,023 |
75,630 |
750 |
76,380 |
(64,334) |
62,069 |
|
| Loss
for the year |
-- |
-- |
-- |
-- |
(58,231) |
(58,231) |
|
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at December 31, 1999/January 1, 2000 |
50,023 |
75,630 |
750 |
76,380 |
(122,565) |
3,838 |
|
| Loss
for the year |
-- |
-- |
-- |
-- |
(123,465) |
(123,465) |
|
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at December 31, 2000 |
50,023 |
75,630 |
750 |
76,380 |
(246,030) |
(119,627) |
|
|
========== |
========== |
========== |
========== |
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| CASH
FLOW STATEMENT |
|
| For
the Year Ended December 31, 2000 |
|
|
|
Note |
2000 |
1999 |
|
|
|
(Rupees in
thousands) |
|
|
|
|
| Cash
flow from operating activities |
|
|
| Cash
generated from/(used in) operations |
26 |
119,336 |
(73,330) |
|
| Staff
retirement benefit paid - net |
|
|
(940) |
(2,962) |
|
| Financial
charges paid |
|
|
(76,892) |
(52,465) |
|
| Taxes paid |
|
|
(14,144) |
(30,235) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
27,360 |
(158,992) |
|
|
| Net
cash inflow/(outflow) from operating activities |
|
|
| Cash
flow from investing activities |
|
| Fixed
capital expenditure - net |
|
|
(4,588) |
(22,881) |
|
| Sale
proceeds of fixed assets |
|
|
16 |
-- |
|
| Long-term
deposits - net |
|
|
(54) |
(715) |
|
| Long-term
loans and advances - net |
|
(317) |
(529) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash (outflow) from investing activities |
|
(4,943) |
(24,125) |
|
| Cash
flow from financing activities |
|
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
| Net
increase/(decrease) in cash and cash equivalents |
22,417 |
(183,117) |
|
| Cash
and cash equivalents at the end of the year |
|
(508,984) |
(325,867) |
|
|
|
|
------------------ |
------------------ |
|
| The
annexed notes form an integral part of these accounts. |
27 |
(486,567) |
(508,984) |
|
|
|
|
========== |
========== |
|
|
|
|
|
Chief Executive |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2000 |
|
|
| 1.
LEGAL STATUS AND OPERATIONS |
|
|
| 1.1
The Company is a public company incorporated in Pakistan under the Companies
Ordinance, 1984. Its shares |
|
| are
listed on the Karachi Stock Exchange and is engaged in the manufacturing and
marketing of major |
|
| domestic
appliances. |
|
|
|
|
|
|
| 1.2
The Company under a Scheme oŁ Arrangement and as sanctioned by the High Court
of Sindh was vested, with |
|
| effect
from July 1, 1997, the Major Domestic Appliances (MDA) undertaking of Philips
Electrical Industries of |
|
| Pakistan
Limited (PEI) inclusive of MDA business and all assets, rights, liabilities
and obligations pertaining |
|
| thereto.
Accordingly, the issued and paid up share capital of PEI was proportionately
reduced and transferred to |
|
| the Company. |
|
|
|
|
| 1.3
The Company had been facing serious cash flow problems in recent months and
despite exhaustive negotiations |
|
| had
been refused an extension oŁ credit by the banks. Further, two of the main
bankers oŁ the Company have |
|
| filed
recovery and enforcement of security proceedings in the Court. In addition a
creditor has also filed a |
|
| petition
with the High Court of Sindh, Karachi for the winding-up oŁ the Company for
non-payment of its dues. |
|
| Therefore,
the Board oŁ Directors, considering the dire financial condition and
inability to sustain profitable |
|
| operation,
decided in their subsequent to year end meeting oŁ March 26, 2001 to have the
Company wound-up |
|
| by
the Court pursuant to section 305(a) oŁ the Companies Ordinance, 1984. Such a
decision has also been |
|
| approved
by the shareholders in the Extra Ordinary General Meeting held on May 30,
2001. The Company, |
|
| accordingly,
is in the process of submitting a petition in the High Court of Sindh for the
winding-up proceedings. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
| 2.1
Basis of Presentation |
|
| These
accounts have been prepared under the historical cost convention as modified
by the revaluation of |
|
| certain
fixed assets, in accordance with the requirements of the Companies Ordinance,
1984 and International |
|
| Accounting
Standards as applicable in Pakistan. |
|
|
|
|
|
| 2.2
Staff retirement benefits |
|
| The
Company operates an approved and funded defined pension scheme for all
permanent officers. The scheme provides |
|
| pension
based on the employee's average basic salary during the last year of service.
Pensions are payable for life and |
|
| thereafter
to surviving spouses and/or dependent children. The Company also operates an
approved and funded gratuity |
|
| scheme
for all its permanent employees. Gratuity is based on the last drawn basic
salary. |
|
|
| In
addition to the benefits under the funded gratuity scheme, the unionised
staff are also entitled to supplemental gratuity |
|
| benefits.
These supplemental gratuity benefits are presently unfunded and are paid
directly by the Company. |
|
|
| During
the current year the Company has established its own funds for gratuity,
pension and provident schemes, which |
|
| were
previously operated by PEI. The related assets and liabilities have been
transferred by PEI on the basis of actuarial |
|
| valuation
as at December 31, 1999. |
|
|
| The
actuarial valuation of the above pension and gratuity schemes as at December
31, 1999, determined a transitional |
|
| obligation
of Rs. 6.172 million, out of which Rs. 1.171 million of supplemental gratuity
was met by PEI and the |
|
| remaining
amount has been recognised in the current year. |
|
|
| The
projected unit credit method, using the following significant assumptions, is
used by the actuaries for the valuation |
|
| of
the above mentioned funded as well as unfunded schemes: |
|
|
| *
discount rate at 12% per annum |
|
| *
expected rate of return on plan assets at 12% per annum |
|
| *
expected rate of increase in salary at 12% per annum. |
|
|
| The
Company also participates in a defined contribution provident fund for all
its employees. Equal monthly |
|
| contributions
are made to the fund at the rate of 10% of basic salary by the employee and
the Company. |
|
|
| 2.3 Taxation |
|
|
|
| The
charge for current taxation is based on taxable income at the current rates
of taxation after taking into |
|
| account
tax credits and tax rebates available, if any, or on the basis of presumptive
tax regime. |
|
|
|
|
| The
Company accounted for deferred taxation on all major timing differences using
the liability method and as such had |
|
| recognized
deferred tax asset upto December 31, 1999. However, as discussed in note 1.3,
the Company is being |
|
| wound-up,
therefore, such deferred tax asset has been reversed due to uncertainty of
realisation. |
|
|
| 2.4
Tangible fixed assets and depreciation |
|
| Operating
fixed assets are stated at cost less accumulated depreciation except for
leasehold land and buildings |
|
| and
plant and machinery which are stated at revalued amounts less accumulated
depreciation and subsequent |
|
| additions
thereto at cost less accumulated depreciation. Capital work-in-progress is
stated at cost. |
|
|
| Depreciation
is charged to income applying the straight-line method whereby the asset is
written off over its |
|
| estimated
useful life without taking into account any residual value. Depreciation on
additions is charged from |
|
| the
month in which the asset is put to use and on deletions upto the month of
deletion. |
|
|
| Gains
and losses on disposals are taken to income currently. |
|
|
| Maintenance
and repairs are charged to income as and when incurred, major renewals and
improvements are |
|
| capitalised. |
|
|
| 2.5
Stores and spares |
|
| These
are valued at weighted average cost. The value of slow moving items is
appropriately reduced. |
|
|
| 2.6
Stock-in-trade |
|
| Stock-in-trade
is valued at the lower of cost and net realisable value. Cost has been
arrived at on first-in-first- |
|
| out
basis. Cost in relation to work-in-process and manufactured goods include
direct material, wages and |
|
| applicable
manufacturing overheads. Cost of goods-in-transit reflects the purchase price
only. |
|
|
| Net
realisable value is determined by considering the prevailing selling prices
in the ordinary course of |
|
| business
less costs necessary to be incurred to make the sale. |
|
|
| 2.7
Foreign currencies |
|
|
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of exchange approximating to |
|
| those
prevailing at the balance sheet date except where forward exchange contracts
have been entered into for |
|
| repayment
of liabilities in which case the rates contracted for are used. |
|
|
|
|
| Exchange
gains and losses are included in income currently. |
|
|
|
| 8
Revenue recognition |
|
| Sales
are recorded on despatch of goods. |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL |
|
|
|
|
2000 |
1999 |
|
|
|
(Rupees in thousands) |
|
|
|
| 50,000 |
Ordinary shares of Rs. 10
each |
|
|
fully paid in cash |
|
500 |
500 |
|
|
|
|
| 3,920,134 |
Ordinary shares of Rs. 10
each |
|
|
|
issued as fully paid -
note 3.1 |
|
39,201 |
39,201 |
|
|
|
|
| 1,032,234 |
Ordinary shares of Rs. 10
each |
|
|
|
issued as fully paid
bonus shares |
10,322 |
10,322 |
|
| ------------------ |
|
------------------ |
------------------ |
|
| 5,002,368 |
|
|
50,023 |
50,023 |
|
| ========== |
|
========== |
========== |
|
|
| 3.1
These represent shares issued to the shareholders under the Scheme of
Arrangement referred to in note 1.2. |
|
|
|
|
| 3.2
During the year, Royal Philips Electronics, Eindhoven, The Netherlands sold
2,017,747 ordinary shares to |
|
| Portmarnock
International Limited, Jersey, Channel Islands out of its aggregate holding
of 3,026,620 ordinary |
|
| shares
of the Company as at December 31, 1999. |
|
|
|
|
|
| 4.
STAFF RETIREMENT BENEFITS |
|
|
|
|
|
