| Dewan Sugar Mills Limited |
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| Annual
Report 1999 |
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| Mission
Statement |
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| The
mission of Dewan Sugar Mills Limited is to be the finest |
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| Organisation,
and to conduct business responsibly |
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| in
a straight forward way. |
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| Our
basic aim is to benefit the customers, employees |
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| and
shareholders and to fulfil our commitments to the society. |
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| Our
hallmark is honesty, initiative and teamwork of our people |
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| and
our ability to respond effectively to change in all aspects |
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| of
life including technology, culture and environment. |
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| We
will create a work environment, which motivates, recognises |
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| and
rewards achievements at all levels of the Organisation |
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| because |
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| IN
ALLAH WE TRUST & IN PEOPLE WE BELIEVE. |
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| We
will always conduct ourselves with integrity |
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| and
strive to be the best. |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
DEWAN ZIA-UR-REHMAN
FAROOQUI |
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Chairman |
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DEWAN GHULAM MUSTAFA
KHALID |
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Vice Chairman |
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DEWAN MOHAMMAD YOUSUF
FAROOQUI |
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Managing Director / Chief
Executive |
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DEWAN ABDUL REHMAN
FAROOQUI |
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Deputy Managing Director |
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DEWAN MUHAMMAD AYUB
KHALID |
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DEWAN ASIM MUSHFIQ
FAROOQUI |
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DEWAN ABDULLAH AHMED
SWALEH FAROOQUI |
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| AUDITORS |
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MESSRS. FARUQ ALI &
CO. |
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Chartered Accountants |
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Habib Square, |
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M.A. Jinnah Road, |
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Karachi. |
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| TAX
ADVISORS |
SHARIF & COMPANY |
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Advocates |
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| BANKERS |
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MUSLIM COMMERCIAL BANK
LIMITED |
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HABIB BANK LIMITED |
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SOCIETE GENERALE, |
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THE FRENCH &
INTERNATIONAL BANK |
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STANDARD CHARTERED BANK |
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AMERICAN EXPRESS BANK |
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BANK OF AMERICA |
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CITI BANK |
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ABN AMRO BANK |
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UNITED BANK LIMITED |
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| REGISTERED
OFFICE |
DEWAN CENTRE |
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3-A, Lalazar, |
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Beach Hotel Road, |
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Karachi - 74000, |
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Pakistan. |
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| MILLS |
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JILLANIABAD, BUDHO TALPUR |
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Taluka: Mirpur Bathoro, |
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District: Thatta, Sindh, |
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Pakistan. |
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| CONTENTS |
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| Notice
of the Meeting |
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| Statement
Under Section 160 |
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| Directors'
Report |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Share Holding |
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| NOTICE
OF EIGHTEENTH ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 18th Annual General Meeting of Dewan Sugar Mills
Limited will be |
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| held
on 25 March, 2000 at 6:30 p.m. at Dewan Centre, 3-A Lalazar Beach Hotel Road,
Karachi, to |
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| transact
the following business: |
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| ORDINARY
BUSINESS: |
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| 1.
Recitation from HOLY QURAN. |
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| 2.
To read and confirm the minutes of the Extra Ordinary General Meeting held on
20th |
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| September,
1999. |
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| 3.
To receive, consider and adopt the annual audited accounts for the year ended
30 September, |
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| 1999
together with the Directors' and Auditors' Report thereon. |
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| 4.
To approve the declaration of Cash Dividend @ 12.5% and issue of bonus shares
@ 10%. |
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| 5.
To appoint Auditors of the Company for the year ending 30 September 2000 and
to fix their |
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| remuneration. |
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| SPECIAL
BUSINESS: |
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| 6.
To consider and approve short term loans and advances, out of surplus funds
available with |
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| the
Company to Dewan Textile Mills Limited and/or Dewan Khalid Textile Mills
Limited |
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| and/or
Dewan Mushtaq Textile Mills Limited, in compliance with the provisions of
Section 208 |
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| of
the Companies Ordinance, 1984. |
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| 7.
To approve remuneration payable to the Chief Executive. |
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| 8.
To consider and approve the increase in the authorised capital of the Company
from |
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| Rs.
150,000,000/- to Rs. 300,000,000/-. |
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| 9.
To transact any other business with the permission of the Chairman. |
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By and on behalf of Board
of Directors |
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| Date:
04 March, 2000 |
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(DEWAN MOHAMMAD YOUSUF
FAROOQUI) |
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| Place
· Karachi: |
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Managing Director/Chief
Executive |
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| NOTES: |
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| 1.
The Share Transfer Books of the Company will remain closed from 24 March,
2000 to 31 March, |
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| 2000
(Both days inclusive). |
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| 2.
A member entitled to attend, speak and vote at the meeting is entitled to
appoint a proxy to |
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| attend,
speak and vote for him/her. (A proxy must be member of the company). |
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| 3.
An instrument of proxy and a power of attorney or other authority (if any)
under which it is |
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| signed.
or a notarially certified copy of such power of attorney, in order to be
valid must be |
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| deposited
at the registered office of the Company not less than 48 hours before the
time of the |
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| meeting. |
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| 4.
Members are requested to notify any change in their addresses immediately. |
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| "Statement
under section 160 of the Companies Ordinance, 1984 is attached with the
Annual |
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| Report
circulated to the members of the company". |
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| STATEMENT
UNDER SECTION 160 |
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| OF
THE COMPANIES ORDINANCE, 1984 |
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| This
statement is annexed to the Notice of the 18th Annual General Meeting of
Dewan Sugar Mills |
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| Limited
(hereinafter referred to as DSML.) to be held on 25 March, 2000 and sets out
material fact |
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| concerning
the Special Business to be transacted at the Meeting. |
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| 1.
Investments in Associated Companies |
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| The
Board of Directors considers to advance temporary short term financing to the
associated |
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| companies
out of surplus funds available with the Company. Details of such financing
are given |
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| below: |
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| (i)
Name of borrower Company and asso- |
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- Dewan Textile Mills
Limited |
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| ciated undertaking
together with the |
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Rupees Fifty Million only |
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| amount
of loans and advances. |
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- Dewan Khalid Textile
Mills Limited |
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Rupees Fifty Million only |
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- Dewan Mushtaq Textile
Mills Limited |
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Rupees Fifty Million only |
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| (ii)
Rate of interest to be charged on each |
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- 1% above the rate on
which the lending |
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| loan and advance together
with the |
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Company has obtained its
own borrowing |
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| particulars
of collateral security to be |
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- No Security is
considered necessary as all the |
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| obtained
from borrower. |
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companies are under
common management |
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|
control. |
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| (iii)
Period for which these loans and |
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- Twelve Months |
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| advances
will be made |
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| (iv)
The terms of repayment or any other |
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- The loans and advances
are adjustable within |
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| terms
of loans and advances. |
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a period of twelve months
or as and when |
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required by the lending
Company. |
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| (v)
Purpose of loans and advances |
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- The purpose of loans
and advances is to pro- |
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vide any immediate
requirement of working |
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capital of the borrowing
Company. |
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| (vi)
Benefits likely to accrue to the |
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The investing Company and
its shareholders |
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| Company and its shareholders
from |
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will be benefited in a
manner that their invest- |
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| loans
and advances |
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ment will fetch a return
of one percent over |
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and above the mark-up
rate at which the |
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investing Company has
borrowed. Further, |
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the surplus funds will
not remain idle and will |
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be invested in the most
efficient manner |
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whereby the investing
Company, not only get- |
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ting good return but the
funds will also remain |
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at the disposal of the
investing Company as |
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such loans and advances
are repayable on |
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|
demand. |
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| In
this regard following resolution is proposed to be passed, with or without
modification, as a |
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| 'SPECIAL
RESOLUTION.' |
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| "Resolved
that the Board of Directors of the Company be and is hereby authorised to
make |
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| temporary
short term loans / advances to the following associated companies up to
maximum |
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| limit
of Rs. 50 million each at the mark up rate of 1% above the rate on which the
Company has |
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| obtained
the borrowing. |
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| -Dewan
Textile Mills Limited |
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| -Dewan
Khalid Textile Mills Limited |
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| -Dewan
Mushtaq Textile Mills Limited |
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| These
temporary loans / advances shall be adjusted as and when required by the
Company and |
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| shall
not exceed 12 months period." |
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| 2.
Remuneration payable to the Chief Executive and whole-time working Director |
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| Approval
of shareholders will be sought for the remuneration payable to the Chief
Executive and |
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| whole
time working Director. For this purpose it is intended to propose that the
following |
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| resolution
be passed as an Ordinary Resolution, namely: |
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| "Resolved
that the Company hereby authorises the payment as remuneration to Dewan |
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| Mohammad
Yousuf Farooqui, Chief Executive, Rs. 75,000 per month, exclusive of
perquisites |
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| and
other benefits to which he is entitled under his terms of office for the
whole year ending 30 |
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| September
2000 and for the remainder of his term remuneration as increased by the sums
that |
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| may
be applicable under their respective terms of office". |
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| 3.
Increase in Authorised Capital |
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| In
order to enable the Company to increase its paid-up capital in excess of the
existing authorised |
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| capital
of Rs. 150,000,000/- and to cater for such increases from time to time, the
directors have |
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| recommended
to raise the authorised capital to Rs. 300,000,000/- which the shareholders
may |
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| approve
by passing with or without modification the following Resolution as a Special |
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| Resolution
which is as follows: |
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| Resolved
that the Authorised capital of the Company be and is hereby increased from
Rs. |
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| 150,000,000/-
(Rupees One Hundred and Fifty Million) divided into 15,000,000 ordinary
shares |
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| of
Rs. 10/- each to Rs. 300,000,000/- (Rupees Three Hundred Million) divided
into 30,000,000 |
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| ordinary
shares of Rs. 10/- each and to effect the same clause V of the Memorandum of |
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| Association
and Article No. 4 of the Articles of Association be and are hereby amended to
read |
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| as follows: |
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| Clause
V of Memorandum of Association of the Company |
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| The
Share Capital of the Company is Rs. 300,000,000/- (Rupees Three Hundred
Million) |
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| divided
into 30,000,000 Ordinary Shares of Rs. 10/- each. The Company shall have
powers to |
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| increase
or reduce the share capital from time to time as it may think proper and the
shares |
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| forming
the capital-original, increased or reduced may be divided into such classes,
in |
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| accordance
with the provisions of the Companies Ordinance, 1984. |
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| Article
No. 4 of the Articles of Association of the Company |
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| The
Share Capital of the Company is Rs. 300,000,000/- divided into 30,000,000
ordinary shares |
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| of
Rs. 10/- each. |
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| DIRECTORS'
REPORT |
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| Your
Directors take pleasure in presenting to you the Eighteenth Annual Report of
the Company |
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| together
with the audited accounts for the financial year ended on September 30, 1999. |
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| Alhamdolillah,
the results for the year under review are satisfactory despite many adverse
factors |
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| such
as increase in quality premium, low recovery and downward slide in sugar
prices in the inter- |
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| national
markets. |
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| By
the Grace of Almighty Allah, your Company has earned a Net Profit of Rs.
38.781 million after |
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| Charging
Rs. 71.504 million for depreciation and making a provision for Tax amounting
to Rs. 47.263 |
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| million.
The highlights of the Accounts are as follows: |
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|
1999 |
1998 |
|
|
(Rupees) |
|
|
| Gross
Sales - Sugar |
|
1,681,413,444 |
2,253,372,127 |
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| Fertilizer |
|
665,362,990 |
-- |
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| Polypropylene |
|
99,484,166 |
-- |
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|
---------- |
---------- |
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|
2,446,260,600 |
2,253,372,127 |
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|
========== |
========== |
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| Depreciation
(Consolidated) |
|
71,503,904 |
62,000,552 |
|
| Financial
Charges (Consolidated) |
|
140,408,969 |
112,377,805 |
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| Taxation
(Consolidated) |
|
47,263,503 |
22,083,130 |
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| Net
profit after tax |
|
38,781,268 |
30,785,993 |
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| We
humbly and gratefully bow our heads before Almighty Allah, the Most Gracious
and Merciful, |
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| who
has rewarded and blessed your Company with His innumerable bounties in the
difficult times. |
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| IF
YE GIVE THANKS, I WILL GIVE YOU MORE (HOLY QURAN) |
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| Your
Directors are pleased to propose appropriation of profit in the following
manner: |
|
|
| - Profit for the Year 1998-99 |
|
| - Un-appropriated profit
brought forward |
|
Rs. |
38,781,268 |
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|
Rs. |
99,016,086 |
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| Profit
available for appropriation |
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|
---------- |
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|
Rs. |
137,797,354 |
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|
========== |
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| Appropriation |
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| -
Cash Dividend @9% - 1997-98 |
|
Rs. |
12,447,270 |
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| Final
Cash Dividend @ 12.5% |
|
Rs. |
17,287,875 |
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| Proposed
issue of Bonus Shares @ 10% |
|
Rs. |
13,830,300 |
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| -
Un-appropriated profit carried forward |
|
Rs. |
94,231,909 |
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|
---------- |
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Total |
Rs. |
137,797,354 |
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|
========== |
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| The
Board of Directors took decision for appropriation of the profit keeping in
view the expectations |
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| of
the shareholders from Dewan Mushtaq Group, statutory regulations future
profitability and pre- |
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| sent
scenario of sugar industry. |
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| The
Board also decided to apprise its valued shareholders with the current status
and future preva- |
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| lent
situation of Sugar Industry in detail through this report. |
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|
| PLANT
PERFORMANCE |
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| The
sugar cane crushing season for 1998-99 commenced on 11 November 1998 and
continued upto |
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| 14
April 1999. During the season, the plant crushed 1,054,999 metric tons or
28,265, 975 maunds of |
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| sugar
cane. Total white sugar produced was 100,860 metric tons at an average
recovery of 9.56%. |
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| Total
quantity of molasses produced was 54,725 metric tons at an average recovery
of 5.19%. Again |
|
| due
to availability of lower quality sugar cane near the end of the season
coupled with start up of |
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| new
factories and expansion of existing mills in the vicinity, we could not meet
the target of crush- |
|
| ing
3.5 crore maunds. |
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|
| REVIEW
ON ACCOUNTS |
|
|
| Alhamdolillah,
despite lower recovery; lower margins, increased financial expenses and other |
|
| inputs;
the result may be termed as satisfactory. The total gross sales of sugar
& molasses of the com- |
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| pany
amounted to Rs. 1.68 billion as compared to Rs. 2.25 billion in the previous
year. The Earning |
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| per
Share (EPS) of the Company works out to Rs. 2.80 as compared to last year's
EPS, which was Rs. |
|
| 2.45.
Alhamdolillah, your Company has been able to meet all its financial
obligations on time and |
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| from
its own resources. |
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|
| The
current season of sugar again witnessed substantial export from Pakistan to
all parts of the |
|
| world
with major shipments going to India and Indonesia but this has not helped in
improving the |
|
| profitability
in the industry. The average export price from Pakistan was around US$ 260
per ton |
|
| during
the season compared to US$ 290 per ton in the previous season. The
international prices |
|
| recorded
its lowest of US$ 180 per ton. Your Company was allowed a specific export
quota of around |
|
| 24,000
tons. In view of low international prices the Government allowed rebate of
Rs. 4,500 per ton |
|
| on
export which made this export possible. Major exports were affected between
December 1998 and |
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| March 1999. |
|
|
| Whilst
the rebate announced by the Government was significant, its payment was
delayed beyond |
|
| normal
time which created pressure on liquidity of the companies and also resulted
in higher finan- |
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| cial charges. |
|
|
| The
export that your Company made was based on quota announced by the Pakistan
sugar Mills |
|
| Association
which also imposed penalties for non-performance. This was done to allow an
equal |
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| opportunity
to all the mills to participate in the export. The export of sugar helped in
reducing the |
|
| pressure
of over supply in the local market and maintained equilibrium of stock within
the Country. |
|
| However,
substantial stocks were held for around eight to ten months which resulted in
high finan- |
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| cial charges. |
|
|
| The
tax figure increased significantly over the previous year as the Company paid
withholding tax |
|
| to
custom authorities at the rate of 5 per cent on the import of fertilizer for
trading purposes. This |
|
| withholding
tax is treated as full and final settlement of income tax obligation for
trading business. |
|
|
| In
Sindh Province, area cultivated under sugar cane increased to 270,800
(1997/98 --261,586) |
|
| hectares,
up by 3.52% with yields improving to 63% (1997/98 -- 61%) h/t. up by 3%. This
gave an |
|
| aggregate
harvest of 17,050,700 (1997/98 -- 15,999,614) tons. Supplies to Sindh Sugar
Industry |
|
| increased
to 15.095 (1997/98 -- 13.853) million tons, up by 9%, forming 89% (1997/98 --
87%) of the |
|
| crop
harvest. A larger crop and also a larger crushing influenced recovery to drop
by 10% to 8.96% |
|
| (1997/98
--9.92%) which indicates a steady decline in sugar cane quality. This vital
area pertaining |
|
| to
quality of sugar can deserves attention on urgent basis. The arrest of
decline in quality of sugar |
|
| cane
and its improvement will serve as catalyst for providing boom in the sugar
industry. It is sugar |
|
| per
hectare that serves as medium of measuring production efficiency, as the
famous proverb goes, |
|
| sugar
is produces in fields and processed in factories |
|
|
| DIVERSITY
AND INTEGRATION |
|
|
| The
polypropylene packaging plant achieved capacity utilisation of around 90%
during the year. |
|
| The
bags have been well received in the market. In the current year, the division
has earned a net |
|
| profit
before tax of Rs. 1,232,892 after charging depreciation of Rs. 9,264,602 and
financial charges of |
|
| Rs.
11,068,274. |
|
|
| During
the year your Directors also imported fertilisers. In the past years, the
imported fertiliser was |
|
| supplied
to sugar cane growers as a loan the price of which was adjusted from their
sugar cane sup- |
|
| plies.
In the current year, apart from providing fertiliser to sugar cane growers as
a loan, it was also |
|
| sold
in the market. Your Company has earned a profit of Rs. 42,761,330 before tax
from this activity. |
|
| This
trading activity also benefited polypropylene division as their bags were
used for packing of |
|
| fertiliser
at sea port. The trading in fertilizer provided support to your Company in
respect of prof- |
|
| itability
as well. |
|
|
| Your
Company obtained approval from it's shareholders in Extra Ordinary General
Meeting held on |
|
| September
20, 1999 to make an investment in the equity of Dewan Farooque Motors
Limited. During |
|
| the
current year it has subscribed Rs. 130 million in 13 million ordinary shares
of RS. 10 par value. |
|
| The
new company is shaping up well and the models it has launched are receiving
good response |
|
| from
the market. The Initial Public Offering to the general public will be made
soon. The Board feels |
|
| satisfied
with this investment and is confident that it will be a profitable venture
which will benefit |
|
| the
shareholders. |
|
|
| CURRENT
YEAR PROSPECTS |
|
|
| The
present sugar cane crushing season (1999-2000) began on 03 November 1999 and
upto 29 |
|
| February
2000 the plant crushed 842,228 metric tons or 22,565,220 maunds of sugar cane
at an aver- |
|
| age
recovery of 9.93% and produced 82,695 metric tons of sugar and 41,079 metric
tons of molasses. |
|
|
| The
national production is expected to touch 2.8 million tons which alongwith
carry over stock of |
|
| 0.2
million tons will adequately meet the country's annual consumption
requirement of 3 million |
|
| tons.
Due to lower production of sugar and equilibrium between demand and supply
Government |
|
| has
not allowed it's export. |
|
|
| Contrary
to the local scene the international sugar market is facing a huge glut. Due
to this over- |
|
| supply
situation international prices are moving between US$ 160 to US 180 per ton
and the man- |
|
| ufacturers
are looking for markets to dump their product. Timely action of the previous
Government |
|
| to
levy regulatory duty has saved the local sugar industry from a major
disaster. |
|
|
| Due
to volatile international market situation and extremely low price of sugar
Government should |
|
| ensure
that adequate protection is provided to the local industry against cheap
imports. Under the |
|
| WTO's
requirement the ITP on imported products have been replaced by 'transaction
value' from |
|
| January
01, 2000. This will have far reaching implications in a downward spiralling
international |
|
| market,
therefore, the Government will have to be vigilant in tracking the prices to
curb any cheap |
|
| sugar
imports making way in the country. |
|
|
| VOTE
OF THANKS |
|
|
| The
Board puts on record its gratitude to its valuable shareholders, federal and
provincial govern- |
|
| ment
functionaries, banks, development financial institutions, and customers of
'Salsabil' whose |
|
| cooperation,
continued support and patronage have enabled your Company to surpass the
desired |
|
| result. |
|
|
| The
Board also express its thanks for the valuable teamwork, loyalty and laudable
efforts rendered |
|
| by
the executives, staff members and workers of your Company, during the year
under review, and |
|
| wishes
to place on record its appreciation for the same. |
|
|
| AUDITORS |
|
|
| The
Auditors of your Company, M/s. Faruq Ali & Company. Chartered
Accountants, retire and offer |
|
| their
services for re-appointment for the ensuing year on the same remuneration. |
|
|
| YEAR 2000 |
|
|
| The
onset of Year 2000 has cleared all the hyperbole regarding the famous Y2K
problem. We are |
|
| pleased
to inform our shareholders that all our Hardware and Software is functioning
as usual with- |
|
| out
any problem. Alhamdolillah, all the applications are working perfectly and
the results obtained |
|
| from
computer generated information reconciles to the manual records that were
maintained in |
|
| order
to cater to any unforeseen circumstances. |
|
|
| CONCLUSION |
|
|
| In
conclusion, we bow, beg and pray to Almighty Allah, Rahman-o-Rahim, in the
name of our |
|
| beloved
prophet, Muhammad, peace be upon him, for continued showering of His
Blessings, |
|
| Guidance,
Strength, Health and Prosperity to us, our company, Country and Nation; and
also pray |
|
| to
Almighty Allah to bestow peace, harmony, brotherhood and unity in true
Islamic spirit to whole |
|
| of
Muslim Ummah, Ameen, Summa-Ameen. |
|
|
| LO-MY
LORD IS INDEED HEARER OF PRAYER (HOLY QURAN) |
|
|
|
For and on behalf of the
Board of Directors |
|
|
|
Dewan Mohammad Yousuf
Farooqui |
|
| Karachi
· March 02, 2000 |
|
Managing Director/Chief
Executive |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of Dewan Sugar Mills Limited, as at
30th September, 1999 |
|
| and
the related Profit and Loss Account 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 purpose of our
audit and, after |
|
| due
verification thereof, 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 and the Cash Flow Statement,
together with the |
|
| Notes
forming part thereof, 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 30 September 1999 and of the profit and the Cash Flow 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. |
|
|
| Faruq
Ali & Company |
|
| Chartered
Accountants |
|
| Karachi. |
|
| Date:
02 March, 2000 |
|
|
|
