Gandhara Nissan Limited - Annual Reports

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Ghandhara Nissan Limited

Annual Report 2001

Contents

Company Profile

Notice of the Meeting

Chairman's Review

Directors' Report

Auditors' Report to the Members

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Statement of Changes in Shareholders' Equity

Notes to the Accounts

Pattern of Shareholding

Company Profile

BOARD OF DIRECTORS

Mr. Raza Kuli Khan Khattak

Chairman

Lt. Gen. (Retd) Ali Kuli Khan Khatt

Chief Executive

Mr. Ahmed Kuli Khan Khattak

Mr. Mushtaq Ahmed Khan

Mr. K.U. Rahman

Mr. Jamil A. Shah

Mr. Anis Wahab Zuberi

Mr. Ch. Sher Mohammad

Mr. Zafar Aziz Osmani

COMPANY SECRETARY

Mr. Mohammad Saleem Baig

REGISTERED OFFICE

Ghandhara House

109/2, Clifton Karachi

BANKERS OF THE COMPANY

Allied Bank of Pakistan Limited

Societe Generale The French & International Bank

The Hong Kong & Shanghai Banking Corp.

United Bank Limited

American Express Bank Limited

The Muslim Commercial Bank Limited

The Bank of Tokyo - Mitsubishi Limited

Askari Commercial Bank

Bank Al-Falah

Union Bank Limited

LEGAL & TAX ADVISOR

Shaukat Law Associates

217-218, Central Hotel Annexe

Abdullah Haroon Road, Karachi

AUDITORS

M/s. Hameed Chaudhary & Co.

M/s. Muniff Ziauddin & Co.

Chartered Accountants

5th Floor, Karachi Chambers

5, Victoria Chambers

Hasrat Mohani Road

Abdullah Haroon Road

Karachi

SHARE REGISTRAR

T.H.K. Associates (Pvt) Ltd.

Ground Floor, Sheikh Sultan

Trust Building No. 2,

Beaumont Road, Karachi

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 19th Annual General Meeting of Shareholders of

Ghandhara Nissan Limited will be held on Wednesday, the 26th December, 2001

at 8:30 A.M., at Ghandhara House 109/2, Clifton, Karachi, to transact the

following business:

1. To receive, consider and approve the Audited Accounts of the Company

for the year ended 30th June, 2001.

2. To appoint Auditors for the year ending 30th June, 2002 and to fix their

remuneration. The retiring Auditors, M/s. Hameed Chaudhri & Co.,

Chartered Accountants and Muniff Ziauddin & Co., Chartered

Accountants, being eligible, offer themselves for reappointment.

3. To transact any other business with the permission of the Chairman.

By Order of the Board

M. SALEEM BAIG

Karachi: 4th December, 2001

COMPANY SECRETARY

NOTES:

1. The Share Transfer Books of the company will remain closed from

26th December, 2001 to 4th January, 2002 (both days inclusive).

2. Shareholders are requested to intimate any change in their address to our

Share Registrars, Messrs THK Associates (Pvt) Ltd., Share Department,

Ground Floor, Sheikh Sultan Trust Building No. 2, Beaumont Road,

Karachi.

3. A member entitled to attend and vote at the Annual General Meeting may

appoint another member as his/her Proxy to attend and vote instead of

him/her. Form of Proxy is enclosed with the Annual Report. Votes may be

given personally or by Proxy or by Attorney or, in case of a Corporation, by a

representative. The instrument of Proxy, duly stamped, signed and

witnessed, should be lodged at the Registered Office of the Company at

Ghandhara House, 109/2, Clifton, Karachi, not later than 48 hours before

the time of the meeting.

CDC Account Holders will further have to follow the under-mentioned

guidelines as laid down in Circular - 1 dated January 26, 2000 issued by the

Securities and Exchange Commission of Pakistan.

(a) For Attending the Meeting

i) In case of individuals, the account holder or sub-account holder and/or

the person whose securities are in group account and their registration

details are uploaded as per the regulations, shall authenticate his/her

identity by showing his original National Identity Card (NIC) at the time

of attending the meeting.

ii) In case of corporate entity, the Board of Directors' resolution/power of

attorney with specimen signature of the nominee shall be produced

(unless it has been provided earlier) at the time of the meeting.

(b) For Appointing Proxies

i) In case of individuals, the account holder or sub-account holder and/or

the person whose securities are in group account and their registration

details are uploaded as per the Regulations, shall submit the proxy form

as per the above requirement.

ii) Attested copies of NIC of the beneficial owners and the proxy shall be

furnished with the proxy form.

iii) The proxy shall produce his original NIC at the time of the meeting.

Chairman's Review

I am pleased to welcome you to the Nineteenth Annual General Meeting

of shareholders of the company and to present to you the Annual Report

for the year ended 30th June, 2001.

Economy

Pakistan's economic performance in the Financial Year ended

30th June, 2001, has shown some sign of recovery, as the deficit was

contained within it's targeted level, inflation was low, current account was

in surplus and the foreign exchange reserves were higher; however, on

the negative side, restrained expenditures and efforts for increasing tax

revenues have resulted in a lower purchasing power.

In the large-scale manufacturing sector, this was the first time in seven

years that most industrial groups recorded positive growth; strong growth

in the Automobile and complementary sectors in particular has created a

feeling of optimism as these products have high public profiles.

The Automobile industry in 2000 - 01 showed a marked improvement due

to easy financing available to customer from Banks and Leasing

Companies and despite the economic recession, the production of cars

recorded a volume increase of 22%.

Financial Restructuring

The management is making all efforts and inviting potential investors with

the aim of reviving your company.

We are grateful to the lease creditors who continue to extend their

support and creating confidence in potential investors for injection of

fresh funds.

Contract Assembly Business

We are pleased to inform you that we have recently signed a Contract

Assembly Agreement with Sigma Motors (the Licensee of Land Rover UK)

in Pakistan. The preliminary work has already been completed and the

actual assembly of Land Rover at Ghandhara Nissan's Plant is expected

to start by April 2002. The revenue from this segment will help improve the

financial health of the company.

Review of Operations

The year under review was also a difficult one as the financial crisis of the

Company is continuing.

The Plant capacity remained under utilized, however, during the year, the

Company sold 314 cars against 94 cars in the preceding year.

The fixed factory overheads remained unabsorbed due to low production

volume. Further, high financial charges, exchange loss on foreign

currency liability due to Yen - Rupee parity, incorporation of GNL's share

in associated company losses; all contributed towards the loss

for the year.

Associated Company

Ghandhara Nissan Diesel Limited

During the year the heavy commercial vehicles market remained

depressed due to slow down in economic activities, however the

management adopted stringent measures and restricted the losses to

Rs.23 million in the year under review as compared to over Rs.56 million in

the preceding year.

Future Outlook

The manufacturing sector is expected to continue / improve upon the

preceding years growth. Hopefully, with the successful financial re-

structuring and commencement of Contract Assembly operations the

Company's financial health will improve.

Karachi

Raza Kuli Khan Khattak

Dated: 26th Nov. 2001

Chairman

Directors' Report

The Directors of your Company take pleasure in presenting their

report together with the Audited Accounts and Auditors' Report

thereon for the year then ended 30 June 2001.

Financial Results

The financial results of your Company for the year ended

30 June 2001 under review are summarized as follows:

2001

2000

Rupees in thousand

Loss Before Taxation

(205,162)

(137,065)

Taxation

Current year

(1,239)

(333)

Prior year

(134)

------------------

(1,239)

(467)

------------------

Loss After Taxation

(206,401)

(137,532)

Accumulated Loss

Brought Forward

(660, 164)

(522,632)

Accumulated Loss

------------------

Carried Forward

(866,565)

(660,164)

==========

Loss Per Share

(13.76)

(13.20)

==========

Chairman's Review

The review included in the Annual Report deals inter alia with the

performance of the Company for the year ended 30 June 2001 and

future prospects. The Directors endorse the contents of the review.

Directors' Comments on the Auditors' Report

Your directors have carefully considered the audit report to the

shareholders and are pleased to reply item wise as under.

Item (c) of the Report

The Memorandum of Understanding was signed between GNL and

Lease Syndicate members for the re-scheduling of its lease and LMM

financing facilities on 29th June 2000. The Company could not service

its debts in time due to financial difficulties, therefore, the MOU is

being reappraised and a more viable option is being prepared through

mutual consent.

Item (d) of the Report

The Company could not pay the engineering & technical fee to Nissan

Motor Company and Tomen Corporation on which they have claimed a

mark-up of Rs.26.434 million. In their proposed Financial

Restructuring the management is negotiating for softer terms of

repayment in a longer time frame, we are also hopeful that upon

payment of engineering & technical fee the total mark-up may be

waived by our principals.

The directors are of the opinion that the Company by virtue of its

Nissan operations Franchise is still a going concern; additionally, the

Company's agreement for the contract assembly of Land Rover

vehicles will further enhance its chances of success.

Pattern of Shareholding

The pattern of shareholding of the company is annexed.

Auditors

The present Auditors M/s. Hameed Chaudhri & Co., Chartered

Accountants and M/s. Muniff Ziauddin & Co., Chartered Accountants,

retire and being eligible, offer themselves for reappointment.

For and on behalf of the

Board of Directors

Lt. Gen. (Retd) Ali Kuli Khan Khattak

Jamil A. Shah

Chief Executive

Director

Karachi

Dated: 26th Nov. 2001

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of GHANDHARA NISSAN LIMITED

as at 30th June 2001 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 except for the matter noted in para (c)

and (d) below, 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 statement 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 amount 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;

received confirmation of outstanding balances from the members of the

syndicate in respect of rescheduled / restructured amount of locally

manufactured machinery (LMM) financing facility and lease finances by

the leasing companies / financial institutions for their rescheduled balances

as at 30 June 2001 and waiver of financial charges.

(d) as more fully explained in notes 10 and 24.2 to the financial statements, in

view of the pending negotiations, Tomen Corporation and Nissan Motor

Company have not confirmed the outstanding balances including the

engineering and technical fee payable. Mark-up amounting to Rs.26.434

million has been claimed on engineering and technical fees payable which

has not been accounted for and the fee has been classified as a long term

liability.

(e) 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, give the information required by the Companies

Ordinance, 1984 in the manner so required and except for classification

and carrying value of assets and liabilities as referred to in para (c) and (d)

above, respectively give a true and fair view of the state of the Company's

affairs as at 30 June 2001 and of the loss, its cash flows and changes in

equity for the year then ended; and

(f) in our opinion, no Zakat was deductible at source under the Zakat and Ushr

Ordinance, 1980.

Without qualifying our opinion we draw attention to note 2 in the financial

statements. The company has incurred a net loss of Rs.206.401 million during the

year ended 30 June 2001 and, as of that date the accumulated loss amounting

to Rs.866.565 million. The Company's current liabilities exceeded its current assets

by Rs.343.175 million and its total liabilities exceeded its total assets by

Rs.475.834 million. However, the financial statements have been prepared under

going concern assumption in view of the matters stated in note 2 to these

accounts.

HAMEED CHAUDHARI & CO.

MUNIFF ZIAUDDIN & CO.

CHARTERED ACCOUNTANTS

Date: 26th November 2001

KARACHI

BALANCE SHEET AS AT 30 JUNE 2001

Rupees in thousand

Note

2001

2000

SHARE CAPITAL

Authorised Capital

80,000,000 ordinary shares of

Rs. 10/- each

800,000

==========

Issued, subscribed & paid-up capital

150,000

RESERVE

Capital Reserve

Share premium

40,000

Accumulated loss

(866,565)

(660,164)

------------------

Shareholders' Equity

(676,565)

(470,164)

SURPLUS ON REVALUATION OF FIXED ASSETS

200,731

------------------

(475,834)

(269,433)

LOAN FROM CONTRACTING COMPANY / SPO

203,578

188,578

LONG TERM DEPOSITS

20,111

18,111

LONG TERM LOANS

91,687

ENGINEERING & TECHNICAL FEE PAYABLE

85,288

81,911

OBLIGATION UNDER FINANCE LEASE

281,073

282,451

DEFERRED LIABILITY FOR STAFF GRATUITY

5,475

4,856

CURRENT LIABILITIES

Finance under mark-up arrangements

215,975

156,231

Current maturity of long term liabilities

1,244

5,660

Bills payable against letters of credit

46,043

Creditors, provisions, accrued charges & other liabili

321,962

213,144

Taxation

1,706

467

------------------

540,887

421,545

CONTINGENCIES

------------------

752,265

819,706

==========

The annexed notes form an integral part of the accounts.

FIXED CAPITAL EXPENDITURE

Operating fixed assets

506,617

569,137

Capital work-in-progress

9,000

------------------

506,617

578,137

LONG TERM DEPOSITS

2,904

2,982

LONG TERM INVESTMENTS

45,033

53,493

CURRENT ASSETS

Stores, spares and loose tools

28,165

35,748

Stocks-in-trade

141,583

104,955

Trade debtors - unsecured considered good

2,724

2,957

Advances, deposits, prepayments and

other receivables

23,603

40,312

Cash & bank balances

1,636

1,122

------------------

197,711

185,094

------------------

752,265

819,706

==========

These financial statements were approved by the board of directors and authorised for issue on

26th November 2001 and are signed on its behalf by:

Lt. Gen. (Retd) Ali Kuli Khan Khattak

Jamil A. Shah

Chief Executive

Director

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 30 JUNE 2001

Rupees in thousand

Note

2001

2000

SALES AND SERVICES

244,688

66,541

COST OF SALES

Cost including fixed overheads

(239,519)

(59,899)

Unabsorbed fixed overheads

(77,234)

(81,486)

------------------

(316,753)

(141,385)

------------------

GROSS LOSS

(72,065)

(74,844)

OPERATING EXPENSES

Administrative and Selling

(21,992)

(19,392)

------------------