Contents

 

 

 

 

 

 

 

1.                  Company Information………………………………………………………( 3 )

 

2.                  Notice of Annual General Meeting…………………………………………( 4 )

 

3.                  Chairman’s Review………………………………………………………...( 6 )

 

4.                  Director’s Report…………………………………………………...............( 7 )

 

5.                  Key Financial & Operation Data…………………………………...............( 9 )

 

6.                  Compliance with the Code of Corporate Governance…………….............( 10 ) 

 

7.                  Auditor’s Review Report to the Members on Compliance with

the Best Practices of Code of Corporate Governance……………………..( 11 )

 

8.                  Auditor’s Report…………………………………………………..............( 12 )

 

9.                  Balance Sheet……………………………………………………...............( 13 )

 

10.              Profit and Loss Account…………………………………………..............( 14 )

 

11.              Statement of Changes in Financial Position (Cash Flow Statement)……..( 15 )

 

12.              Statement of Changes in Equity………………………………………..…( 16 )

 

13.              Notes to the Financial Statements…………………………………………( 17 )

 

14.              Pattern of Shareholdings………………………………………………..…( 39 )

 

15.              Proxy Form……………………………………………………………..…( 40 )

 

 

 

 

Company information

 

 

 

Board of Directors:

                Mr. Mohammad Saeed                        Chairman

                Mr. Yusuf Babar Khan                        Managing Director & Chief Executive

                Mr. H. P. Kotwal                                   Director

                Mr. Salman Tarik Kureshi                       //

                Mr. Sheikh Ajza Majid                            //

                Mr. Shahid Anwar                                   //

                Mr. John Wilson                                      //

                Mr. Adnan A. Kehar                               //

                Mr. Jamal Khurshid                             Alternate Director to

Mr. Sheikh Ajaz Majid

 

                Audit Committee:

                Mr. H. P. Kotwal                                   Chairman

                Mr. Salman Tarik Kureshi                   Member

                Mr. Adnan A. Kehar                               //

               

                Company Secretary:

                                Mr. Mohammad Shabbir

 

                Auditors:

                                Ford, Rhodes, Sidat Hyder & Co.

                                Chartered Accountants

 

                Legal Advisor:

                                Mr. Abdus Samad

 

                Bankers:

                                American Express Bank Limited                       

Muslim Commercial Bank Limited

                                PICIC Commercial Bank Limited

                                Bank Alfalah Limited

                                Habib Bank Limited

                                National Bank of Pakistan

                                Bank Al-Habib Limited

 

                Registered Office:

                                X/3, Manghopir Road, SITE, Karachi-75700.

 

                Factory:

                                X/3, Manghopir Road, SITE, Karachi-75700.

 

Web SITE Address:

                http://www.buxly.com

 

 

 

 

Notice of annual General Meeting

 

Notice is hereby given that the Forty-Ninth Annual General Meeting of the shareholders of Buxly Paints Limited, Karachi will be held at the Registered Office of the Company at X/3, Manghopir Road, SITE, Karachi-75700, on Thursday October 23, 2003 at 3:00 p.m. to transact the following business:

 

Ordinary Busniess:

1.        To confirm the minutes of the 48^th Annual General Meeting held on Wednesday, October 23, 2002.

2.        To receive and consider the audited Balance Sheet and Profit & Loss Account together with the Directors’ and Auditors’ Report thereon for the year ended June 30, 2003.

3.        To approve the payment of final dividend of Rs. 1.25 per share (12.5%) for the year ended June 30, 2003 as recommended by the Directors.

4.        To appoint Auditors and fix their remuneration. The retiring auditors M/s. Ford Rhodes, Sidat Hyder & Co., Chartered Accountant, have offered themselves for re-appointment.

 

Special Business:

i.                                             To approve the remuneration of the Chief Executive of the Company.

ii.                                            To Amend the Articles of Association:

 

Statement under section 160(1)(b) of the Companies Ordinance 1984 and draft resolutions as required under section 164(1) of the Companies Ordinance 1984, pertaining to the special business referred to above are annexed.

 

 

 

By Order of the Board

 

 

 

 

Karachi                                                                                                                    Mohammad Shabbir

September 29, 2003                                                                                                Company Secretary

 

 

Note:

1.        The Share Transfer Books of the Company will remain closed from Monday, the October 13, 2003 to Saturday, October 25, 2003, both days inclusive. No transfers will be admitted/registered after 1:00 p.m. on Saturday,         October 11, 2003.

 

2.        Any member of the Company entitled to attend and vote may appoint a Proxy to attend and vote instead of him/her. Proxies must be received at the registered office of the Company not less than 48 hours before the meeting.

 

3.        Any individual Beneficial Owner of CDC, entitled to attend and vote at this meeting, must bring his/her NIC or Passport to prove his/her identity and in case of Proxy must enclose an attested copy of his/her NIC or Passport. Representative of corporate members should bring the usual documents required for such purpose.

 

4.        Shareholders are requested to notify the Company of any change in their addresses immediately.

 

 

 

 

 

 

* Statement Under Section 160 of the companies Ordinance 1984

 

Material facts concerning the Special Business to be transacted at the Annual General Meeting and the proposed Resolutions as per section 164(1) of the Compaines Ordinance 1984:

 

1.                                      Remuneration of the Chief Executive:

The Board of Directors of the Company at its meeting held on September 25, 2003 has approved and recommended the remuneration of the Chief Executive as advised to the members through Company’s letter dated                September 29, 2003, and the following resolution is now passed.

 

“Resolved that the remuneration of the Chief Executive as fixed by the Board of Directors, under clause 78 of the Company’s Articles of Association, in its meeting held on September 25, 2003 to take effect from July 01, 2003:

 

1.                                      Basic Salary Rs. 572,400.00 per annum.

2.                                      House Rent Allowance 45% of Basic Salary.

3.                                      Utilities Allowance 10% of Basic Salary.

4.                                      Retirement Benefits Rs. 47,700.00 per annum.

(Provident Fund Contribution)

5.                                      Perquisites Rs. 224,190.00 per annum.

 

He will also be entitled to medical expenses at actual, Company maintained car and 7.5% of Company’s profit after tax for the year ending June 30, 2004 be and is hereby approved”.

 

2.                                      Resolved that clause 88 of the Articles of Association of the Company be and is hereby to be read as follows:

 

88. The remuneration of Directors shall from time to time be determined by the Company in General Meeting.      The remuneration paid for attending meetings of the Board to persons other than the regularly paid Chief Executives and full time working Directors shall be fixed as determined by the Board of Directors.

 

 

 

 

 

 

 

 

 

Chairman’s Review

 

 

It is my privilege and pleasure to welcome you to this 49^th Annual General Meeting and to present to you the report on the performance of your company for the year ended  June 30, 2003.

 

Sales volumes are up and Gross Profit Margin showed further improvement over the previous year. Administrative expenses were curtailed but as indicated in my previous year’s report, in order to redefine and a chalk out fresh and aggressive marketing strategy, selling expenses were substantially increased. The years ahead will bring positive results out of this investment.

 

Happily, the financial charges continued to go down and the Balance Sheet is healthier than the previous year. Accordingly, a dividend of 12.5% is being distributed. The trend so established must continue over the years to come.

 

You will be pleased to know that your Company has made in-roads into South Korea and Australia. And although the volumes were not large, there exist definite growth possibilities and we hope to exploit this opportunity in a bigger way the following year.

 

I take this opportunity of expressing my deep appreciation of the dedicated efforts of the executives and the employees alike due to which your company has turned the corner.

 

May Allah bless you.

 

 

Mohammad Saeed

Chairman

 

 

Karachi

September 25, 2003

 

 

 

 

Directors’ report to the shareholders

 

The Directors are pleased to submit the Annual Report of your Company alongwith the Audited Accounts and the Auditors’ Report thereon for the year ended June 30, 2003. Financial results are as follows:

 

Financial Results:

1.        Board of Directors:

The Board of Directors currently comprises a non-executive Chairman, Chief Executive/Managing Director and six non-executive Directors.

               

2.        Board of Directors’ Meeting:

During the year five meetings of the Board of Directors were held. Details of attendance by each member of the Board are as follows:

 

                Name of Director                                                                  Attendance           

Mr. Mohammad Saeed                                                   :               3

Mr. Yusuf Babar Khan                                                   :               5

Mr. H. P. Kotwal                                                           :               4

Mr. Shahid Anwar                                                          :               5

Mr. Salman Tarik Kureshi                                              :               5

Mr. John Wilson                                                             :               1             

Mr. Jamal Khurshid                                                        :               5

(Alternate to Mr. Sheikh Ajaz Majid)           

Mr. Adnan A. Kehar                                                      :               5

 

3.        Pattern of Shareholding:

A statement showing the Pattern of shareholding appears at page No. ______.

 

4.        Earning per Share:

Earning per share is Rs. 1.23 (2002: Rs. 9.76)

 

5.        Auditors:

The retiring Auditors Messrs Ford, Rhodes, Sidat Hyder & Co., Chartered Accountants being eligible, offer themselves for reappointment. The Audit Committee of the Company has recommended their appointment, which is endorsed by the Board.

 

6.        Corporate and Financial Reporting Framework:

The Board of Directors has taken adequate measures for the implementation of the Regulations of the Code of Corporate Governance issued by the Security and Exchange Commission of Pakistan.

 

The Board of Directors confirms compliance with the Corporate and Financial Reporting Framework of the SECP’s code of corporate governance of the following:

 

i.                                 The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

ii.                                Proper books of account of the Company have been maintained.

iii.                              Appropriate accounting policies have been consistently applied in preparation of the financial statements and accounting estimates are based on reasonable and prudent judgment.

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

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

vi.                              There are no significant doubts upon the Company’s ability to continue as a going concern.

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

viii.                           Key operating and financial data for last six years is annexed at page No. _______.

ix.                               There are no statutory payments on account of tax duties levies and charges which are outstanding.

x.                                Value of investment of employees provident fund based on latest audited accounts for the year ended June 30, 2003 is                       Rs. 4,421,147.00.

 

7.        No. of Employees:

The Company employed 73 (2002: 77) employees at the end of the year.

 

 

 

Karachi                                                  Yusuf Babar Khan                                                                Mohammad Saeed

September 25, 2003                              Chief Executive                                                                    Chairman

 

 

 

 

 

 

Statement of Compliance with

the Code of Corporate Governance

 

This statement is being presented to comply with the code of corporate governance contained in the listing regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance whereby a company is managed in compliance with the best practices of corporate governance.

 

The Company has applied the principles contained in the code of corporate governance in the following manner.

 

1.        The Company encourages representation of independent non-executive directors and director representing minority interests on its Board of Directors. At present the Board includes independent non-executive directors and a director representing minority shareholders.

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

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 DFI or NBFI. None of the directors is a member of the stock exchanges.

4.        The tenure of office of Directors is three years and no casual vacancy occurred since    July 01, 2002.

5.        The Company has prepared a statement of Ethics and Business Practices, which has been signed and circulated to all the directors and employees.

6.        The Board of Directors has developed a vision/mission statement and overall corporate strategy. Significant polices of the company have been formulated and approved by the Board of Directors.

7.        All the powers 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 CEO have been approved by the Board of Directors.

8.        The Chairman of the Board of Directors has been elected from among the non-executive directors of the Company.

9.        The meetings of the Board of Directors were presided over by the Chairman and in his absence by director elected by the directors present at the meeting for the purpose.  The Board of Directors meetings were held at least once in every quarter. Written notices of the Board Meeting along-with agenda and working papers were circulated at least seven days before the meetings and the minutes of the meetings were appropriately recorded and circulated.

10.     The Board is currently in the process of setting up an independent and effective internal audit function.

11.     CFO/Company Secretary was appointed prior to the implementation of the code of corporate governance. Terms of appointment and remuneration in case of future appointments on these positions will be approved by the Board.

12.     The Directors’ Report for the year has been prepared in compliance with the requirements of the code of corporate governance and fully describe the matters to be disclosed.

13.     The Financial statements of the Company were duly endorsed by CEO and CFO before approval by the Board.

14.     The Directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding.

15.     The Board has established an Audit Committee. It comprises three members who are non-executive directors including the Chairman of the committee.

16.     The meetings of the Audit Committee were held once every quarter prior to the approval of quarterly, half yearly and annual results of the Company as required by the code. The terms of reference of the committee have been formed and advised to the committee for compliance.

17.     The necessary written material for the orientation of the Directors to appraise their duties and responsibilities under Companies Ordinance and Code of Corporate Governance has been provided to them whereas orientation courses are currently being planned.

18.     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 Accountants of Pakistan and that they or any other partner 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 Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of the Chartered accountants of Pakistan.

19.     The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulation and the auditors have confirmed that they have observed IFAC guidelines in this regard.

20.     We confirm that all other material principles contained in the code have been complied with except that the company is currently in the process of separating the functions of CFO and Company Secretary and is taking other necessary steps to develop an effective internal audit function as discussed above and as envisaged in the code of corporate governance.

 

 

 

 

 

Karachi                                                                                                                                                    Yusuf Babar Khan

September 25,  2003                                                                                                                               Chief Executive Officer

 

 

 

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 Buxly Paints Limited to comply with the Listing Regulation No.37 (Chapter XI) of Karachi Stock Exchange and Clause 40 (Chapter XIII) of the Listing Regulations of the Lahore Stock Exchange where the Company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company’s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express 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 best practices contained in the Code of Corporate Governance for the year ended June 30, 2003.

 

 

Karachi –                                                                                               Chartered Accountants

September 25, 2003

 

 

 

AUDITORS' REPORT TO THE MEMBERS

 

We have audited the annexed balance sheet of BUXLY PAINTS LIMITED as at June 30, 2003 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

 

It is the responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting 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:

 

(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 except for the changes, as stated in note 2.3 to the financial statements, with which we concur;

 

(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 statement and statement 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 and respectively give a true and fair view of the state of the company's affairs as at June 30, 2003 and of the profit, its cash flows and changes in equity for the year then ended; and

 

(d)           in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980      (XVIII of 1980), was deducted by the company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.

 

(e)           without qualifying our opinion, we draw attention to the disclosure made by the company in note 8.1 to the accompanying financial statements in respect of certain trade debts, aggregating to Rs.1.870 (2002: Rs.2.209) million. Pending the outcome of the matter discussed therein, no provision has been made by the company against the above-referred trade debts in the financial statements of the current year.

 

 

 

 

 

 

Karachi -                                                                                             Chartered Accountants

 

 

BUXLY PAINTS LIMITED

BALANCE SHEET AS AT JUNE 30, 2003

 

					Note	June 30, 2003		June 30, 2002
						(Rs. in '000)
ASSETS								(Restated)
NON-CURRENT ASSETS
	Tangible fixed assets
		Operating fixed assets			3	11,436		12,160
		Capital work-in-progress			4	1,036		-
	Long term deposits				5	677		666
	Deferred taxation				6	3,434		4,257
CURRENT ASSETS
	Stock-in-trade				7	13,828		12,263
	Trade debts				8	40,826		36,820
	Short term investment				9	1,477		1,640
	Advances and deposits				10	2,393		4,024
	Prepayments and other receivables				11	240		259
	Taxation				12	5,716		4,627
	Cash and bank balances				13	2,330		3,934
						66,810		63,567
TOTAL ASSETS						83,393		80,650
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
	Share Capital
		Authorised
			5,000,000 (2002: 5,000,000) Ordinary shares of Rs.10 each			50,000		50,000
		Issued, subscribed and paid-up			14	14,400		14,400
	Reserves				15	22,311		20,393
						36,711		34,793
SURPLUS ON REVALUATION OF FIXED ASSETS					16	4,996		6,936
NON-CURRENT LIABILITIES
	Obligations under finance leases				17	925		3,573
	Deferred liabilities				18	1,508		1,990
CURRENT LIABILITIES
	Current portion of obligations under finance leases					2,648		2,026
	Short term running finances				19	3,282		2,913
	Creditors, accrued and other liabilities				20	31,321		26,877
	Dividends				21	2,002		1,542
						39,253		33,358
COMMITMENT					22
TOTAL EQUITY AND LIABILITIES						83,393		80,650

 

The annexed accounting policies and explanatory notes form an integral part of these financial statements.

 

 

 

 

 

 

          _________________                                                                            ____________                                           

                        Chief Executive                                                                      Director         

 

 

BUXLY PAINTS LIMITED

 

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30, 2003

 

					Note	June 30, 2003		June 30, 2002
						(Rs. in '000)
								(Restated)
NET SALES					23	146,764		120,808
	Cost of sales				24	109,717		95,197
GROSS PROFIT						37,047		25,611
	Administrative expenses				25	10,464		8,050
	Selling expenses				26	21,667		12,933
						32,131		20,983
OPERATING PROFIT						4,916		4,628
OTHER INCOME					27	589		528
						5,505		5,156
	Financial charges				28	1,995		3,769
	Workers’ Profit Participation Fund					175		714
						2,170		4,483
						3,335		673
	Gain on sale of land, building, etc.					-		12,886
PROFIT BEFORE TAXATION						3,335		13,559
	Taxation				29	1,557		(493)
NET PROFIT FOR THE YEAR						1,778		14,052
UNAPPROPRIATED PROFIT / (ACCUMULATED LOSSES)
	BROUGHT FORWARD					14,400		(11,598)
	Effect of change in accounting policy with respect to incremental
		depreciation charged during the year				207		229
	Surplus on revaluation of fixed assets realised during the
		year on disposal of fixed assets				1,733		13,157
						1,940		13,386
PROFIT AVAILABLE FOR APPROPRIATION						18,118		15,840
APPROPRIATION
	Proposed dividend @ 12.5% (Rs.1.25 per Ordinary share
		of Rs.10) [2002: 10% (Re.1 per Ordinary share of Rs.10)]				1,800		1,440
UNAPPROPRIATED PROFIT CARRIED FORWARD						16,318		14,400
BASIC EARNINGS PER SHARE (Rupees per share)					30	1.23		9.76

 

The annexed accounting policies and explanatory notes form an integral part of these financial statements.

 

 

 

                       _________________                                                               ____________                                                       

                        Chief Executive                                                                      Director         

 

 

BUXLY PAINTS LIMITED

CASH FLOW STATEMENT

FOR THE YEAR ENDED JUNE 30, 2003

 

 

					Note	June 30, 2003		June 30, 2002
						(Rs. in '000)
CASH FLOWS FROM OPERATING ACTIVITIES
	Cash generated from operations				31	8,310		(7,439)
	Financial charges paid					(2,017)		(3,439)
	Income tax paid					(1,823)		(741)
	Gratuity paid					(1,455)		-
	Net cash inflow from / (used in) operating activities					3,015		(11,619)
CASH FLOWS FROM INVESTING ACTIVITIES
	Fixed capital expenditure					(1,218)		(1,124)
	Capital work-in-progress					(1,036)		-
	Sale proceeds of fixed assets					480		28,699
	Long term deposits					(11)		(335)
	Short term investments					163		(1,640)
	Net cash (used in) / inflow from investing activities					(1,622)		25,600
CASH FLOWS FROM FINANCING ACTIVITIES
	Dividend paid					(1,340)		-
	Repayment of short term loan					-		(2,886)
	Obligation under finance lease – net					(2,026)		1,286
	Net cash used in financing activities					(3,366)		(1,600)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS						(1,973)		12,381
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR						1,021		(11,360)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR					32	(952)		1,021

 

The annexed accounting policies and explanatory notes form an integral part of these financial statements.

 

 

 

 

 

                       _________________                                                           ____________

                        Chief Executive                                                                      Director         

 

 

BUXLY PAINTS LIMITED

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED JUNE 30, 2003

 

							Share Capital		Reserves
							Issued, Subscribed & paid-up		General reserve			(Accumulated losses) / Unappropriated profit		Total
							--------------------------- (Rs. in 000's) ---------------------------
Balance as at June 30, 2001 as previously reported							14,400		5,993			(19,666)		727
		Effect of change in accounting policy with respect to     incremental depreciation on revaluation of fixed assets,     charged in previous years (notes 2.3(b) and 16)					-		-			4,568		4,568
		Effect of change in accounting policy with respect to     deferred taxation (notes 2.3 (a) and 6)					-		-			3,500		3,500
Balance as at June 30, 2001 as restated							14,400		5,993			(11,598)		8,795
	Net profit for the year						-		-			14,052		14,052
	Surplus on revaluation of fixed assets realised on     disposal of  assets						-		-			13,157		13,157
	Final dividend @ 10%						-		-			(1,440)		(1,440)
	Effect of change in accounting policy with respect to     incremental depreciation on revaluation of fixed assets,     charged in the profit and loss account during the year     (notes 2.3 (b) and 16)						-		-			229		229
Balance as at June 30, 2002 as restated							14,400		5,993			14,400		34,793
	Net profit for the year						-		-			1,778		1,778
	Surplus on revaluation of fixed assets realised on     disposal of assets						-		-			1,733		1,733
	Transferred from surplus on revaluation of fixed assets     on account of incremental depreciation charged in the     profit and loss account in respect of current year     (notes 2.3 (b) and 16)						-		-			207		207
	Final dividend @ 12.5%						-		-			(1,800)		(1,800)
Balance as at June 30, 2003							14,400		5,993			16,318		36,711

 

The annexed accounting policies and explanatory notes form an integral part of these financial statements.

 

 

 

                       _________________                                                                           __________

                                    Chief Executive                                                                                    Director

 

BUXLY PAINTS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2003

 

 

1.         THE COMPANY AND ITS OPERATIONS

 

Buxly Paints Limited was incorporated in Pakistan on April 8, 1954 as a private limited company. The shares of the company are currently listed on the Karachi and Lahore Stock Exchanges. The company is engaged in the manufacturing and sale of paints, pigments, protective surface coatings, varnishes and other related products.

 

The registered office of the company is situated at X-3, Manghopir Road, S.I.T.E., Karachi, Pakistan.

 

2.         SIGNIFICANT ACCOUNTING POLICIES

 

2.1                                                        Basis of preparation

 

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan and the requirements of Companies Ordinance, 1984. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence.

 

2.2                                                      Accounting convention

 

                These financial statements have been prepared under the historical cost convention except for certain fixed assets that are measured at revalued amounts.

 

                2.3          CHANGES IN ACCOUNTING POLICIES

 

          (a)           During the current year, as a result of the adoption of International Accounting Standard (IAS) 12, "Income Taxes”, the company changed its accounting policy to account for deferred tax assets and liabilities in accordance with the provisions of the revised IAS as opposed to the past policy of not accounting for the same. Henceforth, deferred tax is provided, using the liability method, on all major temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the assets can be utilised.

 

                          This policy has been applied retrospectively in order to conform with the benchmark treatment prescribed by International Accounting Standard (IAS) - 8 "Net Profit and Loss for the Period, Fundamental Errors and Changes in Accounting Policies", which requires that any resulting adjustment should be reported as an adjustment to the opening balance of retained earnings of the earliest period presented and comparative information should be restated as if the new policy had always been in use. Accordingly, unrecorded deferred tax asset arisen in the previous years and the opening balance of the accumulated losses have been adjusted as shown in the Statement of Changes in Equity.

 

                          The effect of the change resulted in a net deferred tax asset of Rs.3.434 as at June 30, 2003 whereas the opening balance of accumulated losses has been reduced by Rs.3.500 million, which is the amount of adjustment relating to the periods prior to      June 30, 2001.

          (b)           With effect from the current year, the company has revised its accounting policy in respect of the treatment previously accorded to the incremental depreciation arising on revalued assets and has brought the same in line with the requirements of Section 235 of the Companies Ordinance, 1984, as amended by the Companies (Amendment) Ordinance, 2002 and Securities and Exchange Commission of Pakistan's (SECP)    S.R.O. 45(1)/2003 dated January 13, 2003, as more fully explained in note 16.2.

 

                          This policy has been applied retrospectively in order to conform with the benchmark treatment prescribed by International Accounting Standard (IAS) - 8 "Net Profit and Loss for the Period, Fundamental Errors and Changes in Accounting Policies", which requires that any resulting adjustment should be reported as an adjustment to the opening balance of retained earnings of the earliest period presented and comparative information should be restated as if the new policy had always been in use.

 

Had the company not changed its accounting policy, as mentioned above, unappropriated profit at the end of the year would have been lower by Rs.5.004 million, whereas surplus on revaluation of fixed assets at the end of the year would have been higher by the same amount.

 

2.4                          Operating fixed assets

 

(a)                           Owned

 

These are stated at cost / revalued amounts less accumulated depreciation and impairment, if any. Depreciation is charged to the profit and loss account applying the reducing balance method whereby the cost of the asset is written off over its estimated useful life. The rates used are stated in note 3 to the financial statements. Full year's depreciation is charged in the year of addition while no depreciation is charged in the year of disposal.

 

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

 

Maintenance and normal repairs are charged to the profit and loss account as and when incurred. Major renewals and improvements are capitalised and the assets so replaced, if any, are retired.

 

Gains and losses on disposal of assets are taken to the profit and loss account.

 

                (b)                           Leased                                                                                                                                   

               

                Assets held under finance leases are initially recorded at the lower of the present value of minimum lease payments under the lease agreements and the fair value of the leased assets. The related obligation under the lease less financial charges allocated to future periods are shown as a liability.

 

                These financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of interest on the outstanding liability.

 

                Depreciation is charged at the same rates as charged on the company’s owned assets or over the lease period as appropriate.

2.5         Capital work-in-progress

 

Capital work-in-progress is stated at cost. It consists of expenditure incurred and advances made in respect of tangible assets in the course of their construction, installation and acquisition.

 

2.6         Stock-in-trade

 

Stock of raw and packing material, work-in-process and finished goods are valued at lower of cost determined on a first-in-first-out (FIFO) basis and net realisable value.

 

Stock in transit is valued at cost plus excise duty where applicable and other materials in transit are valued at cost comprising invoice values plus freight and other charges incurred thereon accumulated to the balance sheet date.

 

Cost in respect of work-in-process comprises of cost of direct material and appropriate proportion of labour cost and manufacturing overheads.

 

Cost in respect of finished goods comprises of cost of direct material, labour cost, manufacturing overhead and excise duty where applicable.

 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated cost necessary to make the sale.

 

2.7         Trade debts

 

Trade debts originated by the company are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.

 

2.8          Other receivables

 

Other receivables are recognised at their original value.

 

2.9          Short term investment

 

Short term investment is initially recognised at cost, being the fair value of the consideration given. Investments with fixed maturity where management has both the intent and the ability to hold to maturity are classified as held to maturity.

 

Subsequent to initial recognition at cost, these investments are measured at amortised cost, using the effective interest rate method, less provision for impairment in value, if any.

 

For investments carried at amortised cost, gains and losses are recognised in income when the investments are derecognised or impaired.

 

2.10        Cash and cash equivalents

 

Cash in hand and at banks and short term bank deposits, if any, are carried at cost. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in bank, net of short term running finances. The cash and cash equivalents are subject to insignificant risk of changes in value.

2.11        Staff retirement benefits

 

                                (a)  Defined contribution plan

 

The company operates an approved contributory provident fund for all employees. Equal monthly contributions are made, both by the company and the employees, to the fund at the rate of 8.33% of basic salary and cost of living allowance.

 

                                (b)  Defined benefit plan

 

The company operates unfunded approved gratuity scheme for all of its permanent employees. Provision is made annually, to cover obligations under the scheme, by way of a charge to profit and loss account, calculated in accordance with the actuarial valuation. Actuarial gain / (loss) is recognised as and when it arise. The most recent valuation in this regard was carried out as at June 30, 2003, using the Projected Unit Credit Method for valuation of the scheme.

 

2.12       Compensated absences

 

Accrual is made for employees compensated absences on the basis of accumulated leaves and the last drawn pay.

 

2.13       Creditors, accrued and other liabilities

 

Liabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the company.

 

2.14        Taxation

 

                (a)  Current

 

Provision for tax on other income and sales are based on taxable income at the rates applicable for the current tax year, after considering the rebates and tax credits available, if any. The tax charge as calculated above is compared with turnover tax under       Section 113 of the Income Tax Ordinance, 2001 and, whichever is higher, is provided in the financial statements.

 

                (b)   Deferred

 

Deferred income tax is recognised, using the liability method, on all major temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

 

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

2.15        Revenue recognition

 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

 

                Specific revenue recognition criteria is as follows:

 

(a)           Sales are recorded on dispatch of goods to customers.

 

(b)           Return on short term investments is recognised on a time proportion basis.

 

(c)           Scrap sales are recognised on receipt basis.

 

2.16        Borrowing costs

 

                                Borrowing costs are recognised as an expense in the period in which these are incurred.

 

2.17        Foreign currency translation

 

Transactions in foreign currencies are translated into reporting currency at the rates of exchange prevailing on the date of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into reporting currency equivalents using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined.  Exchange differences on foreign currency translations are included in income currently.

 

2.18        Financial instruments

 

All the financial assets and financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of the instrument. All the financial assets are derecognised at the time when the company loses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognised at the time when they are extinguished that is, when the obligation specified in the contract is discharged, cancelled, or expires. Any gains or losses on derecognition of the financial assets and financial liabilities are taken to profit and loss account currently.

 

2.19        Off setting of financial assets and financial liabilities

 

A financial asset and a financial liability are offset and the net amount is reported in the balance sheet if the company has a legally enforceable right to offset the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

3.		OPERATING FIXED ASSETS																										WRITTEN
								COST / REVALUATION											A C C U M U L A T E D    D E P R E C I A T I O N									DOWN VALUE
								As at							As at				As at							As at		As at
								July 01,		Additions /		(Disposals) /			June 30,				July 01,				(On disposals) /			June 30,		June 30,
		Description				Note		2002		transfer*		transfers*			2003		Rate		2002		For the year		transfer*			2003		2003
								-------------------------- (Rs. in '000) --------------------------									%		------------------------------------ (Rs. in '000) ------------------------------------
		Owned
		Factory and office building				3.1		2,427		17		-			2,444		10		1,723		72		-			1,795		649
		Plant and machinery						5,527		209		(385)			5,351		10		4,262		137		(277)			4,122		1229
		Gas, electrical and telephone installation						520		-		-			520		10		306		21		-			327		193
		Furnace						46		-		-			46		10		43		-		-			43		3
		Laboratory equipment						1,318		20		-			1,338		10		845		49		-			894		444
		Furniture and fixtures						1,080		34		-			1,114		10		768		35		-			803		311
		Loose tools						21		-		-			21		10		19		-		-			19		2
		Office and other equipment						664		14		(7)			671		10		473		20		(4)			489		182
		Factory equipment						720		-		-			720		10		535		19		-			554		166
		Computers and related accessories				3.2		998		140		-			1,138		33		444		229		-			673		465
		Vehicles						1,340		784		(431)			2,302		20		424		349		(267)			905		1,397
										609	*												399	*
								14,661		1,827		(823)			15,665				9,842		931		(548)			10,624		5,041
																							399
		Leased
		Plant and machinery						8,000		-		-			8,000		10		1,250		675		-			1,925		6,075
		Laboratory equipment						260		-		-			260		10		106		15		-			121		139
		Vehicles						894		(609)	*	-			285		20		457		46		(399)	*		104		181
		June 30, 2003						23,815		1,218		(823)			24,210				11,655		1,667		(548)			12,774		11,436
		June 30, 2002						49,596		1,124		(26,905)			23,815				21,729		1,529		(11,303)			11,655		12,160
												(3,401)	*										(300)	*
		3.1		Factory and office building is on rented land.
		3.2		During the current year, the company changed its accounting estimate in respect of the rate of depreciation on computers and related accessories, whereby, with effect from the current year, the company has revised its depreciation rate on computers and related accessories from 10% to 33% per annum.
				The above change in accounting estimate resulted in a reduction in profit before tax for the current year by Rs.0.159 million. Had the company not changed its accounting estimate, as stated above, profit before tax for the current year and reserves and fixed assets at the end of the year would have been higher by the same amount.

 

		3.3		Depreciation for the year has been allocated as follows:
														June 30,					June 30,
														2 0 0 3					2 0 0 2
														(Rs. in '000)
												Note
				Cost of sales								24		989					1,083
				Administrative expenses								25		678					446
														1,667						1,529
		3.4		Additional depreciation arising due to revaluation of assets amounted to Rs.0.319 (2002: Rs.0.352) million. Had there been no revaluations, the figures of fixed assets, after considering the useful lives of the revalued assets, would have been as follows:
								June 30, 2003						June 30, 2002
								Surplus on				Original		Surplus on					Original
								Revaluation				Cost		Revaluation					Cost
								------------------------- (Rs. in ‘000) -------------------------
				Factory and office building				94				1,970		104					1,970
				Plant and machinery				4,902				1,484		6,832					1,528
								4,996				3,454		6,936					3,498
		3.5		The following assets were disposed off during the year:
											Accumulated			Written down				Sale
				D e s c r i p t i o n					Cost		depreciation			Value				proceeds							Gain / (loss)				Mode of disposal		Particulars of Buyers
									--------------------------------------- (Rs. 000's) ---------------------------------------
				Plant and machinery
				Tripple roll  machine					28		(12)			16				28						12					By Negotiation		Mr. Saeed Rasheed – Karachi
				Attriator (twin)					207		(164)			43				58						15					By Negotiation		M/s. Kohinoor Paints – Karachi
				Hi speed dissolver					100		(65)			35				33						(2)					By Negotiation		Mr. Shakoor Ali – Karachi
				Moor mouse grinder					50		(36)			14				39						25					By Negotiation		M/s. Salman Corp. (Pvt.) Ltd. - Karachi
									385		(277)			108				158						50
				Vehicles
				Suzuki Khyber AAV-652					362		(267)			95				250						155					By Negotiation		Dr. Mohammad Azam Naveed – Lahore
				Honda Motor cycle CD 70					69		-			69				69						-					Insurance claim		M/s. New Jubilee Insurance – Karachi
									431		(267)			164				319						155
				Office and other equipment					7		(4)			3				3						-					By Negotiation		M/s. Mohammadi Refrigeration – Karachi
				June 30, 2003					823		(548)			275				480						205
				June 30, 2002					26,905		(11,303)			15,602				28,699						13,097