The Information Memorandum has been prepared by Prime Finance & Investment Limited from information supplied by Keya Cotton Mills Limited (the Company) and also several discussions with the Chairman, Managing Director, Directors and related Executives of the Company which is publicly available. The Board of Directors of Keya Cotton Mills Limited hereby confirms that to the best of their knowledge and belief the information contained herein is true and correct in all material respects and that there are no other material facts, the omission of which, would make any statement herein misleading.
No person is authorized to give any information or to make any representation not contained in this Prospectus and if given or made, any such information or representation must not be relied upon as having been authorized by Keya Cotton Mills Limited (the Company) or the Prime Finance & I nvestment Limited (Issue Manager).
The Issue, as contemplated in this document, is made in Bangladesh and is subject to the exclusive jurisdiction of the Courts of Bangladesh. Forwarding this Prospectus to any person residing outside Bangladesh in no way implies that the issue is made in accordance with the laws of that country or is subject to the jurisdiction of the laws of that country. 8
Vision
To be the leading cotton yarn producer & exporter in the country
Mission
To be a leading business group in fashion industry by offering best price & quality services within 2015
Objective and Strategy
Our objective is to maintain the most demanding standard & produce high quality finest product to exceed customers need & expectation.
Auditors Huda Vasi Chowdhury & Co Chartered Accountant BTMC Building (Level-8) 7-9, Kawran Bazar C/A Dhaka-1215 Legal Advisor Mr. Nitai Ray Chowdhury Road # 2, House #10, Dhanmondi, Dhaka Tel: 8614515 Tax Consultant Mr. K.M. Hasan FCA K.M. Hasan & Co. Chartered Accountant Issue Manager Prime Finance & Investment Limited 63, Dilkusha C.A., (3 rd Floor) Dhaka-1000 Tel: 9563883 Company Secretary Mr. Syed Noorul Alam Executive Director (Finance) & Company Secretary Tel: 9297779 Key Banker s National Bank Limited Southeast Bank Limited
9 Table of Contents Item Page No.
Information related to Public Offer 10 Summary on Offer 11 Use of Proceeds 12 Company Information 14 Keya Cotton Mills Limited- an Overview 15 The Group 15 Capital Structure 16 Other information 16 Board of Directors & Shareholders 18 Directors and Officers 19 Short Bio Data of Directors 19 Directors Involvement with other Organization 20 Family relationship 20 Involvement of Directors & officers in certain legal proceedings 21 Ownership of the companies securities 21 Management 24 Financial performance 26 Plan of Operation & Discussion of Financial Condition 27 Description of Property 29 Revaluation of Asset 29 Tangible Asset per Share 30 Industry Overview and Risk 32 General Information 36 Lock in of Sponsor share 37 Refund of Subscription money 39 Availability of Securities 39 Description of Securities outstanding or being offered 40 Market for the Securities being offered 40 Rules and Regulation 42 Determination of indicative price 45 Audited accounts 48 SWOT Analysis 69
10
Information related to Public Offer
11
Summary on Offer
Sl. No. Particulars 1 Public Offer
50,000,000 2 FV
10.00 3 EIIs quota
10,000,000 4 Single EIIs quota for BID (10% of EIIs quota)
1,000,000 5 Indicative Price - 6 Indicative Price at 20% upper band - 7 Indicative price at 20% lower band -
12
Use of proceeds Purpose of Public I ssue:
As per decision of Board of Directors meeting held on 3 rd May 2010 the I PO proceeds of Keya Cotton Mills Limited would be utilized for the following purpose:
a. Management of Keya Cotton Mills Limited will take necessary steps to utilize the net proceeds of public offer for investment in the second unit of Keya Cotton Mills Limited
b. Management of Keya Cotton Mills Limited will take necessary steps For repayment of Bank Loan as outstanding with Banks and Financial Institute.
Proceed of IPO will be utilized as follows:
Sl No Particulars Tk. in Million
01
Investment in the second unit of Keya Cotton Mills Limited
1,500.00 02 For repayment of Bank Loan 1,528.12 03 For Working Capital and I PO Expenses 1,971.88 Total 5,000.00
Details as describe below: a) Description of the Second Unit
The proposal envisages setting up of a Textile Spinning Unit with 39,600 spindles and 720 rotor head at J arun, Konabari, Gazipur. The project will be equipped with modern and sophisticated machinery from world best manufacturers in order to produce high quality Cotton yarns. After implementation of the project, it will create job opportunities for 801 persons. The project is expected to go into production within 12 months from the date of opening of 1 st Letter of Credit for Imported Machinery. The total fixed cost of the project has been estimated at Tk. 1,809.00 million.
b) Estimated project cost Estimated project cost (Unit I I of Keya Cotton Mills Limited) Taka in million Land 201.00 Building and civil works 256.00 Plant and machinery including duty freight etc. 1,285.00 Others (including working capital) 67.00 Total 1,809.00
Means of Finance Taka in million
From initial public offering (IPO) 1500.00 From the Directors 200.00 From Bank 109.00
Total 1,809.00 Borowings, Equity support from Banks, Financial Institutes and Others (yet to be arranged)
Total 1,809.00 Mentionable here that the Board of Directors of Keya Cotton Mills Limited in its meeting held on 28 th J une 2010 decided to establish a second unit for producing raw cotton in which net proceeds of IPO will be invested.
Keya Cotton Mills Limited will invest Tk. 1500 million of Initial Public Offering for implementing unit II.
The Second Unit of keya Cotton Mills Limited is expected to commence operation by J anuary 2012. The tentative implementation schedule of the project is presented below:
13
I mplementation Schedule of Second Unit of Keya Cotton Mills Limited
Particulars Approximate date for completion of project Projected date of commercial operation* Land development completion Completed
J anuary 2012 Opening of L/Cs April 2011 Completion of civil works April 2011 Machinery at site J uly 2011 Erection and Installation October 2011 Trial run October 2011 Commercial Operation November 2011 * Subject to fund availability from IPO
Sd/- (Md. Abdul Khaleque Pathan) Director & CEO of Keya Cotton Mills Limited
B. The proceeds of IPO will be used for repayment of long-term liabilities (Bank loan) and Short term liabilities and working capital financing as mentioned below:
I) Schedule of Bank Loan to be repayment
Name of lender Nature of Loan Outstanding Balance as on September 30, 2010 National Bank Limited Long term Tk 794.99 million (Long term) National Bank Limited Short term Tk 173.71 million Southeast Bank Limited Short term Tk 311.40 million Dutch bangle Bank Limited Short term Tk 95.59 million Bank Asia Limited Short term Tk. 75.38 million Agrani Bank Limited Short term Tk 68.11 million Prime Finance & Investment Limited Lease Finance Tk 7.13 million Phoenix Finance & Investment Limited Lease Finace Tk 2.81 million Total Tk. 1528.12 million
I) Schedule of Working Capital to be finance
Sl. No. Particulars Amount Tk in million 01 Working Capital and IPO expenses 1,971.88
Total 5,000.00 million
Sd/- (Md. Abdul Khaleque Pathan) Director & CEO of Keya Cotton Mills Limited
(C) There are no other contract for which Proceeds of IPO will be utilized
14
Company Information
15
Keya Cotton Mills Limited- An Overview
Company at a glance
Keya Cotton Mills Ltd. a Public Limited Company was incorporated in the year 2004 and started commercial production in the year 2006. Initially the project has established with 37,200 spindles having 23 MT per day production capacity. Currently the project has production capacity of 30 MT per day. The project has been setup with latest modern machinery imported from J apan, Switzerland, Taiwan and India. Factory has facilitated with own power generator and also with cogeneration chiller for controlling exact humidity and temperature. Around 762 persons work in this industry. The industry has equipped with modern and sophisticated machinery imported from world renowned manufacturers with the view to produce high quality Cotton Yarns.
Date of Incorporation : 15th J une 2004
Date of Commencement of Business : 15th J une 2004
Year of Commercial Production : 2006
The Group Keya Group of Industries is a renowned business Group in the country. The Group has been in the eye of media with its various products with brand name Keya for the last decade. At present the Group has been managing 10 active large and small companies including two public limited companies namely, Keya Cosmetics Ltd. and keya Detergent Ltd. The Group started its journey under the leadership of Mr. Abdul Khaleque Pathan with his brickfield project Khaleque & Co. Ltd. The group subsequently expanded its activities in the area of soap chemicals, spinning, knit composite, garments and advertisement firm. Within 17 years of operation the group has became one of the renowned business conglomerates in the country. The Group is financed by Sonali Bank Ltd., Standard Bank Ltd., Southeast Bank Ltd., Bank Asia, Eastern Bank Ltd., Prime Bank Ltd., Dhaka Bank Ltd., and United Commercial Bank Ltd. The Group enjoys franchise value in the market and among the shareholders.
Group Profile
Sl. No. Company Activity Annual Production Capacity Manpower Sales Million Tk. (as on 30.06.2010) 01 Keya Cosmetic Ltd. Production of Cosmetics 235 million pcs/Year 370 1,177.93 02 Keya Detergent Ltd. Production of detergent powder 24,960 MT/Year 107 442.79 03 Keya Soap Chemicals Ltd. Production of Raw Soap noodles 37,440 MT/Year 102 759.09
05 Keya Knit Composite Ltd. Composite Knit Garments 13,920 MT/Year 6,510 4,225.82 06 Keya Spinning Mills Ltd. Production of Raw Cotton 6,960 MT/Year 589 1,383.59
07 Keya Cotton Mills Ltd. Production of Raw Cotton 8,925 MT/Year 569 1,367 .32 08 Keya Yarn Mills Limited Production of Raw Yarn 9,800 MT/Year 652 1,465.56 09 Khaleque & Co. (Pvt.) Limited Brick Field 20 Lac/Year 11 8.623 (as on 30.06.2009)
16 As on 30th J une 2010 (Figure in Million TK.) Name of the Companies Assets Liabilities Equity Net Income Khaleque Knitting & Garments I ndustries (Pvt.) Ltd 4,539.91 2,043.75 2,496.16 65.46 Keya Cosmetics Ltd 1,101.90 419.60 682.30 174.99 Keya Spinning Mills Ltd. 5,647.92 4,838.49 809.43 95.25 Keya Detergent Ltd. 544.38 160.81 383.57 55.47 Keya Cotton Mills Ltd. 2983.75 1727.67 1256.08 297.05 Keya Soap Chemicals Ltd. 1,591.43 1,015.64 575.79 25.72 Keya Knit Composite Ltd. 5,561.32 4,085.86 1,475.45 511.50 Keya Yarn Mills Ltd. 3,367.70 3,113.03 254.67 162.64
Capital structure The capital structure of Keya Cotton Mills Limited before and after IPO will be as under: A. Financial structure prior to Initial Public Offering (I PO) (Amount in Taka) Issued & fully paid up capital as on 30 September 2010 Tk. 66,00,00,000.00
Total Capital Structure as per Scheduel X (RJ SC Certified) Tk. 66,00,00,000.00 The face value of ordinary shares has been reduced from Tk. 100 to Tk. 10 each by the decision of an EGM held on September 13, 2008.
Nature of business The principal activities and operations of the Company are manufacturing & selling cotton yarn.
Principal product and services The project has been set up to produce 100% cotton yarn.
Market for the product The Company produces only cotton yarn which is mainly consumed by in house readymade garments manufacturers Number of employees (as on 30 September 2010) The total number of employees as on 30/09/2010 is 569. All are full-time employee.
Names of the customer who purchase 10% or more of the Companys products/ service
Sl No Name of the Customer 01 Keya Knit Composite Ltd., J arun, Konabari, Gazipur.
Material patents, trademarks, licenses or royalty agreements The Company has no material patents, trademarks, license or royalty agreement.
Associate, subsidiary/ related holding company The Company has no holding/subsidiary company. Considering voting right of 20% or more in another company there are only two companies namely Keya Spinning mills Limited and Khaleque Knitting & Garments Ind. (Pvt.) Ltd are the associate company of Keya Cotton Mills Limited as per Para 4 of BAS 28.
Considering the common directorship, the company has following sister companies:
17 Distribution of Products/ Services The Company conducts the business operations under the supervision of Board of Directors and highly skilled management. The Company operates its business through the Head Office at J arun, Konabari, Gazipur and Liaison office at Apt. # 6/13,. Priyo Prangon Tower, House # 19, Road # 17, Kemal Ataturk Avenue, Banani, Dhaka. The Company collects raw materials from foreign suppliers. After processing the raw materials in the production process the final product is distributed that to the buyer at due timely.
Sources and availability of raw materials and the names of the principal suppliers The raw material of the Company is raw cotton, which is fully procured from abroad. The names of main suppliers are mentioned below:
Sl No Name of the Supplier Address 01 Dunavant S.A., Switzerland World Trade Center-10 Route De Laeroport- 1215, Geneva 15- Switzerland 02 Cargill Cotton Ltd., USA 7101 Goodlettt Farms Parkway Cordova , TIN 38016, USA 03 Olam International Ltd., Singapore 9, Temasek Boulevard#11-02 Suntec tower Two, Singapore-038989 04 Allenbergcotton co. P.O. Box 3254, Cordova, TN 38088-3254, Goodlet Farms parkway, Cordova TN 38016 05 Louis Dreyfus Comodities Swiss S.A. 29, route de IAeroport , PO Box 236, 1215, Geneva 15- Switzerland
Sources of, requirement for, power gas and water:
The breakdown of utilities used by Keya Cotton Mills Limited is given below:
Particulars Source and Requirements Power
Power requirement of Keya Cotton Mills Ltd is 3.2 MW/day, which is met up from own gas generator. Yet for smooth operation during time of emergency and maintenance of the project power connection from REB has been arranged as stand by.
Water Keya Cotton Mills Limited requires 6 lac liter/ hour of water per hour which is met by its own deep- tube well. GAS Keya Cotton Mills Limited requires about 850 m3/hour of gas per annum. Titas Gas Transmission & Distribution Co. Ltd. (TGTDCL) supplies required gas for the project.
Future contractual liabilities The company has no plan to enter into any contractual liabilities within next one year other than the normal course of business
Future capital expenditure The company has no plan for future capital expenditure except investment in Keya Spinning Mills Limited, which already described in the implementation schedule under use of proceeds of the company.
18
Board of Directors & Shareholders
19 Directors and officers
Information regarding directorship
Sl. No. Name Age Experience Position 01 Mrs. Feruza Begum 47 yrs 23 yrs Chairman 02 Mr. Abdul Khaleque Pathan 52 yrs 28 yrs Director and CEO 03 Mrs. Khaleda Pervin 31 yrs 11 yrs Director 04 Mr. Masum Pathan 29 yrs 8 yrs Director
Short bio-data of the Directors Mrs. Feruza Begum Chairman Mrs. Feruza Begum, wife of Mr. Abdul Khaleque Pathan was born on 10 th August 1964. She is the Co-founder of Keya Groupof Industries and Directors of the Board of Keya Group. She comes from a respectable Muslim family. She is kind hearted, religious, foreseeing, and patience woman. She is the inspiration of Mr. Pathan and affectionate to her three worthy children two of them are now directors of Keya Groupof Ind. Her active contribution in planning and decision making process brings the group in todays position. Mrs. Feruza Begum involves with various charitable organizations engaged in developing social hack neck.
Mrs. Khaleda Pervin Director
Mrs. Khaleda Pervin, daughter of Mr. Abdul Khaleque Pathan & Mrs. Feruza Begum was born in 1980. She is an MBA. Educational qualification & hereditary blood influenced to join in Keya Groupof Indus. as a Director. She has implemented modern views & concepts to improve human resources throughout the group. She is very industrious. She always deploying her all out efforts in enriching companys status by doing more business. She is very cordial towards the employee. Severally she visited abroad. Beyond Keya Groupof Ind., she is the Chairman of MP Sweaters Ltd. a 100% export oriented Sweater manufacturer. Mrs. Khaleda Pervin works as a Director (Accounts) of Keya Groupof Industries.
Mr. Masum Pathan Director
Mr. Masum Pathan, Son of Mr. Abdul Khaleque Pathan & Mrs. Feruza Begum was born on 12 th February 1982. He is proactive, gentle, brilliant, enthusiastic, industries & sincere in nature. He is cordial to the employee. Very often he traveled abroad to attend seminar, workshop & meet with the buyer. He also works as brand ambassador of Keya Groupof Industries.
Mr. Abdul Khaleque Pathan Director & CEO
Mr. Abdul Khaleque Pathan, founder of Keya Groupof Industries was born on 14 th May 1959 at J arun, Konabari, Gazipur district. He is a man of hard working, brilliant, foreseeing, leadership, gentle, creative and enthusiastic. From his young age, he was very much interested and fond love of doing business. In 1986 he stepped in to the business as an entrepreneur by establishing a brick manufacturing company named Khaleque & Co. Shortly he had been proved successful and spread business in the area of Garments & toiletries. Presently Keya Groupof Industries comprises eight companies under the direct supervision of Mr. Abdul Khaleque Pathan. The core strength of this group is strong financial profitability & quality production.
Mr. Pathan never compromise with the product quality and always adopt modern technology, method, procedure which helps in emerging local & foreign markets.
Mr. Abdul Khaleque Pathan attends many workshops, seminar, trade fair within the country and abroad organized by ministry of commerce, federation of chambers, trade development association etc.
He has traveled many countries in the world like India, Singapore, J apan, Thailand, Saudi Arabia, UAE, Philippines, Malaysia, Hong Kong, China, USA , UK and so many.
Mr. Abdul Khaleque Pathan was awarded as Commercially Important Person (CIP) for the year 1998 and 1999 for outstanding performance done through Khaleque Knitting & Garments Ind. (Pvt.) Ltd., Khaleque Knitting & Garments Ind. (Pvt.) Ltd. also achieved Export Trophy in the year 1996 and 1997.
20
Directors involvement in other organization(s)
Sl. No. Name of Director Name of the Organizations Status 01 Mrs Feruza Begum Keya Detergent Limited keya Spinning Mills Limited Keya Cosmetics Limited Keya Soap Chemicals Limited Keya Knit Composit Limited Khaleque & Co. (Pvt.) Limited Khaleque Knitting & Garments Inds Limited Keya yarn Mills Limited Keya Sweaters Limited Director Chairman Do Do Do Do Do Do Do 02 Mr. Abdul Khaleque Pathan Keya Detergent Limited keya Spinning Mills Limited Keya Cosmetics Limited Keya Soap Chemicals Limited Keya Knit Composit Limited Khaleque & Co. (Pvt.) Limited Khaleque Knitting & Garments Inds (Pvt.) Limited Keya Yarn Mills Limited Keya Sweaters Limited Chairman Managing Director Do Do Do Do Do Do Do 03 Mrs. Khaleda Pervin Keya Detergent Limited keya Spinning Mills Limited Keya Cosmetics Limited Keya Soap Chemicals Limited Keya Knit Composit Limited Khaleque & Co. (Pvt.) Limited Khaleque Knitting & Garments Inds (Pvt.) Limited Keya Yarn Mills Limited M. P. Sweaters Limited Keya Sweaters Limited Managing Director Director Do Do Do Do Do Do Chairman Do
04 Mr. Masum Pathan Keya Detergent Limited keya Spinning Mills Limited Keya Cosmetics Limited Keya Soap Chemicals Limited Keya Knit Composit Limited Khaleque & Co. (Pvt.) Limited Khaleque Knitting & Garments Inds (Pvt.) Limited Keya Yarn Mills Limited Keya Sweaters Limited Director Do Do Do Do Do Do Do Do
Family relationship between the Directors and Officers There is no family relationship between the Directors and Officers except Mr. Abdul khaleque Pathan, Director of the Company also holds Chief Executive Officer position in the company.
Family relationship among the Directors
Name of Directors/ Officer Position Relationship Mr. Abdul Khaleque Pathan Director & CEO Husband of Mrs. Feruza Begum, Father of Mrs. Khaleda Pervin & Mr. Masum Pathan Mrs. Feruza Begum Chairman Wife of Mr. Abdul Khaleque Pathan, Mother of Mrs. Khaleda Pervin & Mr. Masum Pathan Mrs. Khaleda Pervin Director Daughter of Mr. Abdul Khaleque Pathan & Mrs. Feruza Begum, Sister of Mr. Masum Pathan Mr. Masum Pathan Director Son of Mr. Abdul Khaleque Pathan & Mrs. Feruza Begum, Brother of Mrs. Khaleda Pervin
21
Involvement of Directors and Officers in Certain Legal Proceedings No director or officer of the Company was involved in any of the following types of legal proceedings in the last ten years: (a) Any bankruptcy petition filed by or against any company of which any officer or director of the issuer company filing the prospectus was a director, officer or partner at the time of the bankruptcy. (b) Any conviction of director, officer in a criminal proceeding or any criminal proceeding pending against him. (c) Any order, judgment or decree of any court of competent jurisdiction against any director, officer permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or banking activities. (d) Any order of the Securities and Exchange Commission, or other regulatory authority or foreign financial regulatory authority, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or banking activities.
Ownership of the Companys Security Shareholding structure as on 21.10.2010 (as per last Schedule X) A. Shareholding Above 5% of the Directors Sl. No. Name of Shareholder Status Address No. of Shares hold % of holdings 01 Mr. Abdul Khaleque Patahn Director & CEO J arun, Konabari, Gazipur 25,730,120 38.99% Total 25,730,120 38.99%
B. Shareholding Below 5% of the Directors
Sl. No. Name of Shareholder Status Address No. of Shares hold % of holdings 01 Mrs. Feruza Begum Director J arun, Konabari, Gazipur 20,000 0.03% 02 Mrs. Khaleda Pervin Director J arun, Konabari, Gazipur 79,960 0.12% 03 Mr. Masum Pathan Director J arun, Konabari, Gazipur 79,960 0.12% Total 1,809,200 0.27%
\\ C. Shareholding Above 5% of Subscriber to the Memorandum and/ or General Shareholder
Sl. No. Name of Shareholder Status Address No. of Shares hold % of holdings 01 Keya Cosmetics Limited General Shareholder J arun, Konabari, Gazipur 6,300,810 9.55% 02 Khaleque knitting & Garments Industries (Pvt.) Ltd. Subscriber to the Memorandum J arun, Konabari, Gazipur 1,330,2267 20.15% 03 Keya Spinning Mills Limited Subscriber to the Memorandum J arun, Konabari, Gazipur 14,346,963 21.74% Total
33,950,040 51.44%
C. Shareholding below 5% of Subscriber to the memorandum and/ or General Shareholder
Sl. No. Name of Shareholder Status Address No. of Shares hold % of holdings 01 Khaleque & Co (Pvt. ) Ltd Subscriber to the Memorandum J arun, Konabari, Gazipur 79,960 0.12% Total 79,960 0.12%
E. Shareholding below 5% of General Shareholder F. Sl. No.. Name of Investor (s) Status Address No. of Shares % of holdings 1 Tajul Islam Shareholder J arun, Konabari, Gazipur 1,500,000 2.27% 2 M A Kashem Shareholder 34, Kamel Ataturk Avenue, Awal Center, (17th Floor) Banani, Dhaka
10,000 0.015% 46 Mala Rani Paul Shareholder C/O SNM Securities Ltd. 9/E Motijheel C/A, DSE Annex Building,Room-732, Dhaka
5,000 0.0075% Total 6,058,960 9.30% Grand Total (A+B+C+D+E) 66,000,000 100%
(*As per Schedule X certified by Register of J oint Stock Companies and Firms (RJ SC) as on 21/11/2010)
24
Management
25
Description of other Senior Executives and Officers
Name Designation Date of J oining in The Company Educational Qualification Name(s) of organization(s) where worked during the last five years Mr. Abdul Khaleque Pathan Director & CEO 15.06.2004 S.S.C Keya Cotton Mills Limited Mr. Syed Noorul Alam Executive Director (Finance) & Company Secretary 15.06.2004 M. Com. Keya Cotton Mills Limited Mr. Mahbub Alam Chief Finance Officer 2.05.2010 ACA STS Group Bashundhara Group Keya Cotton Mills lImited Mr. Shafiqul Alam Sr. General Manager (Factory) 15.06.2004 B.Sc.in Textile Engineering Keya Cotton Mills limited Mr. Rezaul Haque Deputy Manager (Store) 15.06.2004 M.Com Keya Cotton Mills limited
Family relationship between the Directors and Officers There is no family relationship between the Directors and Officers. 26
Financial Performance 27
Plan of operation and discussion of financial condition I nternal and external sources of cash Internal Sources of Cash (as per audited accounts) Particulars 30-09-2010 30-06-2010 30-06-2009 30-06-2008 Share Capital 660,000,000 600,000,000 247,000,000 247,000,000 Share Money Deposit - - 205,000,000 - Share premium 58,200,000 - - - Tax Holiday Reserve 174,375,049 174,375,049 124,358,563 106,673,778 Proposed Stock Dividend - - 148,000,000 - Retained Earnings 428,843,513 343,289,130 64,861,622 160,005,791 Revaluation reserve 138,418,403 138,418,403 - - Total 1,459,836,965 1,256,082,5 789,220,186 513,679,569
External Sources of Cash (as per audited accounts) Particulars 30-09-2010 30-06-2010 30-06-2009 30-06-2008 Long term Loan /Term Loan 669,508,545 676,403,865 444,164,154 604,034,004 Short term Loan 731,321,199 844,455,079 652,001,221 455,430,048 Current Portion of Long term Loan 128,294,407 99,024,770 - - Lease Liability - - 143,854,865 175,125,625 Accepted Liability - - - 101,405,145 Total 1,529,124,151 1,619,883,7 1,240,020,2 1,335,994,82
Causes for material changes from period to period The Company's income, Cost of Goods Sold, other operating Expense and net income are change over the 2008 to 2010 due to demand volatility in the global market and increase completion in the local market. The following Table shows the year to year financial performance of the Company. [as per audited accounts] Particular Sept. 2010 J une 2010 J une 2009 J une 2008 Taka Taka Taka Turnover 376,362,632 1,367,320,735 1,017,981,403 1,409,963,522 Cost of Goods Sold 271,001,634 (988,821,370) (786,726,094) (1,121,168,971) Gross Profit 105,360,998 378,499,365 231,255,309 288,794, 551 Less Operating and Financial Expenses 42,706,481 (190,851,109) (160,646,056) (159,772,126) Total Operating Profit/ (Loss) 62,654,517 187,648,256 70,609,253 129,022, 425 Add non operating Income 50,489,408 197,883,106 3,666,846 32,500 Net Profit before WPPF 113,143,926 385,531,362 74,276,099 129,054,925 Provision for WPPF 2,983,548 (10,717,818) (3,536,957) (6,145,473) Net Profit before Tax 110,160,377 374,813,544 70,739,142 122,909,452 Provision for Income Tax 16,524,056 (77,763,633) (198,525) (4,875) Provision for deferred Tax 8,081,937 Provision for tax Holiday Reserve - (50,016,486) (17,684,785) (49,163,781) Net Profit for the year 85,554,383 247,033,425 52,855,831 73,740,796
Financial lease commitment
The following machines have been procured from the Phoenix Finance and Investment Limited (Formerly Phoenix Leasing Co Ltd.), Union Capital Limited and LankaBangla Finance Limited on financial lease commitment basis:
Sl. No. Name of Machine Quantity Lease taken From 01 Machinery Ring Frame 01 unit Phoenix Finance and Investment Limited (Formerly Phoenix Leasing Co Ltd.) 02 Machinery Ring Frame 01 unit Union Capital Ltd. 03 Machinery Ring Frame 01 unit LankaBangla Finance Ltd.
Details of financial lease is as follows (as per audited accounts as on 30 September 2010) Sl. No. Name of Leasing Company Rate of Interest Sanction Date Expiry Date Installment amount (Tk.) Total Installment (Monthly basis) Total Lease Amount (Tk.) Outstanding Amount (Tk.) Remarks 01 Phoenix Leasing Co. Ltd. 18.00% 15-Feb-07 17-Feb- 12 1,411,954 60 84,717,240 Nil Fully paid 02 Union Capital Ltd. 17.50% J an-07 31-Dec- 11 1,919,850 60 80,000,000 Nil Fully paid 03 LankaBangla Finance Ltd. 17.50% 25-Apr-08 25-Mar- 13 1,250,910 60 50,000,000 Nil Fully Paid
28
Transactions with holding / subsidiary company or associate company and the Issuer The issuer has no holding/subsidiary company. So no transaction was arise in this respect during the year 2009-2010.
Considering voting right of 20% or more in another company there are only two companies namely Keya Spinning mills Limited and Khaleque Knitting & Garments Ind. Ltd. are the associate company of Keya Cotton Mills Limited as per Para 4 of BAS 28. The shareholding Structure in two companies is given below:
Sl No Name of the Company Shareholding Percentage 01 Keya Spinning Mills Limited 21.74% 02 Khaleque Knitting & Garments Ind. Ltd. 20.15%
Besides this, there exist common directorship in some companies which considered as related party such as:
Sl No Name of the Company Shareholding Percentage by keya Cotton Mills Limited in the Company 01 Keya Knit Composit Limited 31.37% 02 Keya Cosmetics Limited NA 03 Keya Detergent Limited NA 04 Keya Soap Chemicals Limited NA 05 Khaleque & Co (Pvt.) Ltd. NA 06 Keya Sweaters Limited NA 07 Keya Yearn Mills Limited 5.73% 08 Khaleque Knitting & Garments Ind. Ltd. 10.46%
The transaction has been made during the accounting period with above companies as follows:
Particulars Nature of relationship Nature of Transactio n Transaction amount during the year Rate of I nterest Date of Loan Date of Maturity of Loan Issuer Status Khaleque Knitting & Garments Inds. (Pvt.) Ltd. Associate Company & Common Directorship Yarn Importer through BTB L/C (Yarn sales )
na NA NA NA na Keya Spinning Mills Limited Associate Company & Common Directorship Emergency Raw Cotton Loan (Loan given/taken)
na NA na na na Keya Knit Composite Ltd. Common Directorship Yarn Importer through BTB L/C (Yarn sales )
277,426,952 NA NA NA Debtor Keya Cosmetics Limited Common Directorship NA NA NA NA NA NA Keya Detergent Limited Common Directorship NA NA NA NA NA NA Keya Soap Chemicals Limited Common Directorship NA NA NA NA NA NA Khaleque & Co (Pvt.) Ltd. Common Directorship NA NA NA NA NA NA Keya Sweaters Limited Common Directorship NA NA NA NA NA NA 29 Keya Yearn Mills Limited Shareholder &
Common Directorship NA NA NA NA NA NA Khaleque Knitting & Garments Ind. Ltd. Shareholder &
Common Directorship NA NA NA NA NA NA
Description of property The Company has setup its factory at J arun, Konabari, Gazipur and has also setup a liaison office at Apt.# 6/13,.Priyo Prangon Tower, House # 19, Road # 17, Kemal Ataturk Avenue, Banani, Dhaka. The Company possesses the following fixed assets:
(As per audited accounts)
As on 30.09.2010 As on 30.06.2010 As on 30.06.2009
Sl. No Name of the Assets Amount in Tk. Amount in Tk. Amount in Tk. 01 Land & Land Development 228,112,498 228,112,498 89,596,345 02 Building & Other C i 112,787,170 140,517,441 139,826,941 03 Plant & Machinery 927,058,772 1,296,958,637 1,296,958,637 04 Office Equipment 275,645 411,002 360,702 05 Furniture & fixture 41,456 61,729 61,729 06 Elct. & Gas Line Installation 10,151,796 15,956,211 15,956,211 07 Sundry Assets 1,204,184 1,884,097 1,884,097 08 Vehicle 6,215,354 14,776,614 14,776,614 Total 1,285,846,875 1,698,678,229 1,559,421,276
1. The plant and other property as shown above are located at J arun, Konabari, Gazipur and are purchased in brand new condition. 2. The properties of the company have been owned by the company through own financing and lease & loan financing. 3. The entire property is owned by the company. The Company avail bank loan against mortgage of property from the National Bank Limited in order to repay lease liability of different NBFIs which was taken earlier. The entire project of Keya Cotton Mills Limited are registered mortgaged to National Bank Limited, Gulshan Branch, Dhaka an amount of Tk. 75.85 crore. 4. The company acquired plant and machinery by lease financing but subsequently the company repay the lease liability. Currently the company has no lease liability against any property in this respect.
Revaluation of Assets
The company revalued its fixed assets (land) for the 1 st time in the year 2010 as per Board Resolution dated on 3 rd May 2010 Reserve is created by the sum of revaluation surplus and transferred the equal amount to the equity as per the provision of BAS-16.
Name of the Valuer Company : Asian Surveyors Limited Name of the Valuer : K.C. AICH
The particulars about the valuation team is presented below: Sl No Name of the Valuation team member Qualification 01 Mr. K.C. AICH Science Gradute 02 Mr. J otirmoy Bhattacharjee Civil Engineering 03 Mr. M. Alauddin Mechanical Engineering from UK 04 Mr. Fatullahil Azim Chowdhury Masters Degree
Some of mentionable Valuation works completed by Asian Surveyors Limited Sl No Name of the Company for which revaluation of Assets was done 01 J ames Finley 02 ACI Ltd 03 Sonargaon Hotel 04 Square Pharmaceuticals 05 Ashuganj Thermo Power Station 06 J amuna Fertiliser Factory Limited 07 Zia Fertiliser Factory Limited 08 Palash Urea Fertiliser Factory
Reasons for valuation To ascertain current value of the land valuation was conducted by the company. 30
Auditors Disclosure regarding revaluation of fixed asset
The first revaluation of the company was made on 22 J une 2010 by the Asian surveyor Limited . The report was signed by the Mr. K.C. AICH, Executive Director of Asian Surveyor Limited.The valuation has been made for reflection of actual value of asset. The revalued amount was incorporated in the accounts as on 30 J une 2010. The summary of revaluation is shown below:
Particulars of Asset Book Value as on 30.06.2009 Addition during the year Revaluation Surplus as on 30.06.2010 Revalued Book Value as on30.06.2010 Land 89,596,345 97,750 138,418,403 228,112,498
Summary of Valuation Report
Sl. No. Particulars of Assets Asset Value before revaluation (Amount in Tk.) Asset Value After revaluation (Amount in Tk.) A. Land 89,694,095 228,112,498
Tangible Assets per Share of Keya Cotton Mills Limited as on 30 September 2010
Particulars Amount in (Tk.)
Share Capital 660,000,000
Reserve and Surplus (including revaluation reserve) 741,636,965 Share Premium 58,200,000
Total shareholders equity 1,459,836,965
No. of Paid-up ordinary shares as on 30 th September 2010 66,000,000
Net Tangible Assets per Ordinary Share (considering re-valuation reserve) 22.12 (1,459,836,965/ 66,000,000)
Net Tangible Assets per Ordinary Share (without re-valuation reserve) 20.02 (1,459,836,965-138,418,403)/66,000,000
Face Value of Share 10.00
A Special report regarding any allotment of shares to the Directors and Subscribers to the Memorandum of Association and Articles of Association for any consideration otherwise than for cash
Paid up capital structure of Keya Cotton Mills Limited stands as on 30 J une 2010: A) Considering Cash: Paid-up capital as on existing New allotment Total paid up (No of Share) Face value Amount in Tk. 15-06-2004
*The Board of Directors in its meeting held on 13 th September 2008 decided to denominated face value of share from existing Tk. 100 to Tk. 10 per share. Subsequently the shareholders of the company in the EGM held on 13 September 2008 unanimously approved the change in face value of share. 31
B) Otherwise than Cash
Paid-up capital as on existing New allotment Total paid up (No of Share) Face value Amount in Tk. 21-11-2010* 45,200,000 14,800,000 (Bonus Share) 66,000,000 10/- 660,000,000
*As per Schedule X
The Paid Up Capital of the Company as on 30 th J une 2010 stands at Tk. 600,000,000, i.e., 60,000,000 nos. ordinary share @ Tk. 10 per share. The Board of Directors in its meeting held on 5 th J une, 2010 decided to raise paid up capital through capital raising by issuing 6,000,000 shares of Keya Cotton Mills Limited. Subsequently the company applied to Securities and Exchange Commission (SEC) on 15 J une 2010 for capital raising.
Upon getting Consent from the Securities and Exchange Commission (SEC) vide their letter no SEC/IPO/CPLC-161/2008/50 Date: J une 27, 2010 the share money by way capital raising of Tk. 120,000,000 (i.e.,6,000,000 ordinary shares of Tk. 20 each including premium of Tk.10 per share) fully collected and deposited the same in the Southeast Bank Limited & National Bank Ltd. All the related returns filed to The Registrar of J oint Stock Companies and Firms and certified copy withdrawn respectively. The paid up capital of the Company thus stands at Tk.660,000,000, i.e 66,000,000 nos. of Ordinary share @ Tk. 10 per share.
VAT, income tax, customs duty or other tax liability VAT The project of The Company is 100% export oriented. Government of Bangladesh has declared that there is no VAT on 100% export oriented project
Income Tax The company has enjoyed Tax holiday for 4 (four) years from the date of 1 st February 2006, which already expired on 31 st
J anuary 2010. Therefore, Tax holiday reserve has been made for 7 month at the rate of 25% in respect of business income/Operating Income and Provision for income tax has been charged on 37.5% on total income. Tax Status of the Company are as follows:
I ncome Year Assessment Year Status Remarks 2005-06 2006-07 The Company is enjoying Tax Holiday for the period of 4 years* No Tax demand 2006-07 2007-08 Do Do 2007-08 2008-09 Do Do 2008-09 2009-10 Do Do 2009-10 2010-11 Up to 31.01.2010 Tax holiday. After that provision for Income Tax Tk. 77,763,633 has been made for last 5 months including deferred Tax of Tk. 63,983,255
No return submitted for the assessment year 2010-11
Custom duty or other liabilities There are no dues outstanding on account of custom duty. 32
Industry Overview and Risk
33
I ndustry overview Textile sector of Bangladesh is playing a very important role in the economic development of the country by earning huge foreign exchange which is next to wage earners remittance. Besides creation of employment opportunities and supporting government policy of poverty alleviation, textile sector has become the accelerator of economic growth. Over more than a decade, the sector experienced significant development and export earnings of textile and clothing increased considerably. The knitwear sectors export earnings stood at $ 6.4 billion while wovens was $6.1 billion during the last year. Keeping the momentum, Bangladesh has already become one of the major suppliers of clothing in EU market. The sector also has remarkable contribution to GDP (around 10%) as around 77% of the export earnings come from this sector. At this moment 100% demand for raw materials for knit RMG are being met by local sources side by side it fulfills the requirements for domestic fabric and yarn.
Since after liberation, the number of spinning mills gradually increased over the years. The country has 1350 textile mills with cumulative investment of TK. 400 billion which is the biggest industrial sector. Spindle capacity increased to 7.2 million having yarn production capacity of 1600 million kg. Loom capacity also increased to 5000 million having fabric production capacity of 1600 million meters. Considerable size of backward linkage industry has been established for which knit sub sector also achieved phenomenal growth. The achievement so far made was possible due to permitting textile machinery at zero duty/tax and other incentives. However, due to significant involvement of capital machineries, the sector, on an average, is highly leveraged having 70% borrowing in the capital structure.
Bangladesh also emerged as a significant supplier of Denim cloths and Home textile products to the European market. This has become possible due to availability of local raw materials-particularly cotton yarn which are being produced mainly from waste cotton. I n spite of that Denim fabric manufacturers are experiencing problems due to no specific rate of wastage for denim fabric, high duty/tax of spare parts of denim machines, delay in obtaining utilization permission (UP), delay in realizing money from exported fabrics etc.
The demand for clothing continues to be in increasing trend due to increased population. However, the production of yarn and cloths are not being increased in line with demand resulting to considerable demand-supply gap. However, due to irregular gas supply, textile production started reducing which resulted to maximum 50% production loss. The problem started since March 2009 and nowadays has reached to worst situation in Dhaka, Chittagong, Gazipur, Savar and Narayangonj zones. At the time of recovering from the impact of global recession, the gas crisis has been a big menace for the sector which can even cause the loss of the international market. Despite the fact, we have ample scope to consolidate the sector to explore maximum benefit out of it for which fair deal by the government in terms of infrastructure, utilities, policies, financial support and necessary market protection from illegal entry of textile raw materials and finished good is required.
Risk factors & Management perceptions about the risks
The Company is operating in a field involving a great deal of external/internal risk factors and the management of Keya Cotton Mills Limited perceives the risk factors which are as follows simultaneously: -
Interest rate risks Interest rate risk arise due to fluctuation of interest rate in money market. Volatility in money market and increased demand for loan presses on interest rate structure to be fixed in high. Rising of interest rate increases the cost of fund for a company, which have borrowed fund, and consequently profit is squeezed.
Management perception Although the company has availed loan facilities from financial institutions, management of the Company is expectant that interest rate fluctuation will not deeply affect profitability of the company. On the other hand, the company is going to raise fund from capital market for repayment of loan, which will further reduce their interest rate risk exposure.
Exchange rate risks Devaluation of local currency against major international currencies affects business performance of import based companies or companies borrowed in foreign currency adversely.
Management perception Import of the machinery/raw materials may be affected by the local currency devaluation.
Industry risks The company is operating in a highly competitive industry. Textile is the largest industrial sub-sector in Bangladesh. It contributes highest in the countrys total export earnings, gives employment to over four million people, meets the second basic need for clothing of the country and contributes around 50% of the industrial value addition. But after phasing out of the MFA, the global textile trade is now free from quota restriction. The phasing out of MFA has created a tough competitive environment, where Bangladesh is now competing the countries like China, India, Pakistan, Indonesia, Thailand, Vietnam etc. countries that is very strong in production of textile goods. All sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital.
34
Management perception The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, dyeing, printing and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices. In recent years, there has been a great deal of private initiative regarding investment in the backward linkage industries, taking advantage of the low cost of labor and power in the country and high local demand. The private sector investment in this sector, further boosted by government's various incentives, is likely to take the backward linkage industries to a better position where they can provide the necessary competitiveness to the entire textile industry to survive successfully in the free world market.
Market and technology related risks
(i) Market related risks Serving as a backward linkage, the spinning industry depends heavily on export-oriented knitting and weaving industries. Any fall in demand of the latter in the export market will naturally cause shrinking of the market for spinning industry.
Management perception The country enjoys Most Favored Nation status and has signed bilateral trade and investment treaties with 16 countries in North America, Asia and Europe. Investors can also take advantage of the generalized-system of preference (GSP) which allows duty-free access to the European Markets. Since 1990, the Government has embarked on a highly successful macroeconomic, stabilization program with balance of payments much improved, foreign exchange reserves and export earnings increased.
(ii) Technology related Risk: Technology always plays vital role for existence of any industrial concern. I nnovation of new and cost effective technology may obsolescence existence technology, which may cause negative impact.
Management perception The project is equipped with worlds modern and latest machinery and technology and to cope with the pace in harmony with modern textile world the Company is continuing modernization program of its machinery.
Potential or existing government regulations: The Company operates under companies act, taxation policy adopted by NBR, Security and Exchange Commission (SEC)s rules and rules adopted by other regulatory organizations. Any abrupt changes of the policies formed by those bodies will impact the business of the Company adversely.
Management perception Unless any adverse policies are taken, which may materially affect the industry as a whole; the business of the Company will not be affected. Government emphasizes on the growth of Yarn I ndustry to boost up the export of RMG. Yet the promoters and the sponsors have endeavor to convince the policy makers for adopting favorable terms & conditions, which will eventually help the yarn manufacturers of Bangladesh to compete with the low cost locations in the global arena.
Potential changes in global or national policies The performance of the company may be affected by the political and economical instability both in Bangladesh and worldwide. Any instance of political turmoil and disturbance in the country may adversely affect the economy in general.
Management perception The company can prosper in a situation of political stability and a congenial business environment. Political turmoil and the disturbance are bad for the economy and so also for us.
Operational Risk Difficulty in raw material import, increase of raw material price, strikes or other disruption within production premise may hinder regular flow of operational activities.
Competitive condition in the Business The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.
All sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital. 35
The textile industry in Bangladesh is growing rapidly from last two decades. Number of companies are operating in our country which creates intense competition in the industry. The major market competitors of the textile industry are as follows:
Sl. No. Name of the Company 01 Metro Spinning Ltd. 02 Arif Knit Spin Ltd. 03 Amber Cotton Mills Ltd. 04 Hanif Spinning Mills Ltd. 05 MSA Spinning Mills Ltd. 06 Square Spinning Mills Ltd. 07 Shamsudding Spinning Mills Ltd. 08 Shameem Spinning Mills Ltd. 09 R. K. Spinning Mills Ltd. 10 Gulshan Spinning Mills Ltd. 11 Malek Spinning Mills Limited 12 Maksons Spinning Mills Limited 36
General Information 37
Lock-in on Sponsors Shares All issued shares of the issuer at the time of according consent to public offering shall be subject to a lock-in period of three years from the date of issuance of prospectus or commercial operation, whichever comes later. Provided that the persons, other than Directors and those who hold 5% or more, who have subscribed to the shares of the Company within immediately preceding two years of according consent, shall be subject to a lock-in period of one year from the date of issuance of prospectus or commercial operation, whichever comes later. G. Shareholding Above 5% of the Directors- Lock In period 03 years Sl. No. Name of Shareholder Status No. of Shares hold Amount Taka % of holdings Last Allotment date Date of Issuan ce of Prospe ctus Period of Lock I n from the Date of Issuance of Prospectus 01 Mr. Abdul Khaleque Patahn Director & CEO 25,730,120 257301200 38.99% 2/03/2010 03 years Total 25,730,120 257301200 38.99%
H. Shareholding below 5% of the Directors- Lock in period 03 years Sl. No. Name of Shareholder Status No. of Shares hold Amount Taka % of holding s Last Allotment date Date of Issuance of Prospect us Period of Lock I n from the Date of I ssuance of Prospectus 01 Mrs. Feruza Begum Director 20,000 200,000 0.03% 2/03/2010 03 years 02 Mrs. Khaleda Pervin Director 79,960 799,600 0.12% 2/03/2010 03 years 03 Mr. Masum Pathan Director 79,960 799,600 0.12% 2/03/2010 03 years Total 179,920 1,799,200 0.27%
I. Shareholding Above 5% of Subscriber to the Memorandum and/ or General Shareholder- Lock in period 03 years Sl. No. Name of Shareholder Status No. of Shares hold Amount Taka % of holding s Last Allotment date Date of Issuan ce of Prospe ctus Period of Lock I n from the Date of Issuance of Prospectus 06 Keya Cosmetics Limited General Shareholder 6,300,810 63,008,100 9.55% 2/03/2010 03 years 07 Khaleque knitting & Garments Industries (Pvt.) Ltd. Subscriber to the Memorandum 1,330,2267 133,022,670 20.15% 2/03/2010 03 years 08 Keya Spinning Mills Limited Subscriber to the Memorandum 14,346,963 143,469,630 21.74% 2/03/2010
03 years 33,950,040 339,500,400 51.44%
J . Shareholding below 5% of Subscriber to the memorandum and/ or General Shareholder- Lock In 03 year (Subscription of Share beyond 02 years of Issuance of Prospectus)
Sl. No. Name of Shareholder Status No. of Share s hold Amount Taka % of holdings Last Allotment date Date of Issua nce of Prosp ectus Period of Lock I n from the Date of Issuance of Prospectus 01 Khaleque & Co (Pvt. ) Ltd Subscriber to the Memorandu m 79,960 799,600 0.12% 2/03/2010 03 years Total 79,960 799,600 0.12%
38 K. Shareholding below 5% of General Shareholder- Lock In 01 year (Subscription of Share within 02 years of Issuance of Prospectus)
Sl. Name of Investor (s) No. of Shares Amount % of holdings Last Allotment date Date of Issuance of Prospectus Period of Lock In from the Date of Issuance of Prospectus 1 Tajul Islam 1,500,000 1,500,00,00 2.27% 26/08/2010 01 year 2 M A Kashem 1,500,000 1,500,00,00 2.27% 26/08/2010 01 year 3 Nazmul Ahsan Farid 250,000 250,00,00 0.38% 26/08/2010 01 year 4 Nayma Mehrin 250,000 250,00,00 0.38% 26/08/2010 01 year 5 Md. Shariful Islam 200,000 200,00,00 0.30% 26/08/2010 01 year 6 Sarder Munsef Hossain 150,000 150,00,00 0.23% 26/08/2010 01 year 7 Kamrun Nahar 140,000 140,00,00 0.21% 26/08/2010 01 year 8 Shaarat Fasion Wear Ltd. 120,000 120,00,00 0.18% 26/08/2010 01 year 9 Mominul Islam Sangram 110,000 110,00,00 0.17% 26/08/2010 01 year 10 One Multipurpose Co-operative Society Ltd. 100,000 100,00,00 0.15% 26/08/2010 01 year 11 Rezaul Ahmed 100,000 100,00,00 0.15% 26/08/2010 01 year 12 Major Syed Golam Wadud (Rtd.) 100,000 100,00,00 0.15% 26/08/2010 01 year 13 Md. Zainul 100,000 100,00,00 0.15% 26/08/2010 01 year 14 Zillur Rahman 100,000 100,00,00 0.15% 26/08/2010 01 year 15 Mrs. Razia Rashid 100,000 100,00,00 0.15% 26/08/2010 01 year 16 Md. Mustafizur Rahman 100,000 100,00,00 0.15% 26/08/2010 01 year 17 Chowdhury Ashik Mahmud Bin Harun 100,000 100,00,00 0.15% 26/08/2010 01 year 18 Garments Export Village Ltd. 100,000 100,00,00 0.15% 26/08/2010 01 year 19 Mustafizur Rahman 100,000 100,00,00 0.15% 26/08/2010 01 year 20 Afsar Uz Zaman 100,000 100,00,00 0.15% 26/08/2010 01 year 21 Mohammod Ruhul Amin 70,000 70,00,00 0.11% 26/08/2010 01 year 22 Mrs. Roseline Talukder 70,000 70,00,00 0.11% 26/08/2010 01 year 23 Md. Kamal Uddin 60,000 60,00,00 0.09% 26/08/2010 01 year 24 Ms Tansin Keya 59,960 59,96,00 0.09% na 01 year 25 Masbahul Islam 50,000 50,00,00 0.08% 26/08/2010 01 year 26 Md. Ahsanul Kabir 50,000 50,00,00 0.08% 26/08/2010 01 year 27 Umma Kulsum 50,000 50,00,00 0.08% 26/08/2010 01 year 28 Monowara Sultana 50,000 50,00,00 0.08% 26/08/2010 01 year 29 Md. Motahar Rahman 40,000 40,00,00 0.06% 26/08/2010 01 year 30 Md. Sazzadur Rahman 30,000 30,00,00 0.05% 26/08/2010 01 year 31 Sk. Ashrafur Rahman 30,000 30,00,00 0.05% 26/08/2010 01 year 32 Farida Zaman Irin 20,000 20,00,00 0.03% 26/08/2010 01 year 33 Husne Ara Hussain 20,000 20,00,00 0.03% 26/08/2010 01 year 34 Quazi Arham Uddin 15,000 15,00,00 0.02% 26/08/2010 01 year 35 Md. Abu Sayeed 15,000 15,00,00 0.02% 26/08/2010 01 year 36 Md. Mahmud Hasan 15,000 15,00,00 0.02% 26/08/2010 01 year 37 Sheikh Hossain Zilu 10,000 10,00,00 0.015% 26/08/2010 01 year 38 Ferdausi Begum 10,000 10,00,00 0.015% 26/08/2010 01 year 39 Abdul Rashid 10,000 10,00,00 0.015% 26/08/2010 01 year 40 Munmun Sultana 10,000 10,00,00 0.015% 26/08/2010 01 year 41 Bishnu Pada Paul 10,000 10,00,00 0.015% 26/08/2010 01 year 42 Md. Tajul Islam 10,000 10,00,00 0.015% 26/08/2010 01 year 43 Muhammad Asiful Haque 10,000 10,00,00 0.015% 26/08/2010 01 year 44 Abdullah Al Mamun 10,000 10,00,00 0.015% 26/08/2010 01 year 45 Badrun Nesa Khanam 10,000 10,00,00 0.015% 26/08/2010 01 year 46 Mala Rani Paul 5,000 5,00,00 0.0075% 26/08/2010 01 year Total 6,058,960 60,589,600 9.30% Grand Total (A+B+C+D+E) 66,000,000 660,000,000 100% 39
Refund of Subscription Money
As per SEC Notification Dated February 9, 2010, the issuer shall refund application money to the unsuccessful applicant of the public offer by any of the following manner based on the option given by the applicant in the application form;- a) Through banking channel for onward deposit of the refund money into the applicants bank account as provided in the respective application form for subscription; or b) Through issuance of refund warrant in the name and address of the applicant as provided in the respective application form for subscription: Provided that, in case of deposit into the applicants bank account, the applicant will bear the applicable service charge, if any, of the applicants banker, and the issuer shall simultaneously issue a letter of intimation to the applicant containing, among others, the date and amount remitted with details of the bank through and to which bank such remittance has been effected.
Subsrciption by and refund to Non-Resident Bangladeshi (NRB)
1. A Non-Resident Bangladeshi shall apply either directly by enclosing a foreign demand draft drawn on a Bank payable at Dhaka, or through a nominee by paying out of foreign currency deposit account maintained in Bangladesh or in Taka, supported by foreign currency encashment certificate issued by the concern Bank, for the value of Securities applied for through crossed Bank cheque marking Account Payee only.
2. The value of Securities applied for by such person may be paid in Taka or US Dollar, UK Pound Sterling or Euro at the rate of exchange mentioned in the securities application form.
3. Refund against over subscription shall be made in the currency in which the value of securities was paid for by the applicant through Account Payee bank cheque payable at Dhaka with bank account number, Banks name and Branch as indicated in the securities application form. If the applicants bank accounts as mentioned in their IPO Application Forms are maintained with the Bankers to the Issue and other bank as mentioned above, refund amount of those applicants will be directly credited into the respective bank accounts as mentioned in their IPO Application forms.
Availability of securities Offer 1. Shares Particulars No. of shares Amount in Tk. A. 20% of IPO of Ordinary Shares of Tk (*) each including a premium of Tk (*) per share shall be reserved for Eligible Institutional Investors through Book Building Method 10,000,000 (*) B. 10% of IPO i.e. 5,000,000 Ordinary Shares of Tk (*) each including a premium of Tk (*) per share shall be reserved for Non Resident Bangladeshis. 5,000,000 (*) C. 10% of IPO i.e. 5,000,000 Ordinary Shares of Tk (*) each including a premium of Tk (*) per share shall be reserved for Mutual Funds and Collective Investment Schemes registered with the Commission. 5,000,000 (*) D. The remaining 60% of IPO i.e. 30,000,000 Ordinary Shares of Tk (*) each including a premium of Tk (*) per share shall be opened for subscription by the General Public. 30,000,000 (*) Total 50,000,000 (*) 2. All shares as stated in clause 1.A, 1.B, 1.C and 1.D shall be offered for subscription and subsequent allotment by the Issuer, subject to any restriction, which may be imposed, from time to time, by the Securities and Exchange Commission. 3. Under the clause 1.A the institutional investors will be allotted securities on a prorate basis at the weighted average price of the bid that would clear the total number of securities being offered to the institutional investors. 4. The securities offered to the investors under clause 1.B, 1.C and 1.D will be at the cut off price determined during the book building process. 5. In case of over-subscription under any of the categories mentioned in 1.B, 1.C and 1.D the Issue Manager shall conduct an open lottery of all the applications received under each category separately in accordance with the letter of consent issued by the Securities and Exchange Commission. 6. In case of under-subscription under any of the 10% categories mentioned in 1.B and 1.C, the un-subscribed portion shall be added to the general public category and, if after such addition, there is over-subscription in the general public category, the issuer and the issue manager shall jointly conduct and open lottery of all the applicants added together. 7. In case of under-subscription of the public offering, the un-subscribed portion of securities shall be taken up by the underwriter(s). 8. The lottery as stated in clause (5) and (6) shall be conducted in presence of representatives form the Issuer, the Stock Exchanges, and the applicants, if there be any. 40 Application for subscription 1. Application for shares may be made for a minimum lot for 100 ordinary shares to the value of Tk. (*) and should be made on the Companys printed application forms. Application form and prospectus may be obtained from the registered office of the Company, members of Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. or from the Bankers to the Issue. In case adequate forms are not available, applicants may use photocopied/cyclostyled/hand written/typed copies of the forms. Applications must not be for less than 100 shares. Any application not meeting this criterion will not be considered for allotment purpose. 2. J oint application form for more than two persons will not be accepted. In the case of joint application each party must sign the application form. 3. Application must be in full name of individuals or limited companies or trusts or societies and not in the name of firms, minors or persons of unsound mind. Applications from insurance, financial and market intermediary companies must be accompanied by Memorandum and Articles of Association. 4. An applicant cannot submit more than two applications, one in his/ her own name and another jointly with another person which is applicable for both Non-resident Bangladeshi (NRB) as well as other than Non- Resident Bangladeshi Applicants. In case an applicant makes more than two applications, all applications will be treated as invalid and will not be considered for allotment purpose. In addition, whole or part of application money may be forfeited by the Commission. 5. Bangladeshi nationals (including Non-Resident Bangladeshi (NRB) nationals working abroad) and Foreign nationals shall be entitled to apply for shares. 6. Payment for subscription by investors other than Non-Resident Bangladeshi (NRB) may be made to the said branches/office of the Banks mentioned below in Cash/Cheque/Pay Order/Bank Draft. The Cheque/Pay Order/Bank Draft shall be made payable to the Bank to which it is sent and be marked Keya Cotton Mills Limited and shall bear the crossing A/ C Payee Only and must be drawn on a Bank in the same town of the Bank to which application form is deposited. 7. All completed application forms together with remittances for the full amount payable on application shall be lodged by investors other than Non-Resident Bangladeshis (NRB) with any of the Branches of the Bankers to the Issue.
Description of Securities outstanding or Being Offered
Dividend, voting, pre-emption rights The share capital of the Company is divided into Ordinary Shares, carrying equal rights to vote and eligible to receive dividend in terms of the relevant provisions of the Companies Act 1994 and the Articles of Association of the Company. All shareholders shall have the usual voting right in person or by proxy in connection with, among others, election of Directors & Auditors and other usual agenda of General MeetingOrdinary or Extra Ordinary. On a show of hand, every shareholder present in person and every duly authorized representative of a shareholder present at a General Meeting shall have one vote and on a poll every shareholder present in person or by Attorney or proxy shall have one vote for every share held by him or her. In case of any additional issue of shares for raising further capital the existing shareholders shall be entitled to Right I ssue of shares of in terms of the guidelines issued by the SEC from time to time.
Conversion and liquidation rights If the Company at any time issues convertible preference shares or debentures with the consent of SEC or /and other regulatory authority, such holders of security shall be entitled to convert such securities into ordinary shares if it is so determined by the company In terms of the provisions of the Companies Act 1994, Articles of Association of the Company and other relevant rules in force, the shares of the Company are freely transferable. The Company shall not charge any fee for registering transfer of shares. No transfer shall be made to a firm, an infant or person of unsound mind.
Dividend policy There is no limitation to pay dividend to common or preferred stock holders because of provisions in debt instruments or otherwise. The profits of the Company shall be divisible among the members in proportion to the shares held by them respectively. 41 Subject to above the Company in the General Meeting may declare a dividend to be paid to the members according to their respective rights and interests in the profits and may fix the time for payment. No larger dividend shall be declared than is recommended by the Directors but the Company in the General Meeting may declare a smaller dividend. No dividend shall be payable except out of the profits of the year or any other undistributed profits and no dividend shall carry interest as against the Company. The declaration of the Directors as to the amount of net profits of the Company shall (subject to the certificate of the auditors) be conclusive. The Directors may from time to time pay to the members such interim dividends as in their judgments the position of the Company justifies. A transfer of shares shall pass to the transferee the right to any dividend declared but not paid thereon before the registration of the transfer.
Other rights of Shareholders In terms of the provisions of the Companies Act 1994, Articles of Association of the Company and other relevant rules in force, the shares of the Company are transferable. The Company shall not charge any fee, other than Government duties for registering transfer of shares. No transfer shall be made to a minor or person of unsound mind. The Directors shall present the financial statements as required under the law & I nternational Accounting Standard. Financial statements will be prepared in accordance with the International Accounting Standards consistently applied throughout the subsequent periods and present with the objective of providing maximum disclosure as par law and International Accounting Standard to the shareholders regarding the financial and operational position of the company. The shareholders shall have the right to receive all periodical statement and reports, audited as well as un audited, published by the company from time to time. In case of any declaration of stock dividend by issue of bonus shares, all shareholders shall be entitled to it, in proportion to their shareholdings, on the date of book closure for the purpose. The Shareholders holding minimum of 10% shares of paid-up capital of the company shall have the right to requisition Extra- ordinary General Meeting of the Company as provided for in section 84 of the Companies Act 1994.
Market for the securities being offered The issuer shall apply to all the Stock Exchanges in Bangladesh within seven (7) working days from the date of consent accorded by the Commission to issue prospectus. The issuer will apply at:
Declaration about Listing of Shares with Stock Exchanges None of the Stock Exchanges, if for any reason, grant listing within 75 days from the closure of subscription, any allotment in terms of this prospectus shall be void and the company shall refund the subscription money within fifteen days from the date of refusal for listing by the stock exchange, or from the date of expiry of the said 75(seventy five) days, as the case may be.
In case of non-refund of the subscription money within the aforesaid fifteen days, the company directors, in addition to the issuer company, shall be collectively and severally liable for refund of the subscription money, with interest at the rate of 2% (two percent) per month above the Company rate, to the subscribers concerned.
The I ssue Managers, in addition to the issuer company, shall ensure due compliance of the above mentioned conditions and shall submit compliance report thereon to the Commission within seven (7) days of expiry of the aforesaid fifteen (15) days time period allowed for refund of the subscription money. Trading and settlement regulation of the stock exchanges shall apply in respect of trading and settlement of the shares of the Company. 42
Rules and Regulation
43
Book Building Method Book building method Book Building is a process used by companies raising capital through Public Offerings to aid price and demand discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected from institutional investors at various prices, which are within the price band approved by the Securities and Exchange Commission. The process is directed towards only eligible institutional investors. The bidding is handled through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by the Commission, especially developed for book building method. The offer price for initial public offering is cut-off price, the lowest price offered by the bidders at which the total issue is exhausted. The steps including book building method are as under:
a) Issuer shall invite for indicative price offer from the eligible institutional investors through proper disclosure, presentation, document, seminar, road show, etc.; b) Issuer in association with issue manger and eligible institutional investors shall quote an indicative price in the prospectus and submit the same to the Commission with copy to the stock exchanges; (c) Such indicative price range shall be determined as per price indications obtained from at least five eligible institutional investors covering at least three different categories of such investors; (d) Rationale for the indicative price must be included in the prospectus i.e. the issuer is required to disclose in detail about the qualitative and quantitative factors justifying the indicative price; (e) The indicative price shall be the basis for formal price building with an upward and downward band of 20% (twenty percent) of indicative price within which eligible institutional investors shall bid for the allocated amount of security; (f) Eligible institutional investors bidding shall commence after getting consent from the Commission for this purpose; (g) If institutional quota is not cleared at 20% (twenty percent) below indicative price, the issue will be considered cancelled unless the floor price is further lowered within the face value of security: Provided that, the issuers chance to lower the price shall not be more than once; (h) Prospectus will have to be posted on the Websites of the Commission, stock exchanges, issue manager and issuer at least two weeks prior to the start of the bidding to facilitate investors to know about the company and all aspect of offering; (i) No institutional investor shall be allowed to quote for more than 10% (ten percent) of the total security offered for sale, subject to maximum of 5 (five) bids; (j) Institutional bidding period will be 3 to 5 (three to five) working days which may be changed with the approval of the Commission; (k) The bidding will be handled through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by the Commission, especially developed for book building method; (l) The volume and value of bid at different prices will be displayed on the monitor of the said system without identifying the bidder; (m) The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids that would clear the total number of securities being issued to them; (n) Institutional bidders shall deposit their bid with 20% (twenty percent) of the amount of bid in advance to the designated bank account and the rest amount to settle the dues against security to be issued to them shall be deposited within 5 (five) working days prior to the date of opening subscription for general investors; 44 (o) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for full settlement of the security to be issued in their favor, 50% (fifty percent) of bid money deposited by them shall be forfeited by the Commission. The securities earmarked for the bidder who defaulted in making payment shall be added to the general investor quota. (p) General investors, which include mutual funds and NRBs, shall buy at the cut-off price; (q) There shall be a time gap of 25 (twenty five) working days or as may be determined by the Commission between closure of bidding by eligible institutional investors and subscription opening for general investors; (r) Subscription for general investors shall remain open for the period as specified by the Commission; (s) General investors shall place their application through banker to the issue; and (t) All application money shall be kept in a separate escrow account opened with a designated bank with prior intimation to the Commission. Issuer will not be allowed to utilize such money until all the process of issue is completed and Commissions consent to this effect is obtained.
Amendment in the Public Issue Rules 2006 vide the to the Securities and Exchange Commission Notification no SEC/ CMRRCD/ 2008/ 186/ 57/ Admin/ --------- date August 01, 2010 states that
(a) The issuer/issue manager shall issue invitation to the eligible institutional investors, both in writing and through publication in at least 5 (five) widely circulated national dailies, giving at least 10 (ten) working days time, to the road show/presentation/seminar indicating time and venue of such event. The invitation letter shall accompany an information document containing all relevant information covering the proposed issue of the issuer. The eligible institutional investors shall submit indicative price to the issuer/issue manager, signed jointly by the Chief Executive Officer (CEO) and the Financial Analyst, highlighting the factors taken into consideration in support of the indicative price, within the next 3(three) working days of the said road show/presentation/seminar;
(b) The issuer, in consultation with the issue manager, shall quote its own indicative price in the prospectus based on the indicative prices so obtained from the eligible institutional investors:
Provided that the quote of the indicative price in the prospectus shall not exceed the arithmetic mean of the price offers so obtained from the eligible institutional investors;
(c) The prospectus shall simultaneously be submitted to the Commission and the stock exchanges along with the due diligence statements issued by all concerned;
(d) If any issue fails to get indicative prices from at least 15 (fifteen) eligible institutional investors covering at least 3 (three) categories, including at least 5 (five) registered merchant bankers, the whole process shall be cancelled, which may be repeated with prior permission of the Commission;.
Price discovery for determining indicative price.
The price discovery process for determining indicative price of security will involve the following institutional investors registered with or approved by the Commission in this regard:-
(a) Merchant bankers excepting the issue manager concerned to the proposed issue (b) Foreign institutional investors registered with or approved by the Commission (c) Recognized pension funds and provident funds (d) Bank and non-bank financial institutions under regulatory control of Bangladesh Bank; (e) Insurance companies regulated under Insurance Act, 1938 (Act No. IV of 1938) (f) Institutional venture capital and institutional investors registered with or approved by the Commission (g) Stock Dealer registered with the Commission and (h) Any other artificial juridical person permitted by the Commission for this purpose. 45
Determination of Indicative price
46
Determination of I ndicative price
face value of Tk. 10 each).
I) Net Assets Value (NAV)
The Net Assets Value (NAV) is based on historical accounting book value of companys net assets. This is determined on the basis of the figures appearing in the audited balance sheet as at 30 th September, 2010 as follows:
1. 2.
Property Plant and Equipment Current Assets
1,998,093,887 1,129,408,780
Total Assets (A) 3,127,502,667
1. 2. Current Liabilities Non Current Liabilities 926,091,964 741,573,737 Total Liabilities (B) 1,667,665,701
Net Assets Value (A-B) 1,459,836,966
Numbers of Outstanding Shares 66,000,000
Net Assets Value Per Share (Taka) 22.12
II) Earning Based Value per share:
The companys operational performance and financial results reflect its growth, financial strength, earning and prospects that help investors in making informed investment decision. The operational and financial results are summarized as follows:
Financial Year (As on 30 th J une )
Turn Over (Tk.) Net Profit After Tax (Tk.) No. of Share EPS Tk. 10 Basis 2006-07 161,869,452 54,898,019 10,00,000 5.50 2007-08 1,409,963,522 73,740,796 24,700,000 3.00 2008-09 1,012,033,841 84,249,914 24,700,000 4.13 2009-10 1,367,320,735 247,033,425 60,000,000 6.41 J uly to Sept.* 2010 1,505,450,528 342,217,532 66,000,000 5.49 Average
1,091,327,616 160,427,937 4.91 *Annualize Figure
The weighted average net profit after tax for the last 5 (five) years 2005-06 To 2009-10 stands at Tk 160.43 million and the weighted average EPS stands at Tk. 4.91.
Market P/E as on 30 September 2010 =26.29 Sectoral P/E (Textile Sector) as on 30 September 2010=55.89
Earning based Value per share based on Market P/E as on 30 September 2010=4.91X26.29 =129.08
Earning based Value per share based on Sectoral P/E as on 30 September 2010=4.91X55.89 =274.42
Earning based Value per share based at current EPS on Market PE as on 30 September 2010=5.49X26.29 =144.33
The offering price of ordinary shares of the Keya Cotton Mills Limited is Tk. 60 each (including premium of Tk. 50 per share for 47
If we consider the share price on the basis of DSE overall price earning multiple of 26.29, the earning based value of shares of the Company at average EPS of 4.91 stands at Tk. 129.08, and the earning based value of shares of the Company at current EPS of 5.49 stands at Tk. 144.33.
II I) Average market price of similar stocks:
Average Market Price
Sl. No. Company Name Last 1 year average price 1 Al-Haj Textile 81.44 2 BEXTEX Limited 84.34 3 CMC Kamal 36.59 4 H.R.Textile 34.81 5 Maksons Spinning Mills 93.57 6 Prime Textile 46.35 7 Rahim Textile 147.70 8 Saiham Textile 43.47 9 Sonagaon Textile 46.05 10 Square Textile 132.23 Average 74.66
From the above it is clear that market price of prospective similar companies of textile sector is on average Tk 74.66.
Determination of offering price under different methods Amount (Taka) 1. Net asset Value (NAV) per share current cost basis 22.12 2. Net Asset Value per share-Historical cost basis 20.02 3. Earning Based Value per Share based on average EPS on market PE as on 30 th September 2010 129.08 4. Earning based value per share based on current EPS as per audited accounts on market PE as on 30 th September 2010 144.33 5. Average Market Price of similar shares 74.66 Average 78.04
From the above calculation the fair value of share under different method stands at Tk 78.04. After following conservative approach we considered expected price of Keya Cotton Mills Limited Tk 60 per share including Tk 50 premium per share.
48
Audited Accounts as on 30 th September 2010
49
AUDITORS REPORT TO THE SHAREHOLDERS OF KEYA COTTON MILLS LIMITED We have audited the accompanying financial statements of KEYA COTTON MILLS LIMITED, which comprises the Statement of Financial Position as at 30 September, 2010 and the related statement of comprehensive income and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations. This responsibility includes: designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion:
In our opinion, the Financial Statements prepared in accordance with Bangladesh Financial Reporting Standards, give a true and fair view of the state of the companys affairs as at 30 September 2010 and of the results of its operations and its cash flows for the period then ended and comply with the Companies Act 1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations. Further to our opinion in the above paragraph, we state that: (i) 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 made due verification thereof; (ii) in our opinion, proper books of account as required by law have been kept by KEYA COTTON MILLS LIMITED so far as it appeared from our examination of those books; (iii) the companys Statement of Financial Position ,Statement of Comprehensive Income and its Statement of Cash Flows dealt with by the report are in agreement with the books of account and returns; (iv) the expenditure incurred was for the purpose of the companys business. Sd/- Dhaka, Chartered Accountants 50 30-Sep-10 30-Jun-10 ASSETS Notes Taka Taka Non-Current Assets 1,998,093,887 1,967,285,556 3 1,266,532,975 1,285,846,874 Pre-Production Expenses 4 2,570,244 2,937,422 Investment 5 728,990,668 678,501,260 Current Assets 1,129,408,780 1,016,462,065 Inventories 6 272,832,775 195,131,536 Current Account with Sister Concerns 7 51,868,804 31,933,076 Accounts Receivable (Annexure-I) 720,809,861 643,414,169 Investment in listed Companies Shares 8 17,887,063 4,254,884 Advance, Deposit & Prepayments 9 50,611,510 130,227,176 Cash and Cash Equivalents 10 15,398,767 11,501,224 TOTAL ASSETS 3,127,502,667 2,983,747,621 EQUITY AND LIABILITIES Shareholders' Equity 1,459,836,965 1,256,082,582 Share Capital (Paid-up) 11 660,000,000 600,000,000 Share Premium (Net of Tax) 12 58,200,000 - Tax Holiday Reserve 13 174,375,049 174,375,049 Revaluation Reserve 14 138,418,403 138,418,403 Retained Earnings 15 428,843,513 343,289,130 Non-Current Liabilities 741,573,737 740,387,120 Long Term Loan 16 669,508,545 676,403,865 Deferred Tax Liability 17 72,065,192 63,983,255 Current Liabilities 926,091,964 987,277,919 Trade and Other Payables 18 8,598,206 8,904,665 Worker's Profit Participation Fund (WPPF) 19 15,469,844 12,486,296 Short Term Loan from Bank 20 731,321,199 844,455,079 Current Portion of Long Term Loan 21 128,294,407 99,024,770 Security Deposit 6,928 6,928 Liabilities for Expenses 22 42,401,379 22,400,181 TOTAL EQUITY AND LIABILITIES 3,127,502,667 2,983,747,621 Net Assets Value Per Share (NAV) 22.12 20.93 Sd/- Sd/- Sd/- Chairman Managing Director Company Secretary Sd/- Dhaka Chartered Accountants Auditors' Report to the shareholders See annexed report to date These financial statements should be read in conjunction with the annexed notes KEYA COTTON MILLS LIMITED STATEMENT OF FINANCIAL POSITION as at 30th September, 2010 Property, Plant & Equipment net of accumulated depreciation
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1 July' 2010 to 30 Sep' 2010 1 July' 2009 to 30 Sep' 2009 Notes Taka Taka Sales 23 376,362,632 312,217,645 Less : Cost of Goods Sold 24 271,001,634 227,499,233 Gross Profit 105,360,998 84,718,412 Less : Operating Expenses 2,622,682 1,833,910 Selling & Administrative Expenses 25 2,622,682 1,833,910 102,738,316 82,884,502 Less: Financial Expenses 26 40,083,799 40,513,332 Operating Profit 62,654,517 42,371,170 Add: Non-operating income 27 50,489,408 40,114,294 Net Profit before WPPF 113,143,925 82,485,464 Less:Provision for WPPF 2,983,548 2,017,675 Net Profit before Income Tax 110,160,377 80,467,789 Provision for Tax Current Tax 28 16,524,056 - Deferred Tax 29 8,081,937 - Profit available for Appropriation 85,554,383 80,467,789 Provision for Tax Holiday Reserve - 16,948,468 85,554,383 63,519,321 - - 85,554,383 63,519,321 Basic Earning per Share (EPS) (2009:Restated) 30 1.37 3.26 Sd/- Sd/- Sd/- Chairman Managing Director Company Secretary Sd/- Dhaka Chartered Accountants KEYA COTTON MILLS LIMITED STATEMENT OF COMPREHENSIVE INCOME for the period from 1July to 30 September, 2010 Operating Profit Auditors' Report to the shareholders See annexed report to date Profit for the period Other Comprehensive Income Total Comprehensive Income Transferred to Statement of Changes in Equity These financial statements should be read in conjunction with the annexed notes
52
1 July' 2010 to 30 Sep' 2010 1 July' 2009 to 30 Sep' 2009 Taka Taka CASH FLOW FROM OPERATING ACTIVITIES: Cash Received from Turnover and Others 315,543,863 241,879,348 Payment for Cost and Expenses (347,939,917) (209,399,232) Receipts/(Payments) in Advance, Deposits and Prepayments 79,615,666 5,714,659 Interest Paid (37,108,800) (36,613,332) Tax Paid (1,800,000) - Net Cash Generated from Operating Activities 8,310,812 1,581,443 CASH FLOW FROM INVESTING ACTIVITIES: Investment in Shares of Listed Company (13,632,179) (65,552,071) Acquisition of Fixed Assets (85,800) - Net Cash used in Investing Activities (13,717,979) (65,552,071) CASH FLOW FROM FINANCING ACTIVITIES: Short Term Loan from Bank (113,133,880) 128,462,983 Increase/(decrease) in Share Capital 60,000,000 - Long Term Loan 22,374,317 (26,295,022) Short Term Loan from Sister Concern (19,935,728) (11,608,081) Share Premium 60,000,000 - Net Cash Generated from Financing Activities 9,304,710 90,559,880 Net Cash Inflow 3,897,543 26,589,252 Opening Cash & Bank Balances 11,501,224 1,197,122 Closing Cash & Bank Balances 15,398,767 27,786,374 0.13 0.06 Sd/- Sd/- Sd/- Chairman Managing Director Company Secretary KEYA COTTON MILLS LIMITED STATEMENT OF CASH FLOWS for the period from 1 July to 30 September, 2010 Operating Cash Flow Per Share
53
Share Share Tax Holiday Revaluation Retained Capital Premium Reserve Surplus Earnings Balance as on 01-07-2010 600,000,000 - - 174,375,049 138,418,403 343,289,130 1,256,082,582 Total Comprehensive Income for the year - - - - - 85,554,383 85,554,383 Share Capital 60,000,000 - - - - - 60,000,000 Share Premium - 58,200,000 - - - - 58,200,000 Tax Holiday Reserve - - - - - - - Balance as on 30 -09-2010 660,000,000 58,200,000 - 174,375,049 138,418,403 428,843,513 1,459,836,965 Share Share Tax Holiday Revaluation Retained Capital Premium Reserve Surplus Earnings Balance as on 01-07-2009 247,000,000 - 205,000,000 124,358,563 - 244,255,706 820,614,269 Total Comprehensive Income for the year - - - - - 63,519,321 63,519,321 Share capital - - - - - - - Capitalization of Profit - - - - - - - Tax holiday reserve - - - 16,948,468 - - 16,948,468 Balance as on 30 -09-2009 247,000,000 - 205,000,000 141,307,031 - 307,775,027 901,082,058 Sd/- Sd/- Chairman Total For the period from 1 July to 30 September, 2009 Managing Director Company Secretary Particulars KEYA COTTON MILLS LIMITED STATEMENT OF CHANGES IN EQUITY For the period from 1 July to 30 September, 2010 Total Share money Deposit Particulars Share money Deposit
54
3 Property Plant & Equipment Land & Land Development 228,112,498 - - 228,112,498 - - - - 228,112,498 228,112,498 Building & Other Construction 140,517,441 53,500 - 140,570,941 5 27,730,271 1,410,508 29,140,779 111,430,162 112,787,170 Plant & Machinery* 1,296,958,637 6,000 - 1,296,964,637 7.5 369,899,865 17,382,464 387,282,330 909,682,307 927,058,772 Furniture & Fixture 61,729 - - 61,729 10 20,273 1,036 21,309 40,420 41,456 Office Equipment 411,002 2,300 - 413,302 15 135,357 10,423 145,780 267,522 275,645 Motor Vehicle 14,776,614 - - 14,776,614 20 8,561,260 310,768 8,872,028 5,904,586 6,215,354 Electrical & Gas Installation 15,956,211 - - 15,956,211 10 5,804,415 253,795 6,058,210 9,898,001 10,151,796 Sundry Assets 1,884,097 24,000 - 1,908,097 10 679,913 30,705 710,618 1,197,479 1,204,184 Total 1,698,678,229 85,800 - 1,698,764,029 412,831,355 19,399,699 432,231,054 1,266,532,975 1,285,846,875 Total as at 30 June' 2010 1,559,421,276 838,550 138,418,403 1,698,678,229 328,859,397 83,971,958 412,831,355 1,285,846,874 1,230,561,879 Depreciation charged for the year has been allocated as follows: Particulars Amount (Tk.) Factory Overhead (Note -24.2) 19,011,705 Administrative & Selling Expenses (Note -25) 387,994 19,399,699 * Total Plant and machinary is Tk. 1,296,958,637 of which amounting to Tk. 18,53,06,509 is under Finance Lease. Particulars Cost Charged during the period As on 01-07-2010 As on 01-07-2010 Addition during the period As on 30-09-2010 Revaluation Gain Depreciation Rate % Figures in Taka As on 30-09-2010 Written Down Value As on 30-09-2010 As on 30-06-2010
55
KEYA COTTON MILLS LI MI TED Notes to the Financial Statements For the period from 1 J uly to 30 September 2010
Legal Status and Nature of the Company
Domicile, Legal Form and Country of Incorporation:
Keya Cotton Mills Limited (the Company) was incorporated in Bangladesh on 15 J une, 2004 vide registration no. 531333428 with the Registrar of J oint Stock Companies and firms as a Public Limited Company under Companies Act, 1994. Registered Office and Principal Place of Business:
The Companys registered office and the factory are located at J arun, Konabari, Gazipur sadar, Gazipur.
Principal Activities and Nature of Operation:
Its principal activities and operations are production and sale (deemed export) of cotton yarn.
Basis of Preparation
2.1 Statement of Compliance These financial statements have been prepared and the disclosures of information made in accordance with the requirements of the Companies Act 1994, The Securities and Exchange Rules 1987, the listing Regulations of Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and International Accounting Standards (IAS) as adopted by the Institute of Chartered Accountant of Bangladesh (ICAB), as Bangladesh Accounting Standard (BAS). The balance sheet and income statement have been prepared according to BAS-34 (Interim Financial Reporting) based on accrual basis following going concern assumption under Generally Accepted Accounting Principles and practices in Bangladesh.
2.2 Basis of Measurement
The financial statements are prepared under the historical cost convention, except land, which is measured at valuation basis.
2.3 Significant accounting policies
The specific Accounting Policies selected and applied by the companys management for significant transactions and events that have a material effect within the framework of BAS-1 Presentation of Financial Statements in preparation and presentation of financial statements. The accounting policies set out below has been applied consistently to all periods presented in these financial statements.
2.4 Revenue recognition
In compliance with the requirements of BAS 18 Revenue, revenue is recognized only when the products are invoiced and dispatched to the customers;
2.5 Investment in Associates
In compliance with requirements of BAS-28 Investment in Associates Under the equity method, the investment in an associate is initially recorded at cost. Subsequently, the carrying amount of the investment is increased or decreased to recognize the investors share of the profit or loss of the investee after the date of acquisition. The investors share of the profit or loss of the investee is recognized in the investors profit or loss.
2.6 Property, plant and equipment
2.6.1 Recognition and measurement Property, Plant and Equipment are stated at their cost (except Land & Land Development) less accumulated depreciation in accordance with BAS 16 Property, Plant and Equipment. Cost represents cost of acquisition or construction and include purchase price and other directly attributable cost of bringing the asset to working conditions for its intended use but do not include any capitalized borrowing cost. Revaluation of Land & Land Development has done on J une 22, 2010 and no depreciation is charged on Land & Land Development. Expenditure on repairs and maintenance of property, Plant & Equipment is treated as expense when incurred. Subsequent expenditure on property, Plant and Equipment is only recognized when the expenditure improves the condition of the asset beyond its originally assessed standard of performance. Name of Company Total No. of Shares Total I nvestment (in Tk.) Percentage of Investment (%) Keya Knit Composite Ltd. 8,15,500 8,15,50,000 31.37 56
2.6.2 Deprecation of fixed assets Depreciation has been charged on addition from the date of acquisition date and no depreciation is provided on retirement/disposal of assets. Depreciation was computed using diminishing balance method. The costs an accumulated depreciation of depreciable assets retired or otherwise disposed of are eliminated from the assets and accumulated depreciation. The annual depreciation rates applicable to the principal categories are:
Building & other Construction 5% Plant & Machinery 7.5% Furniture & Fittings 10% Office equipment 15% Motor vehicles 20% Electrical & Gas I nstallation 10% Sundry Assets 10%
Depreciation has been charged to Statement of Comprehensive Income.
2.6.3 Revaluation of Fixed Assets
Basis of revaluation Valuation of land has been done on 22 J une 2010 by an independent valuer (M/S.Asian Surveyors Ltd.) taking the location, size, industrial importance and the facilities available in and around into account. A local enquiry about the value of such land normally being purchased and sold in the locality has also been conducted. The revaluation report has approved by the directors in the Board Meeting held on 28 J une 2010.
2.7 Borrowing costs
Interest on loan is treated in line with the requirement of BAS 23 Borrowing Cost. Interest on loan for ongoing projects is shown under project in progress as interest during construction (IDC) and project to date IDC is capitalized after completion of the project. Interest on loan for completed project is charged in the statement of comprehensive income as expenses in the period in which it is expired.
2.8 Measurement of lease payments
Lease payments made under finance leases (excluding cost for services such as insurance and maintenance) are recognized as expense in the statement of comprehensive income on a straight-line basis and the reduction of the outstanding liabilities as per the requirements of BAS 17- Leases
2.9 Valuation of inventories
Inventories comprise Raw Materials, Finished Yarn, Waste Cotton, Stores & Spares, Stores-in-transit and Work in process. They are stated at the lower of cost and net realizable value in accordance with BAS 2 - Inventories after making due allowance for any obsolete or slow moving item. The costs of inventories are assigned by using weighted average cost formula. Net realizable value of work in Process is determined after deducting the estimated cost of completion and estimated costs necessary to make the sale from estimated selling price.
2.10 Taxation
Tax Holiday Period & Reserve The company enjoyed tax holiday period for 4 (four) years with effect from 1 February 2006 to 31 J anuary 2010 (vide letter ref No-11 (11) ANU -1/2006) dated 02/05/2006. So, no Tax Holiday Reserve is required to maintain for the Reporting Period.
Current tax Income tax is calculated and provision is made in accordance with the provisions of Income Tax Ordinance & Rules -1984. The corporate tax rate for Textile Sector is 15%. Current Tax provision has been made for Reporting Period (J uly to September 2010).
Deferred Tax Deferred tax is recognized using the balance sheet method. Deferred tax arises due to temporary difference deductible or taxable for the event or transactions recognized in the income statement
2.11 Provision In accordance with the guidelines as prescribed by BAS 37 Provisions were recognized when all the following criteria are met: When the Company has a present obligation as a result of past event; When it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and 57 Reliable estimates can be made of the amount of the obligation.
2.12 Employees Benefit Obligations
Workers Profit Participation Fund (WPPF)
Provision for Workers Profit Participation Fund has been made @ 5% of net profit after charging the contribution and such contribution provided as per provision of Labour Law -2006 and payable as defined in the said law.
2.13 Contingent Assets & Capital Expenditure Commitment of the Company.
Contingent assets are current or possible asset, arising from past events and whose existence is due to the occurrence or non-occurrence of one more uncertain future event, which are not within the control of the company. But there is no Contingent Assets & Capital expenditure commitment of the company for the period ended on 30 September 2010.
2.14 Foreign Currency Translation
Transactions denominated in foreign currencies are translated in to Bangladesh Taka and recorded at rates of exchange ruling on the date of transaction in accordance with BAS 21 - The Effects of Changes in Foreign Currency Rates. Foreign currency monetary assets and liabilities at the balance sheet date are translated at the rates prevailing on that date. Exchange differences at the balance sheet date are charged /credited to the Statement of Comprehensive Income, to the extent that this treatment does not contradict with the schedule XI of Companies Act 1994. This schedule required all exchanges gains and losses arising from foreign currency borrowings, taken to finance acquisition on construction of fixed assets, to be credited / charged to the cost/value of such assets.
2.15 Accounts Receivable These are carried at original invoice amount. This is considered good and collectible, and therefore, no amount was written off as bad debt and no debt was considered doubtful to provide for.
2.16 Cash and cash equivalents According to BAS 7 - Statement of Cash Flows, cash comprises cash in hand and bank deposits and, cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. BAS 1 - Presentation of Financial Statements provides that Cash and Cash Equivalents are not restricted in use. Considering the provisions of BAS 7 and BAS 1 cash in hand and bank balances have been considered as cash and cash equivalents.
2.17 Statement of cash flows Statement of Cash Flows is prepared principally in accordance with BAS 7 Statement of Cash Flows and the cash flow from the operating activities have been presented under direct method as prescribed by the Securities and Exchange Rules 1987 and considering the provision of Paragraph 19 of BAS 7 which provides that Enterprise are Encouraged to Report Cash Flow From Operating Activities Using the Direct Method.
2.18 Earnings Per Shares (EPS)
The Company calculates Earnings Per Shares (EPS) in accordance with BAS 33 Earnings per Shares which has been shown on the face of the Statement of Comprehensive Income.
2.19 Internal Control:
The following steps have been taken for implementation of an effective internal control Procedure of the company: A strong internal control and compliance division has been formed with a view to establish a well-designed system of internal control. Regular review of internal audit with view to implement the suggestion of internal auditors in respect of internal control technique. To establish an effective management system that includes planning, organization and supervising culture in the factory as well as at Head Office.
58 30-Sep-10 30-Jun-10 Taka Taka 4 Pre Production Expenses Opening 2,937,422 4,406,134 Less: Adjustment During the period 367,178 1,468,712 2,570,244 2,937,422 5 Investment Long Term Investment Shares ( Note: 5.1) 5,100,000 5,100,000 Long Term Investment in Associated Company (Note: 5.2) 323,890,668 273,401,260 Investment in Share Money (KYML) 400,000,000 400,000,000 728,990,668 678,501,260 5.1 Long Term Investment in Shares Name of Company No. of Share Keya Yarn Mills Ltd. 50,000 5,000,000 5,000,000 Khaleque Knitting & Garments Ind. 17,401 100,000 100,000 Total 5,100,000 5,100,000 5.2 Long Term Investment in Associated Company Name of Company Nos.of Share Keya Knit Composite Ltd. 815,500 81,550,000 81,550,000 Add: Share of Profit (Cumulative) 242,340,668 191,851,260 Total 323,890,668 273,401,260 6 Inventories Raw Cotton & Packing Materials 110,952,416 32,709,836 Work-in-Process 16,759,890 16,394,690 Finished Goods 134,120,222 134,964,009 Stores & Spare Parts 11,000,248 11,063,001 Total 272,832,775 195,131,536 7 Keya Knit Composite Limited 109,478,669 109,478,669 Khaleque Knitting & Garments Ind. Limited (16,215,528) (16,215,528) Khaleque & Company (Pvt.) Limited 497,543 497,543 Keya Spinning Mills Limited (10,928,732) (20,928,732) Keya Yarn Mills Limited (30,963,148) (40,898,876) Total 51,868,804 31,933,076 8 Investment in Listed Companies Shares Keya Cosmetics Ltd. 100,000 4,202,156 4,202,156 Bank Asia Ltd. 267 52,429 52,429 Dutch Bangla Bank Ltd. 1 123 123 Exim Bank Ltd. 1 9 9 Mutual Trust Bank Ltd. 1 126 126 Lanka-Bangla Finance Ltd. 1 41 41 DESCO 500 1,533,349 - Grameen Phone Limited 30,000 7,218,095 - International Leasing & Financial Services Ltd. 1,500 3,124,861 - Prime Islami Life Ins. Co. Ltd 500 1,755,874 - Total 17,887,063 4,254,884 Total Market Value of Listed Companies Shares as on 30.09.2010 is Tk. 2,70,25,545. So, no provision has been made against these shares. The quantity (those are possible to describe) and value of the above items are narrated in Annexure - II Current Account with sister concerns Management has decided to write off Preproduction expenses within next five years from the year of 2007-08. 59 30-Sep-10 30-Jun-10 Taka Taka 9 Advance, Deposit & Prepayment: Advance Advance for Land 5,607,554 21,350,087 Advance income tax 857,616 474,509 Advance against Purchase 865,047 963,165 Union Capital Limited - 301,310 Materials in transit 777,291 64,147,510 Software Supply 1,680,000 1,680,000 9,787,508 88,916,581 Deposit Titas Gas 2,799,800 2,799,800 Margin Deposit in Bank 37,464,242 37,950,835 40,264,042 40,750,635 Pre-payments Margin for Bank Guarantee 559,960 559,960 Total 50,611,510 130,227,176 10 Cash and Cash Equivalents Cash in Hand 7,690 47,949 Cash at Bank: Current A/C A/c No. UCBL-Motijheel Branch 11088104 3,946 3,946 Bank Asia Ltd.-Dilkusha Branch 833007161 1,126,614 7,980,225 Bank Asia Ltd.-Scotia Branch 733003484 3,350 3,350 Dutch Bangla Bank Ltd.-Gulshan Br. 116110000003203 10,001,908 765,208 Dutch Bangla Bank Ltd.-Gulshan Br. 111270078 44,076 44,076 Shahjalal Bank Ltd.-Dhaka Main Br. 11100007562 55,517 34,684 One Bank-Principal Branch 23088002 92,385 92,385 Agrani Bank-Ramna Branch 99070 151,343 151,343 Sonali Bank Ltd.-BBA Branch 33019856 267,690 361,339 HSBC - Ancor Tower Branch 77011 149 149 Standard Bank- Gulshan Branch 10024 2,544 2,543 Southeast Bank- Gulshan Branch 12601 3,609,822 1,535,364 National Bank- Gulshan Branch 9875 5,134 119,726 Krishi Bank- Kawran Bazar Branch 1696 21,313 352,151 Pubali Bank Ltd.-Principal Branch 35807 5,286 6,786 15,391,077 11,453,275 Total 15,398,767 11,501,224 11 Share Capital Authorized Capital 25,00,00,000 Ordinary shares of Tk. 10/- each 2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000 Issued, Subscribed, and Paid-up Capital of Tk.10 each Share Holding Position: Mr. Abdul Khaleque Pathan 257,301,200 4,797,560 Mrs. Feroza Begum 210,000 799,600 Mrs. Khaleda Pervin 799,600 799,600 Mr. Masum Pathan 799,600 799,600 Ms.Tansin Keya 589,600 - Khaleque & Co. Ltd. 799,600 799,600 Keya Spinning Mills Ltd. 58,988,660 178,469,630 Khaleque Knitting & Garments Inds. (Pvt) Ltd. 217,503,640 350,526,310 Keya Cosmetics Ltd. 63,008,100 63,008,100 Other forty five (45) Shareholders 60,000,000 - Total 660,000,000 600,000,000 60 30-Sep-10 30-Jun-10 Taka Taka 12 Share Premium Account 60,000,000 - Less: Tax Paid ( @3%) 1,800,000 - Total 58,200,000 - 13 Tax Holiday Reserve Opening 174,375,049 124,358,563 Add: Provided during the year - 50,016,486 Total 174,375,049 174,375,049 14 Revaluation Reserve Opening Balance 138,418,403 - Revalued value of Land - 228,112,498 Less: Acquisition cost - 89,694,095 - 138,418,403 Total 138,418,403 138,418,403 15 Retained Earnings Opening 343,289,130 244,255,705 Add: Profit During the Period 85,554,383 247,033,425 428,843,513 491,289,130 Less: Capitalization of Profit - 148,000,000 Total 428,843,513 343,289,130 16 Long Term Loan Term Loan ( Note-16.1) 669,508,545 676,403,865 Total 669,508,545 676,403,865 16.1 The above Share Premium is collected from issuance of 60,00,000 nos. Ordinary Shares @ Tk. 10 each and Income Tax @ 3% has been paid on it as per Income Tax rules. Details of Share holding position including percentage of holding is shown in Annexure -III The above loan received on January'2010 from National Bank Limited, Gulshan Branch. Rate of interest is 13% and repayable by 20 equal quarterly installments of Tk.54,735,000/= each within 5 years. Main Security against this loan is Mortgage of 481 decimal land with factory shed and building (present and future). Collected from Share Issue (60,00,000 nos.shares @Tk.10 each) During the period Paid up Capital increased by Tk. 60,000,000/= due to allotment of new shares at a price of Tk.20 each (including premium Tk.10 each) as per decision of the Board Meeting held on June 5, 2010 and getting approval from the regulatory authority. During the period no revaluation of Fixed Assets has been done. As a result no revaluation reserve has created this period. Addition during the period The company has completed tax holiday tenure of five years at 31, January '2010. That is why, no reserve has been maintained against this tenure.
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30-Sep-10 30-Jun-10 Taka Taka 17 Deferred Tax Liability Fixed Assets (Based on Financial Statements) 1,266,532,975 1,285,846,874 Less: Fixed Assets (Based on Tax Rules) 786,098,359 859,291,842 Taxable Temporary Difference 480,434,616 426,555,032 Deferred Tax Liability (15% on Taxable Temporary Difference) 72,065,192 63,983,255 72,065,192 63,983,255 18 Trade and other payables Adrita Enterprise 158,816 158,816 Kishan Trading Corporation 1,800 1,800 Eastern Steel Mills Limited 1,116 1,116 A.H. Enterprise 27,331 40,998 Sail International Limited - 100,200 Ananta Paper Cone Industries 839,694 859,819 STY Poly Pack Industries Ltd. 174,000 229,100 Sara Enterprise - 500,000 J.N. Paper Products 135,650 135,650 R.M.Trade Line Industries (Pvt.) Limited 236,450 233,625 Deshbandhu Polymer Limited 264,400 234,000 Rizwan Transport Agency Ltd 710,427 710,427 Silver Liner Agency 187,459 187,459 MR Enterprise 15,414 414 Phoenix Insurance Co. Limited 3,467,321 3,662,909 Bdjobs.Com - 5,880 Bhai Bhai Enterprise 14,382 14,382 Cargo Control Bangladesh Ltd. 229,245 229,245 K.M. Alam & Co. 5,000 5,000 Model Offset Printing Press 6,320 3,820 Zam Zam Filling Station - 36,608 Hassan Enterprise 1,988 1,988 Genera Automation Limited 3,000 3,000 Quality Servey Limited 75,659 75,659 Bangla Trac Limited 1,472,750 1,472,750 Executive Motors Limited 157,984 - C & F Bill Payable 412,000 - Total 8,598,206 8,904,665 19 Worker's Profit Participation Fund (WPPF) Opening balance 12,486,296 1,768,478 Add: Provided during the year 2,983,548 10,717,818 15,469,844 12,486,296 Less: Payment during the period - - Total 15,469,844 12,486,296 Provision for Workers Profit Participation Fund has been made @ 5% of net profit after charging the contribution but before tax of the company and is payable to workers as per provision defined in the Labour Law 2006.
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30-Sep-10 30-Jun-10 Taka Taka 20 Short Term Loan from Bank Southeast Bank Ltd. 311,398,887 39,465,600 Sonali Bank Ltd. - 135,947,728 Dutch-Bangla Bank Limited 95,589,115 98,330,930 Standard Bank Ltd. - 34,374,910 Bank Asia Ltd 75,380,000 14,446,958 Nationl Bank Ltd. 173,708,661 260,374,168 Agrani Bank Ltd. 68,109,518 65,919,526 Krishi Bank Ltd, Kawran Bazar Branch - 194,091,850 Prime Finance & Investment Ltd. 7,135,018 1,502,839 Eastern Bank Limited - 570 Total 731,321,199 844,455,079 Note: Southeast Bank Ltd.- LTR National Bank Ltd.- LTR 21 Current Portion of Long Term Term Loan ( NBL) 125,483,474 93,025,982 Lease Liability 2,810,933 5,998,788 128,294,407 99,024,770 22 Liabilities for Expenses Audit Fee 150,000 150,000 Provision for Income Tax (Note- 22.1) 29,921,329 13,397,273 Salary & Wages 3,126,978 3,513,713 Utility Charges (Gas bill) 4,026,139 3,137,261 Provision for Interest 5,176,933 2,201,934 Total 42,401,379 22,400,181 22.1 Provision for Income Tax Opening balance 13,397,273 - Add: Provision during the period 16,524,056 13,780,378 29,921,329 13,780,378 Less: Payment during the period - 383,105 Total 29,921,329 13,397,273 The Short term loan were sanctioned by the Southeast Bank Limited (Gulshan Branch) for 180 days with a revolving limit of Taka. 360,000,000 and is usually renewed on annual basis .The interest rate is subject to change from time to time. Such loan is secured against project finance security. The loan against trust receipt (LTR) were sanctioned by National Bank Limited (Gulshan Branch) with a limit of Tk. 80 Crore for validity of one year and renewed on annual basis. The interest rate is 13% p.a.
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30-Sep-10 30-Sep-09 Taka Taka 23 Sales Export 376,362,632 312,217,645 Total 376,362,632 312,217,645 24 Cost of Goods Sold Raw Material Consumed (Note-24.1) 247,166,570 382,887,364 Factory Overhead (Note-24.2) 39,933,399 38,607,553 Manufacturing Cost 287,099,970 421,494,917 Add: Opening Work in Process 16,394,690 1,994,983 Cost of goods available for Use 303,494,660 423,489,900 Less: Closing Work in Process 16,759,890 4,678,714 Less: Wastage Sales 16,576,923 16,399,996 Cost of Production 270,157,847 402,411,190 Add: Opening Finished Goods 134,964,009 118,928,915 Finished Goods available for Sale 405,121,856 521,340,105 Less: Closing Finished Goods 134,120,222 293,840,872 Total 271,001,634 227,499,233 24.1 Raw Materials Consumed Opening Stock of Raw Materials 43,772,837 191,847,589 Add: Purchase of Raw Materials 325,346,397 192,441,939 Consumption 369,119,234 384,289,528 Less: Closing Stock of Raw Materials 121,952,664 1,402,164 Raw Materials Consumed 247,166,570 382,887,364 24.2 Factory Overhead Factory Wages, Salary & Allowances 10,502,601 10,259,587 Factory Overtime 146,559 111,783 Power & Fuel 141,760 589,840 Labour Charges - 44,343 Entertainment 90,920 65,040 Printing & Stationery 67,486 52,521 Conveyance 368 4,713 Rent, Rates & Taxes 22,200 22,200 Carriage Inward - 35,448 Repairs & Maintenance 2,812,676 1,853,447 Medical Expenses 1,583 500 Utility Charges (Gas bill) 7,135,541 5,005,308 Depreciation 19,011,705 20,562,823 Total 39,933,399 38,607,553 All the sales of the company are 100% exported and those are made against back to back L/C. During the period of July to September 2010, total export were US$ 55,34,745.Those sales are converted in to BDT time to time at the date of transaction rate.
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30-Sep-10 30-Sep-09 Taka Taka 25 Administrative Expenses Salary & Allowances 225,852 353,526 Business Development 7,900 20,700 Printing & Stationery 272 1,600 Conveyance 5,400 6,027 Telephone & Fax 10,500 5,000 Directors' Remuneration 550,000 508,800 Entertainment - 63,450 Fees & Professionals 872,320 79,280 Plantation & Gardening 195,266 - Training Expenses - 7,000 Documentation - 1,700 Preproduction Expenses written off 367,178 367,178 Deprecation 387,994 419,649 Total 2,622,682 1,833,910 26 Financial Expenses Interest on Bank & Other Financial Interest 38,845,388 39,235,141 Bank Charges and Commission 1,183,120 1,211,085 Exchange Fluctuation 55,291 67,106 Total 40,083,799 40,513,332 27 Non operating income Share of Profit from Associated Company (KKCL) 50,489,408 40,114,294 Total 50,489,408 40,114,294 28 Calculation of Current Tax 15% Tax on Taxable Income 16,524,056 13,397,273 20% Tax on Dividend - 383,105 16,524,056 13,780,378 29 Calculation of Deferred Tax Fixed Assets (Based on Financial Statements) 1,266,532,975 1,285,846,874 Less: Fixed Assets (Based on Tax Rules) 786,098,359 859,291,842 Taxable Temporary Difference 480,434,616 426,555,032 Deferred Tax Liability arisen 8,081,937 63,983,255 8,081,937 63,983,255 During the period Tk. 5,38,79,584/= (Tk.48,04,34,616 -Tk.42,65,55,032) has arisen as Taxable Temporary Difference and Deferred Tax calculated on @ 15%
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30-Sep-10 30-Sep-09 Taka Taka 30 Earning Per Share (EPS): Basic Earning Per Share The computation of EPS is given below: (a) Earning attributable to the ordinary 85,554,383 80,467,789 shareholders (Net Profit after provision for tax) (b) Weighted average number of ordinary shares outstanding during the period 62,282,609 24,700,000 (c) Basic EPS(After Provision for Tax) 1.37 3.26 (d) Restated EPS 2.04 3.26 Earning per share (EPS) for the previous year have been restated as per BAS 33: "Earnings per share" because subsequent period 14,800,000 nos. shares were issued as stock dividend.
66 31 Disclosure as per requirement of schedule XI,Part - II of Companies Act. 1994 A. Employee position as per schedule XI , Part II, note 5 of Para 3 ( as on 30 September 2010) Head Office - 4 4 B. Payment to Directors (as remuneration) as per requirement of schedule XI, Part II, Para 4 Position Director & CEO Director Total C. Plant Capacity and Capacity Utilization as per requirement of schedule XI, Part II, Para 7 Details of Capacity has given below: D. Disclosure as per requirement of schedule XI, Part II, Para 8 Value of Raw Materials, Spare Parts and Packing Materials. Import Total Purchase Total Qty. comsumed 318,198,000 318,198,000 19,03,127 kg 2,589,372 3,423,177 - - 487,200 2640 kg - 679,200 24750 pcs - 2,466,825 906830 pcs - 91,995 - 320,787,372 325,346,397 - Value of Export: 32 Disclosure on Related Party Transaction as per IAS-24 "Related Party Disclosure" Types of Transaction Yarn Export through BTB L/C 33 Details of Lease Agreement: Sl. Product Name Finance Amount Lease Term Monthly Rental Rental Paid Future Payment 1 Machinery Ring Frame 55,306,509 60 1,411,954 78,718,452 2,810,933 2 Capital Machinery 80,000,000 60 1,919,850 115,492,310 - 3 Machinery Roving Frame 50,000,000 60 1,250,910 75,054,600 - 34 Disclosure as per requirement of schedule XI, Part - I ( A. Horizontal Form) of Companies Act. 1994 Accounts Receivable 41 Packing Materials: 5) Consideration in connection with retirement from office - Nil. g. Pensions, etc.- 1) Pensions - Nil 2) Gratuities - Nil 3) Payment from Provident Fund - Nil 833,805 Stores & Spare Parts Above 3000 Total 569 524 41 Salary Range Officer & Staff Factory - Below 3000 Mr. Masum Pathan Name of Directors 350,000 200,000 1 July 2010 to 30 September 2010 Mr. Abdul Khaleqe Pathan Worker Total Employee 13 511 13 556 3,485,930 247,166,570 382,800 569,250 2,134,923 93,299 Particulars Raw Cotton Local Purchase - Consumption 240,500,368 The above Directors of the company did not take any benefit from the company other than the remuneration and a. Expense reimbursed to the managing agent -Nil b. Commission or other remuneration payable separately to a managing agent or his associate -Nil 550,000 1634 MT 2231 MT Annual Production of Yarn in MT Actual Production (1 July 2010 to 30 September ' 2010) Installed Capacity (Annual) d. The money value of the contracts for the sale or purchase of goods and materials or supply of services, entered into by the company with the managing agent or his associate during the financial year. e. Any other perquisites or benefit in cash or in kind stating - Nil f. Other allowances and commission including guarntee commission - Nil. Particulars c. Commission received or receivable by the managing agent or his associate as selling or buying agent of other concerns in respect of contracts entered into such concerns with the company - Nil. 4) Compensation for loss of office - Nil HD Poly Bag Synthetic Bag Paper Cone 679,200 2,466,825 487,200 Sticker, Jute Twine etc. 91,995 In BDT 376,362,632 Export 5,534,745 Particulars In Foreign Currency (US$) 4,559,025 Total Transaction with related parties are priced on arm's length basis and are in the ordinary course of business. Particulars Nature of relationship Amount in Taka Keya Knit Composite Ltd. Outstanding Balance 277,426,952 148,349,011 Associated Company Lease From Phoenix Finance Union Capital 9,860,000 Lanka Bangla 639,974,861 70,975,000 Customer Name F.In regard to sundry debtors the following particulars' shall be given separately:- ( I ) Debt considered good in respect of which the company is fully secured : (II) Debt considered good for which the company hold no security other than the debtors personal security There is no such debt in this respect as on 30 September '2010. The company does not make any provision for doubtful debts as on 30 September '2010, because of the fact that sales/export are being made on 100% confirmed L/C basis with fixed maturity dates. (IV) Debt due by directors or other officers of the company There is no such debt in this respect as on 30 September 2010. (V) Debt due by Common Management There are an amount of Tk.5,18,68,804/= has been due form sister company under common management as on 30 September' 2010. (VI) The maximum amount due by directors or other officers of the company (III) Debt considered doubtful or bad There is no such debt in this respect as on 30 September' 2010. The above disclosures are included in 'Annexure - 1' of the accounts. One Composite Limited The debtores occurred in the ordinary course of business are considered good and secured against confiremed L/C.The details of Accounts Receivable are given below: 720,809,861 Total Amoount (BDT) Keya Knit Composite Limited Islam Knit Designs Limited
67 35 Approval of the financial statements: 36 General 36.1 Comparative amounts 36.2 Presentation currency 37 Attendance Status of Directors into the Board Meeting: Attended 3 3 3 3 38 39 Sd/- Sd/- Sd/- Chairman Total 317,525,185 Contingent Liabilities There is a contingent liability of Bank Guarantee amounted Tk 55,99,600 (Taka fifty five lac ninety nine thousand and six hundred only) issued in favour of Titas Gas Transmission and Distribution Company Ltd from Southeast Bank Limited, Gulshan Branch. 3 Mr.Masum Pathan Director 3 Mrs.Khaleda Pervin 3 Director Mr.Abdul Khaleque Pathan Director & CEO Mrs.Feruza Begum 3 Chairman Name of the Directors' Position These financial statements were authorized for issue in accordance with a resolution of the company's Board of Directors on November 04' 2010. Company Secretary Managing Director Wherever considered necessary previous year's figures have been restated, in order to conform to current year's presentation. The annexed financial statements are presented in Bangladeshi currency (Taka), which have been rounded off to the nearest Taka. During the period ended September 30' 2010, eleven Board Meetings were held. The attendance status of all the meetings is as follows: Meeting Held Payments in Foreign Currencies: During the under review, following payments were made in foreing currencies: Name of the item Taka Raw Cotton Stores & Spare Parts 314,974,654 2,550,531