Annual Report 2010 Dt- 17-04-11 Finaly Published

Apex Adelchi Footwear Limited Annual Report

CONTENTS

Corporate Directory 2

Notice of Annual General Meeting 3

Financial Highlights 4

Value Added Statement 5

Report of the Directors 6

Status of Securities and Exchange Commission Compliance 21

Auditors’ Report to the Shareholders 24

Balance Sheet 25

Profit & Loss Account 26

Cash Flow Statement 27

Statement of Changes in Equity 28

Notes to the Accounts 29


2

CORPORATE DIRECTORY BOARD OF DIRECTORS Syed Manzur Elahi Chairman Syed Nasim Manzur Managing Director Munize Manzur Khasru Director Syed Gias Hussain Director Niaz Ahmed Choudhury Director Adelchi Sergio Director Samson H. Chowdhury Independent Director

MANAGEMENT TEAM Syed Nasim Manzur Managing Director Syed Gias Hussain Deputy Managing Director & CFO Abdul Momen Bhuiyan Executive Director A.A. Mosaddeque Executive Director S.M. Shahjahan Company Secretary Dilip Kajuri Financial Controller Atiqul Islam General Manager Syed Md. Mustaque General Manager Md. Mominul Ahsan Head of Human Resources Pradip Kanti Saha General Manager

AUDITORS Shiraz Khan Basak & Co. Chartered Accountants

TAX ADVISER Khandker Fazlul Quadir

LEGAL ADVISER Muhammad Mohsen Rashid Advocate, Supreme Court of Bangladesh

BANKERS Janata Bank Limited Bank Asia Limited Prime Bank Limited City Bank Limited Bank Al Falah Limited

REGISTERED OFFICE House No. 06, Road No. 137 Block - SE(D) , Gulshan-1 Dhaka-1212, Bangladesh Email: [email protected]

FACTORY Chandra, P.S. Kaliakoir Dist. Gazipur Bangladesh


3

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 21ST ANNUAL GENERAL MEETING of Apex Adelchi

Footwear Limited will be held at Bangabandhu International Conference Centre,

Agargaon, Dhaka on Tuesday, May 03, 2011 at 11:00 a.m. to transact the following

business:

1. To receive and adopt the Accounts for the year ended December 31, 2010 and the

Reports of the Auditors and Directors thereon.

2. To declare dividend

3. To elect Directors

4. To appoint auditors and fix their remuneration

By Order of the Board

March 24, 2011 Sd/- Gulshan-1 (S.M. Shahjahan) Dhaka-1212 Company Secretary

Notes: 1. The Record Date of the Company is Sunday, 10 April, 2011. 2. The Proxy Form, duly stamped with a revenue stamp of Tk. 10.00 must be deposited at the registered office

of the company not later than 48 hours before meeting.


4

FINANCIAL HIGHLIGHTS: 2006 - 2010

Tk in thousand Particulars 2010 2009 2008 2007 2006

Authorized Capital 500,000 500,000 500,000 500,000 500,000

Issued, Subscribed & Paid up Capital 112,500 112,500 112,500 75,000 75,000

Sales 6,961,116 5,834,073 5,629,744 4,441,134 2,939,715

Gross Profit 1,092,044 907,580 657,168 514,686 264,015

Profit before Tax 273,630 247,618 223,613 201,736 59,672

Net Profit after Tax 228,227 211,532 189,828 169,358 49,916

Fixed Assets 418,372 537,110 478,105 328,189 271,885

Current Assets 4,258,672 2,950,021 2,770,329 2,466,120 1,500,605

Current Liabilities 3,950,978 2,752,039 2,685,499 2,424,952 1,486,478

Net Current Assets 307,694 197,982 84,830 41,168 14,127

Current Ratio 1.08 1.07 1.03 1.02 1.01

Cash Dividend 45,000 39,375 33,750 18,750 18,750

Stock Dividend 0 0 0 37,500 0

Earnings per Share - Taka 202.87 188.03 168.74 225.81 66.56

Book value per Share - Taka 645 653 500 485 334

Price Earning Ratio - Times 20.27 13.74 10.37 9.61 7.20

6,961

1,092

274

5,834

908

248

5,630

657

224

4,441

515

202

2,940

26460

0

1000

2000

3000

4000

5000

6000

7000

2010 2009 2008 2007 2006

Tk. in

Millio

n

Sales

Gross Profit

Pre-tax Profit

Financial Year


5

VALUE ADDED STATEMENT

For the year ended 31 December, 2010

Tk. in thousand

Sales & other income 6,961,700

Bought in materials and services (6,161,259)

800,441

A p p l i c a t i o n s

National exchequer 75,002 9%

Services (salaries & other benefits to employees) 258,784 32%

Interest and charges 276,621 35%

Shareholders ’ dividend 45,000 6%

Retained earnings 145,034 18%

800,441 100%

18%

32%

35%

6%

9% National exchequer 9%

Services 32%

Interest & charges 35%

Shareholders' dividend 6%

Retained earnings 18%


6

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7

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fviZ RyZv ißvbx‡Z D‡jL‡hvM¨ cÖe„w× AR©b K‡i‡Q (A‡±vei 06, 2010)

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2010 mv‡j wf‡qZbv‡gi RyZv ißvbxi j¶¨gvÎv 2009 mvj †_‡K 13 kZvsk evwo‡q 4.6 †_‡K 4.7 wewjqb Wjv‡i wba©viY Kiv n‡q‡Q| msMV‡bi cÖavb WvK _yqv‡bi fvl¨g‡Z eZ©gvb AbyK‚j cwi‡e‡ki Kvi‡Y ißvbxi cwigvY nqZ 5.00 wewjqb Wjvi Qvwo‡q hv‡e| wZwb AviI e‡j‡Qb †h, AwZwi³ Drcv`b ¶gZv bv _vKvq RyZvi Drcv`Kiv A‡bK Kvh©v‡`k MÖnY Ki‡Z AcivMZv Rvbv‡Z eva¨ n‡”Q|


8

cÖwZ eQi Px‡bi 2 wewjqb †Rvov AwZwi³ RyZvi cÖ‡qvRb n‡e (A‡±vei 01, 2010)

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evsjv‡`k e¨vsK BD‡ivi Pjgvb ìcZ‡bi wel‡q h‡_ó DwØMœ †Kbbv †K› ªxq e¨vs‡Ki 10 wewjqb Wjv‡ii ê‡`wkK gy`ªvi wiRv‡f©i 15 kZvskB wewb‡qvM Kiv Av‡Q BD‡iv‡Z| evsjv‡`k e¨vsK Avkv K‡i EU Ges IMF BD‡iv‡K euvPv‡Z Kvh©Kix c`‡¶c †b‡e| Daily Star May 23, 2010

`yf©vMëkZt eQ‡ii wØZxq fv‡M BD‡iv msµvš— mgm¨v AviI †e‡o †M‡Q MÖx‡m D™¢yZ mgm¨vi Kvi‡Y| me wgwj‡q 2010 mv‡j BD‡ivi g~j¨cZ‡bi Kvi‡Y Avgv‡ì ivR¯^ I gybvdvq UvKvi As‡K eo ai‡bi cÖfve c‡o‡Q|

2010 mv‡ji Kvh©µ‡gi djvdj †_‡K GUv ¯úó nq †h, 2009 mv‡ji Zzjbvq G eQi Avgv‡ì gRy‡Zi cwigvY D‡jL‡hvM¨ cwigvY evov‡Z n‡q‡Q| GUv g~jZt `ywU Kvi‡Y Ki‡Z n‡q‡Q- (1) 2009 mv‡j KuvPv Pvgov, GW&‡nwmf, wUwcAvi †Kbvmn me ai‡bi KuvPvgv‡ji `vg c‡o wM‡qwQj| 2010 mv‡ji †klva© †_‡K me ai‡bi KuvPvgvj, we‡klZt KuvPv Pvgovi `vg evo‡Z ïi“ K‡i| d‡j Avgiv evowZ Li‡Pi fvimvg¨ ivLvi D‡Ï‡k¨ Avgv‡ì cÖ‡qvR‡bi AwZwi³ KuvPvgvj µ‡qi Pzw³ Kwi| (2) 2010 mv‡j Avgv‡ì LyPiv Ges cvBKvix Dfq ai‡bi †`vKv‡bi msL¨v D‡jL‡hvM¨ nv‡i e„w× cvIqvq RyZvi D”P gRyZ cwijw¶Z n‡q‡Q|


9

• ‡`bv`vi (Trade Debtor) cÖvq 172 wgwjqb UvKv e„w× †c‡q‡Q g~jZt wW‡m¤^‡ii D”P cwigv‡Y wkc‡g‡›Ui Rb¨| †h¸‡jvi ißvbx wej wW‡m¤^‡i Avgv‡ì cvIbv (Receivable) wn‡m‡e †`Lv‡bv n‡q‡Q| Gme cvIbv UvKv †deª“qvix 2011 mv‡ji †kl w`‡K G‡m c‡o‡Q|

• GWfvÝ wW‡cvwRU Ges AwMÖg cwi‡kva cÖvq 205 wgwjqb UvKv †e‡o‡Q g~jZt ¸Wm& Bb UªvbwR‡U Ges Gjwm gvwR©‡b 175 wgwjqb UvKv †e‡o hvIqvq| Gme n‡q‡Q g~jZt gRyZ evov‡bvi Kvi‡Y hv c~‡e© Av‡jvPbv Kiv n‡q‡Q|

• PjwZ gyja‡bi cwigvY 433 wgwjqb UvKv †e‡o‡Q g~jZt Avf¨š—ixY weµq evov‡bvi Rb¨ bZzb FY †bqvq Ges gRyZ evov‡Z GjwUAvi Ges wcGwW myweavwì c~Y© mØënvi Kivq|

• wewea cvIbv`vi (Sundry Creditor) cÖvq 715 wgwjqb UvKv †e‡o‡Q g~jZt - mieivnKvix Ges Ab¨vb¨‡ì cvIbv †e‡o‡Q 329 wgwjqb UvKv (cÖavbZt KuvPv Pvgov mieivnKvix) - e‡Kqv Li‡Pi cwigvY †e‡o‡Q 262 wgwjqb UvKv (g~jZt wW‡m¤^‡ii Dcwi e¨q I e‡Kqv Li‡Pi Kvi‡Y)

• 2010 mv‡j Ab¨vb¨ cwiPvjbv e¨q †e‡o‡Q 214 wgwjqb UvKv, g~jZt - bZzb †`vKvbmg~‡n Kg©Pvixi msL¨v e„w× I evwl©K †eZb e„w×i Kvi‡Y 20.30 wgwjqb UvKv - ‡`vKvb cwiPvjbv e¨q †e‡o‡Q 26.50 wgwjqb UvKv - ißvbx Dbœqb e¨q †e‡o‡Q 3.20 wgwjqb UvKv - weÁvcb e¨q †e‡o‡Q 33.00 wgwjqb UvKv - ‡`vKv‡bi fvov eve` f¨vU †e‡o‡Q 34.20 wgwjqb UvKv - AePq †e‡o‡Q 66.90 wgwjqb UvKv

e¨vsK my I PvR©

2009 mv‡j Avgiv 1,417.40 wgwjqb UvKv F‡Yi wecix‡Z Avw_©K e¨q K‡iwQjvg 23.53 kZvsk A_©vr 333.50 wgwjqb UvKv| 2010 mv‡j 1,850.50 wgwjqb UvKv F‡Yi wecix‡Z Avw_©K e¨q n‡q‡Q cÖvq 14.95 kZvsk A_©vr 276.60 wgwjqb UvKv| GUv GKUv D‡jL‡hvM¨ NUbv| GUv g~jZt m¤¢e n‡q‡Q Ad ‡kvi †_‡K Ab †kvi G 7.00 wgwjqb BD‡iv FY cvevi Kvi‡Y hv Avgiv e¨vsK Gwkqv wjt Gi gva¨‡g MÖnY K‡iwQjvg BD‡ivwjei + 3.5% my‡`| G Kvi‡YB my‡ì Li‡Pi cwigvY A‡bK K‡g‡Q| gRyZmg~n

2009 mv‡ji Zzjbvq G eQi gRy‡Zi cwigvY cÖvq 89.60 †KvwU UvKv ‡e‡o‡Q| g~jZt Avf¨š—ixY evRv‡ii Pvwn`v Ges †`ke¨vcx mKj †`vKv‡b ch©vß gRy‡Zi Kvi‡Y| 2009 mv‡ji wW‡m¤^‡ii Zzjbvq Pvgovi gRyZ 5.00 wgwjqb UvKv †e‡o‡Q| GQvov e„nr gRyZ g~jZt cÖZxqgvb nq AvDU‡mvj wefv‡M| Avgv‡ì KviLvbvi wfZ‡iB cÖPzi cwigv‡Y AvDU †mvj ˆZix nq, d‡j TPR Gi D”P gRy‡Zi cÖ‡qvRb nq| wdwbkW& RyZvi gRy‡Zi cwigvY 56 †KvwU UvKv e„w× †c‡q‡Q hv g~jZt bZzb bZzb LyPiv wecYx¸‡jvi b~¨bZg gRyZ msi¶‡Yi Rb¨ cÖ‡qvRb| 2010 mv‡ji †k‡l gRy‡Zi cwigvY wQj 117 w`‡bi Mo weµ‡qi mgcwigvY hv 2009 mv‡j wQj 84 w`‡bi weµ‡qi mgZzj¨|


10

Avw_©K djvdj (nvRvi UvKvq) 31†k wW‡m¤î Õ10 31†k wW‡m¤î Õ09 31†k wW‡m¤î Õ08 Ki cieZx© bxU gybvdv 228,227 211,532 189,828 †hvM t weMZ erm‡ii DØ„Ë 520,037 347,880 207,848 we‡qvM t weMZ erm‡ii mgš^q (192,253) 0 0 ‡hvM t cybt wewb‡qvM mwÂwZ ivBU e¨vK 0 0 12,206 ‡hvM t Gd.Gg.I †jvb ivBU e¨vK 0 0 5,498 e›Ub‡hvM¨ Aewkó gybvdv 556,011 559,412 415,380

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REPORT OF THE DIRECTORS

Dear Shareholders, On behalf of your Board of Directors I welcome you all to this 21st Annual General Meeting of your Company and have the pleasure of presenting the Annual Report along with the audited accounts for the year ended December 31, 2010. Performance Change (+/-) 2010 2009 2010-9 (Taka in ‘000)

Sales 6,961,116 5,834,073 +19% Gross Profit 1,092,044 907,580 +20% Financial Expenses 276,621 333,521 - 17% Other Fixed Expenses 528,697 314,569 +68% Net Profit before Tax 273,630 247,618 +11%

YEAR 2010 IN REVIEW

2010 saw the beginning of limited recovery in the global economy after the global financial crisis of 2009. Although consumption and business confidence remained significantly weaker than the pre-crisis levels, it seemed that the various stimuli and recovery programmes initiated by governments were beginning to make their mark.

However, record levels of unemployment in Germany as well as the US continued to depress consumer spending and retailers were constrained to seek newer sourcing options to protect and grow margins. The continuation of the anti-dumping duties in 2010 imposed by the EU on footwear imports from China and Vietnam helped drive European business to other sources such as India, Indonesia and some extent Bangladesh. Chinese manufacturers however responded by targeting new export destination in North America and Asia to counter the effects of the duties. Overall we witnessed certain global trends in the footwear industry in 2010, some of which are highlighted below :

India’s shoe exports expected to grow (Feb 11, 2010, CLE)

According to the Indian Council for Leather Exports (CLE), the country’s leather sector is looking to increase both production and export levels. The CLE says the new target for exports by 2013-14 is $ 7 billion, by which time more than a million jobs are expected to be created within the industry. The Indian government believes exports will be significantly higher than the 2009-10 totals of $ 4.2 billion. It predicts that finished leather exports will rise to $ 1.4 billion, footwear exports will reach $ 3.4 billion, leather garment exports will hit $ 492 million and leather glove exports will total $ 1.8 billion. Wenzhou shoemakers broaden their horizons (Feb 12, 2010)

According to a number of shoemakers in Wenzhou, China, footwear exports from the region have fallen in the last couple of years as a result of the EU anti-dumping duties imposed on leather shoes from both China and Vietnam.


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However, many have decided to focus on new export destination in North America and Asia in a bid to counter the effects of the duties.

Staff shortages affect Vietnam shoe sector (Feb 10, 2010)

Vietnam’s leather and footwear manufacturers are concerned by the recent downturn in footwear exports and believe staff shortages are one of the driving factors behind the decline.

Many firms in Ho Chi Minh City and southeastern provinces have been facing a real lack of workers, and particularly skilled workers, for many months now. Since the downturn began, many firms have seen their workforce reduced by more than half and many fear the worst is yet to come as production and labour costs continue to rise.

Chinese pay Disputes Mirrored Across Region (FT, July 04, 2010)

• Chinese labour unrest is being replicated in south-east Asia where factories that compete with China to supply low-costs goods face walkouts as employees demand better pay and benefits. In Cambodia, workers are poised to stage a three-day strike this month in a dispute over the minimum wage while in Vietnam, thousands of workers at a Taiwanese-owned shoe factory staged and strike demanding higher salaries.

• The disputes match similar action in China, where growing worker dissatisfaction has led to industrial unrest and higher wages. As a result, foreign factory owners are increasingly moving production from southern and eastern China – long seen as the “workshop of the world” – to the interior and other Asian developing nations.

• Labour costs in countries such as Cambodia, Vietnam and Laos remain a fraction of those in China. But, while their governments have been jostling to attract foreign manufacturers, unions are keen to protect their members and industrial action is on the rise, together with minimum wages across the region.

India records higher shoe exports (October 06, 2010) Indian leather exports grew 16.3% during the first five months of the 2010 financial year (April-August). The country’s leather exports totaled to $ 1.4 billion compared with $ 1.2 billion during the corresponding period last year. Leather footwear exports rose 16.7% to $ 515.1 million from $ 441.4 million, while non-leather footwear exports grew 9.2% to $ 7.6 million from $ 6.9 million.

Vietnamese footwear sector forced to turn orders down (Oct 04, 2010)

According to the Vietnam Leather and Footwear Association (LEFASO), footwear manufacturers in the country are struggling to cope with increasing order levels. It claims higher labour costs in China have seen many brands transfer production to Vietnam since the start of the year. During the first nine months of 2010, shoe export revenues have rose 18% to $ 3.7 billion. “In 2010, Vietnam planned to export $ 4.6 to 4.7 billion worth of footwear products, an increase of 13% over 2009”, said LEFASO Chairman Nguyen Duc Thuan. “However, with the current favourable conditions, the export revenue may reach over $ 5 billion”, Thuan said. Reports suggest many shoe makers have had to turn down orders as they simply do not have the extra capacity to fulfill them.


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China will need two billion extra pairs of shoes a year, claims CLIA (October 01, 2010) Footwear consumption in China will double in the coming years, the China Leather Industry Association (CLIA) has predicted. In comments she made at the All China Leather Exhibition in Shanghai at the start of the move, CLIA president, Madam Zhang Shu Hua, said that, although official figures are hard to put together, her organization estimates that Chinese consumers buy an average of 1.5 pairs of shoes each per year. She said that this was likely to double, which means that the global footwear industry will soon have to find a way of supplying China with an extra 2 billion pairs of shoes a year. To give the figure a bit of context, this is ten times the total number of shoes produced in Italy in 2009. Therefore, rising costs in South China along with labour shortages and capacity constraints in Vietnam and increased shift to India and general labour and material costs increases were the predominant trends in 2010.

With wage inflation in sourcing countries and rising raw materials costs, retailers needed to optimize the efficiency of their supply chain to keep their level of margins without increasing prices to the consumers.

A growing number of major retailers are also working on reducing the environmental footprint of their whole supply chain & products, either being pushed by regulation or not. Manufacturers in Asia know they have to raise their games when it comes to sustainability if they want to keep supplying their products to clients in Europe & USA. In the future environmental credentials may also be a major criteria for retailer to choosing their suppliers.

Importance of proximity is increasing due to more awareness of climate change & environmental impact of transport & shipping and as companies look how to reduce their lead times.

PERFORMANCE HIGHLIGHTS IN 2010 Total export in pairage terms increased 19.1 % Total export in Euros increased by 18.6 % Average Taka per Euro Conversion rate decreased by 5.5 % Total export in Taka terms increased by 12.1 % Domestic sales revenues increased by 59.9 % Gross profit increased by 20.3 % Net profits increased by 10.5 % The continuous decline of the Euro in 2010 adversely impacted our revenues and profits as the currency continued to slide due to weaknesses in the EU economy. “Bangladesh Bank is concerned with the continuous decline of the Euro, as really 15% of the central bank’s $ 10 billion foreign exchange reserve is invested in the tumbling European Currency, Bangladesh Bank Officials said. We are very concerned. We hope the European Union and International Monetary Fund will come forward to save the Euro “said an official of the Foreign Exchange Reserve & Treasury Management Department of the Bangladesh Bank”

-- The Daily Star, May 23, 2010.

Unfortunately the problems for the Euro were exacerbated by the new crisis that emerged in Greece in 2010 and the weakness of the Euro continued to affect the revenue and profitability of our company in Taka terms.


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l There has been a significant build up of Inventories in 2010 compared to 2009, because : a) 2009 saw record collapse of almost all raw material prices such as raw hides, leather,

adhesives & TPR granules for outsoles. From the second half of 2010 we began to see rising raw material prices especially in raw hides, and as a result we booked forward contracts to try and minimize cost increases.

b) 2010 we increased our number of stores both at retail and whole sale, significantly, and as a

result had to hold a much higher level of finished shoes as inventory. l Trade Debtors increased by Tk. 172 million mainly due to typically high December shipments,

export bills for which were receivable as of 31 December. All receivables were collected within end February 2011.

l Advance Deposits & Prepayments increased by Tk. 205 million mainly because of significant

increase of Goods in Transit against L/C and L/C Margins totaling Tk. 175 million. These were due to stock build up of materials post June 2010 as explained under inventories previously.

l Total working capital facilities increased by Tk. 433 million with the major increases coming from

new facilities for local sales and increased LTR & PAD facilities utilized for inventory build up. l Sundry Creditors increased by Tk. 715 million with the major components being - Suppliers, contractors and others increased by Tk. 329 million (mainly raw hide suppliers)

- Outstanding expenses increased by Tk. 262 million (mainly for December overhead expenses & provisions)

l Other Operating Expenses Increased by Tk. 214 million in 2010 due to mainly: - Staff costs for new Outlets & annual increment increased by Tk. 20.3 million - Store operating expenses increased by Tk. 26.5 million - Export Promotion expenses increased by Tk. 03.2 million - Advertisement expenses increased by Tk. 33.0 million - VAT on Shop rentals Tk. 34.2 million

- Depreciation increased by Tk. 66.9 million l Bank Interest & Charges In 2009 we incurred Tk. 333.50 million financial expenses on total financing of Tk. 1,417.40 million approximately 23.53%. In 2010 we incurred Tk. 276.60 million financial expenses on total financing of Tk. 1850.50 million approximately 14.95%. This is remarkable and mainly due to the first off shore to on shore Euro denominated facility arranged by RSA Capital that enabled us to borrow at premium over EURIBOR interest rates. This significantly reduced our average cost of capital. INVENTORIES

There has been an increase in inventory by Tk. 896 million compared to 2009. This is mainly due to higher level of inventory required to meet increased local sales demand and to maintain stock availability in all outlets throughout the country. Stock of leather has gone up by Tk. 5 million compared to December 2009. The increase is also reflected due to higher level of in-house production of outsoles which required higher inventory of TPR raw material. Finished shoe inventory has increased by Tk. 560 million to maintain minimum stock level in an increased number of retail outlets. Overall the closing inventory in 2010 was 117 days of sales as compared to 84 days of sales in 2009.


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FINANCIAL RESULTS Tk. in ‘000

31 Dec ‘10 31 Dec ‘09 31 Dec ‘08 Net Profit after Tax 228,227 211,532 189,828 Add: Prior Year’s Surplus 520,037 347,880 207,848 Less : Prior Year’s Adjustment (192,253) 0 0 Add : Reserve for Re-investment Write back 0 0 12,206 Add : Write back of FMO Loan 0 0 5,498 Balance of Profit Available for Appropriation 556,011 559,412 415,380

Appropriation Recommended:

Proposed Cash Dividend 45,000 39,375 33,750 Dividend Equalization Fund 0 0 33,750 Balance Carried Forward 511,011 520,037 347,880 556,011 559,412 415,380

DIVIDEND

The Board of Directors are pleased to report to you that for the year 2010, a cash dividend of Tk. 40/- per share of Tk. 100/- each has been recommended, and after your approval in this Annual General Meeting will be paid to the shareholders.

CSR

AAFL have a Board level committee on CSR that has an annual budget for CSR activity and working in areas of education especially vocational training and healthcare. In 2010 AAFL continued its program using its factory premises to train fresh individuals as skilled sewing operators and subsequent recruitment by the industry. AAFL is a regular contributor to support education in schools and madrasas, Knowledge centers, DU Alumni Association, IBA, Chittagong University. Also as part of the celebration of 20 years of operations, AAFL launched a yearlong medical awareness campaign for its workers including free medical advise and medicines where required.

FUTURE

l The future holds exciting opportunities for AAFL. The relocation of manufacturing out of China and the declining capacity in China for footwear production for export, is driving buyers to look towards new sources such as Bangladesh.

l The arrival of major shoe manufacturers in Bangladesh to set up manufacturing facilities here, is already attracting backward linkage factories such as shoe lasts and PU soles. These will help reduce costs and lead times for the industry overall. It will also lead to the footwear industry in Bangladesh achieving the critical mass that is essential to attract more major shoe buyers to Bangladesh.

l The strong winter in Europe and North America in 2010 led to very strong retail sales especially of boots and a lot of the excess inventory that had piled up in retail has been cleared. So buyers will be looking to replenish inventory levels which may lead to stronger sales.

l However the increased demand from existing clients as well as the arrival of new buyers means that our capacity utilization is reaching maximum levels. If we are not able to ramp up capacity soon, we may have to turn away orders which could limit our growth.

l There has been a complete turnaround from finished leather prices in 2009 which were at record low levels to record high levels in 2011. Price of cowhides in the domestic market has almost doubled in 2011 from 2009. Therefore there is a huge increase in the cost of finished leather both locally and foreign, and it is not possible to pass on the total increase to finished product prices.


19

l Similarly the prices of TPR granules, which are directly related to petroleum prices are showing an increase of almost 40% from 2010 January levels already.

l 2011 has also seen the emergence of inflationary pressures as a global phenomenon. Skyrocketing petroleum costs as well as cost increases in almost all major import commodities has raised inflation in Bangladesh and the central bank has responded with a tightened monetary stance. Recently, the lending rate caps in Bangladesh have been withdrawn and already banks have raised their prime lending rates by at least 1%. So cost of capital has increased and there is a tightening of credit.

l Chittagong port turnaround time has increased again and buyers are already expressing concern about the knock on effects on lead times for orders.

l The devastating earthquake in Japan will definitely impact the overall footwear exports of Bangladesh since it is the single largest destination for most Bangladeshi footwear exporters. In what is being called the biggest economic crisis in Japan since WW II, consumer spending & confidence will probably be depressed in Japan at least in the year ahead.

l Our sales in the local market continued to grow but we need to develop better product offerings in ladies & children’s segments to accelerate growth. Rising real estate costs and more price sensitivity in high volume segments need also to be managed more efficiently to protect profitability.

l Compliance and environmental pressures will grow every passing day and we need to continuously invest and train to be able to be a supplier of choice for major retailers.

l Last, but not least, the power situation for us has not shown any improvement in 2010. Total expenses for purchase of diesel for standby generator alone was Tk. 46.3 million in 2010 against Tk. 24.8 million in 2009. We hope that the power supply situation will improve in the second half of 2011 as these extra costs are adversely affecting profitability.

In conclusion, AAFL and Bangladesh footwear industry have a remarkable opportunity to benefit from the partial relocation of footwear production from China. In fact the China Leather Industry Association has predicted that footwear consumption in China will double in the coming years. The global footwear industry will soon have to figure out a way of supplying China with an extra 2 billion pair of shoes a year (Footwear news , Oct 01, 2010). So increased demand from new markets such as China and India as well as recovering demand from traditional markets such as Europe and North America offer a window of opportunity for countries like Bangladesh. If we can scale up capacity, improve skills and efficiency and overcome the challenges of rising raw material prices, increased cost of capital and power shortage, AAFL can continue its trajectory of growth.

ELECTION OF DIRECTOR

Mr. Syed Nasim Manzur and Mr. Niaz Ahmed Choudhury retire at this Annual General Meeting as per Articles 113 and 114 of Articles of Association of the Company.

Mr. Syed Nasim Manzur and Mr. Niaz Ahmed Choudhury both remain eligible for re-election. However, Mr. Niaz Ahmed Choudhury expressed his inability to continue due to health reason and will not seek re-election. Mr. Syed Nasim Manzur offered himself for re-election.

APPOINTMENT OF AUDITOR

M/s. Shiraz Khan Basak & Co., Chartered Accountants, the present auditor of the Company, retire at this Annual General Meeting, being eligible, offer themselves for re-appointment.


20

AUDIT COMMITTEE

During the year under review the Audit Committee met and reviewed the internal audit plan of the company. It has highlighted proper attention and timely preparation of production plan, continuous reporting and review of short collections, claim adjustments, overdue interest for delayed collection of export bills, regular review of control on discount in case of local sales, manpower strength and technological development of HR department, concentration on inventory management, improvement in supply chain and merchandising department activities, re-looking into existing JV agreements, etc. The Committee has put forward some recommendations to the Board and the Board has duly accepted the same. The Committee also reviewed the half-yearly and annual accounts for accuracy and proper disclosure prior to their approval by the Board of Directors for publication.

The Audit Committee comprised of: (a) Ms. Munize Manzur Khasru, Chairperson (b) Mr. Samson H. Chowdhury, Member (Independent Director) (c) Mr. Niaz Ahmed Chowdhury, Member

SECURITIES AND EXCHANGE COMMISSION COMPLIANCE

The compliance status report required to be presented by the Company in pursuance to Clause 5.00 of Notification No. SEC/CMRRCD/2006-158/Admin/02-08 of 20th February 2006 issued by Securities and Exchange Commission under Section 2CC of Securities and Exchange Ordinance of 1969 is attached.

CREDIT RATING REPORT

“Credit Rating Information and Services Limited (CRISL) has assigned “AA” (pronounced as double A) rating in the Long Term and “ST-2” rating in the Short Term to Apex Adelchi Footwear Limited (hereinafter referred “AAFL”) based on financials and other relevant quantitative and qualitative information. The above ratings have been done on the basis of its market leadership in footwear export, good market image, sound debt servicing history, experienced management team, improved cost-efficiency, etc. However, the ratings are constrained to some extent by seasonal effect on raw material sourcing, high leverage ratio, dependency on bank borrowing for working capital finance and business performance sensitive to world market demand.

Entities rated in this category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions. The short term rating indicates high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small.” Credit Rating Report # RR/343/2010 Dated 4th April 2010, Page – 1.

ACKNOWLEDGEMENT

On Behalf of the Board I would like to acknowledge the continued support and cooperation from our valued shareholders, and the confidence and trust our customers have bestowed in our products and company. I would like to particularly thank all our employees for their commitment and hard work that have enabled us to achieve our results in 2010. We look forward to your continued cooperation and support as the driving force of growth of your company, in the future. On behalf of the Board March 24, 2011 Syed Manzur Elahi Dhaka Chairman


21

Status of Securities and Exchange Commission Compliance

Status of compliance with the conditions imposed by the Commission's Order No. SEC/CMRRDC/2006- 158/Admin/02-08 dated 20th February, 2006 issued under section 2CC of the Securities and Exchange Ordinance, 1969:

(Report under condition No. 5)

Condition or Clause Number

Title Compliance Status (Put v in the

appropriate column)

Explanation for non-compliance with the condition

Complied Not Complied

1.1 Board size should be between 5 and 20 v 1.2 (i) Independent Director should be 1/10th

of Board size. v

1.2 (ii) Independent Director appointed by elected Directors.

v

1.3 Chairman and CEO positions filled by different persons.

v

1.4 (a) Financial statement should present fairly its state of affairs, the result of its operations, cash flow and changes in equity.

v

1.4 (b) Proper books of accounts have been maintained by the company.

v

1.4(c) Appropriate accounting policies have been followed consistently and estimates are based on reasonable and prudent judgment.

v

1.4(d) IAS as applicable in Bangladesh has been followed.

v

1.4(e) A sound Internal Control system has been effectively implemented and monitored.

v

1.4(f) That the company is a going concern v 1.4(g) Significant deviations in operating

results from last year should be highlighted and explained.

v

1.4(h) Key operating and financial data of at least last three years should be summarized.

v

1.4(i) Give reasons for not declaring dividend N/A


22



appropriate column)



1.4(j) Number of Board meetings held during the year and attendance of the Directors.

v

1.4(k) The pattern of shareholding should be reported disclosing the aggregate number of shares along with name wise details.

v

2.1 Appoint CFO, Head of Internal Audit, and a Company Secretary and define their respective roles and duties.

v

2.2 The CFO and Company Secretary should attend meetings of the Board of Directors.

v

3.00 The company should have an AUDIT COMMITTEE as a sub-committee of the Board of Directors, which should be responsible to the Board of Directors.

v

3.1(i) The Audit Committee should be composed of at least three members.

v

3.1(ii) The Board of Directors should appoint the Audit Committee from among the Directors of the company of whom at least one should be Independent non-shareholder Director.

v

3.1(iii) The Board of Directors are responsible for filling up any vacancy in the Audit Committee due to expiry, retirement or resignation within one month of such vacancy.

v

3.2(i) The Board of Director will select the Chairman of the Audit Committee

v

3.2(ii) The Chairman of the Audit Committee should have a professional qualification and knowledge and experience in accounting and finance.

v

3.3.1(i) The Audit Committee should report on its activities to the Board of Directors.

v

3.3.1(ii)(a) Report on conflict of interests N/A 3.3.1(ii)(b) Suspected or presumed fraud or

irregularity or material defect in the internal control system.

N/A


23



appropriate column)



3.3.1(ii)(c) Suspected infringement of laws, including securities related laws, rules and regulations.

v

3.3.1(ii)(d) Any other matter, which should be disclosed to the Board of Directors immediately.

v

3.3.2 Any report by the Audit Committee to the Board of Director which has material impact on the financial condition and results of operation and has agreed with the Board on the rectification measures within a certain period but unreasonably ignored by the Board, then the Audit Committee should report such findings to SEC.

v

3.4 Any report by the Audit Committee to the Board of Directors under section 3.3.1.(ii) should be signed by the Chairman of the Audit Committee and disclosed in the Annual Report.

v

4.00(i) The External / Statutory Auditors should not give appraisal or valuation services, or give fairness opinions. OR

v

4.00(ii) Give financial information systems designs and implementation. OR

v

4.00(iii) Bookkeeping or other services related to the accounting records or financial statements. OR

v

4.00(iv) Broker-dealer services OR v 4.00(v) Actuarial Services, OR v 4.00(vi) Internal Audit services OR v 4.00(vii) Any other service that the Audit

Committee determines. v

5.00 REPORTING THIS COMPLIANCE IN THE DIRECTOR'S REPORT.

v


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AUDITORS’ REPORT TO THE SHAREHOLDERS OF

APEX ADELCHI FOOTWEAR LIMITED

We have audited the accompanying Balance Sheet of Apex Adelchi Footwear Limited as at 31 December, 2010 and the related Profit & Loss Account, Statement of Changes in Equity and Cash Flow Statement for the year ended 31 December, 2010. Respective Responsibilities of Directors and Auditors: The preparation of these financial statements is the responsibility of the Company’s management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Basis of Audit Opinion: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: In our opinion, the financial statements prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the Company’s affairs as at 31 December, 2010 and of the results of its operations and its cash flows for the year then ended and comply with the Companies Act, 1994 and other laws and regulations where applicable. We also report that:

a) We 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;

b) In our opinion, the Company has kept proper books of accounts as required by law so far as it appeared from our examination of those books;

c) The Company’s Balance Sheet and Profit & Loss Account dealt with by the report are in agreement with the books of accounts;

d) The expenditure incurred was for the purposes of the Company’s business;

for Shiraz Khan Basak & Co. March 24, 2011 Chartered Accountants Dhaka Sd/- (Ramendra Nath Basak, F.C.A)


25

BALANCE SHEET A S A T 3 1 D E C E M B E R 2 0 10

Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Notes Taka Taka

Fixed Assets 3 418,371,710 537,109,886 Current Assets

Inventories 4 2,239,199,979 1,343,434,430

Trade debtors 5 881,553,360 709,941,378

Advances, deposits and prepayments 6 1,032,526,768 827,374,934

Investments 7 8,240,059 4,574,002

Cash & bank balances 8 97,151,909 64,697,015

4,258,672,075 2,950,021,759

Less: Current Liabilities

Working capital loan 9 1,850,501,474 1,417,382,739

Sundry creditors 10 1,912,941,015 1,198,149,514

Provision for income-tax 142,535,228 97,132,208

Proposed cash dividend 45,000,000 39,375,000 3,950,977,717 2,752,039,461 Net Current Assets 307,694,358 197,982,298

Net Assets 726,066,068 735,092,184

Financed by:

Shareholders’ equity: Share capita l 11 112,500,000 112,500,000 Share premium 68,804,919 68,804,919

Dividend equalization fund 33,750,000 33,750,000 Retained earnings 511,011,149 520,037,265

Total Shareholders’ Equity 726,066,068 735,092,184

Sd/- Sd/- Sd/- (Syed Nasim Manzur) (Syed Gias Hussain) (S.M. Shahjahan) Managing Director Deputy Managing Director Company Secretary Sd/- This is the Balance Sheet referred to in our report of same date. (Shiraz Khan Basak & Co.) The annexed notes form part of these accounts. Chartered Accountants March 24, 2011


26

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2010

Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Notes Taka Taka

Sales 12 6,961,115,608 5,834,073,431 Less: VAT 29,598,986 13,203,884

6,931,516,622 5,820,869,547 Cost of Sales Cost of goods sold 13 5,804,093,279 4,883,463,949 Freight & forwarding 14 35,378,905 29,826,050 5,839,472,184 4,913,289,999

Gross Profit 1,092,044,438 907,579,548 Fixed Operating Expenses Marketing & administration 15 521,156,825 307,866,159 Bank interest & charges 276,620,946 333,520,762 Directors' remuneration 6,945,000 5,490,000 Legal & audit fee 16 595,000 1,212,500

805,317,771 648,089,421

Operating Income 286,726,667 259,490,127

Other Income 17 584,504 509,037

Profit before WPPF 287,311,171 259,999,164 Provision for contribution to WPPF (13,681,484) (12,380,913) Profit before tax 273,629,687 247,618,251 Provision for tax (export sales) (30,486,582) (29,594,128) Provision for tax (local sales) (14,916,438) (6,491,872)

Net profit after tax 228,226,667 211,532,251 Appropriations Prior years’ retained earnings 520,037,265 347,880,014

Prior years’ adjustment 3 (192,252,783) 0 Cash dividend (45,000,000) (39,375,000)

282,784,482 308,505,014 Retained Earnings 511,011,149 520,037,265 Earning per share (per value Tk. 100/-) 202.87 188.03 Sd/- Sd/- Sd/- (Syed Nasim Manzur) (Syed Gias Hussain) (S.M. Shahjahan) Managing Director Deputy Managing Director Company Secretary

Sd/- This is the Profit & Loss Account referred to in our report of same date. (Shiraz Khan Basak & Co.) The annexed notes form part of these accounts Chartered Accountants March 24, 2011


27

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2010

Year Ended Year Ended 31 Dec. 10 31 Dec. 09

Taka Taka

CASH FLOW FROM OPERATING ACTIVITIES

Collections from turnover, bills receivable and other income 6,790,088,130 6,030,012,454 Payments for purchase of leather, accessories, components,

payments to creditors and other expenses (6,932,275,491) (6,017,855,391)

CASH FLOW FROM INVESTING ACTIVITIES

Acquisition of fixed assets (219,101,480) (114,706,071)

CASH FLOW FROM FINANCING ACTIVITIES

Loan received/(repaid) 433,118,735 137,427,133

Dividend paid (39,375,000) (33,750,000)

Net cash inflow/ (outflow) for the period 32,454,894 1,128,125

Opening cash and bank balances 64,697,015 63,568,890

Closing cash and bank balances 97,151,909 64,697,015

Sd/- Sd/- Sd/- (Syed Nasim Manzur) (Syed Gias Hussain) (S.M. Shahjahan) Managing Director Deputy Managing Director Company Secretary

Sd/- This is the Cash Flow Statement referred to in our report of same date. (Shiraz Khan Basak & Co.) The annexed notes form part of these accounts Chartered Accountants March 24, 2011


28

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010

Particulars Share Capital

Share Premium

Dividend Equalization

Retained Earnings

Total

Taka Taka Taka Taka Taka

As at January 01, 2010 112,500,000 68,804,919 33,750,000 520,037,265 735,092,184

Prior years’ adjustment - - - (192,252,783) (192,252,783)

Net profit after tax - - - 228,226,667 228,226,667

Proposed cash dividend - - - (45,000,000) (45,000,000)

As at December 31, 2010 112,500,000 68,804,919 33,750,000 511,011,149 726,066,068

Sd/- Sd/- Sd/- (Syed Nasim Manzur) (Syed Gias Hussain) (S.M. Shahjahan) Managing Director Deputy Managing Director Company Secretary

Sd/- This is the Statement of Changes in Equity referred to in our report of same date. (Shiraz Khan Basak & Co.) The annexed notes form part of these accounts Chartered Accountants March 24, 2011


29

NOTES TO THE ACCOUNTS

For the year ended 31 December 2010 1. REPORTING ENTITY :

Company Profile Apex Adelchi Footwear Limited was incorporated on 4 January 1990 as a Public Limited

Company with the Registrar of Joint Stock Companies and Firms in Bangladesh. It was listed with Dhaka Stock Exchange Limited on 11 July 1993 and with Chittagong Stock Exchange Limited on 22 October 1995.

The registered office of the company is at House No. 6, Road No. 137, Block SE (D), Gulshan-1, Dhaka 1212, Bangladesh and its factory at Chandra , shafipur, Kaliakoir, Gazipur.

Nature of Business The Company is an export oriented leather shoe and shoe components manufacturer

producing and selling leather shoes and other leather products in international market. It also sells its products in local market through outlets named Gallerie Apex.

2. BASIS OF PREPARATION:

2.1 Statement of Compliance The financial statements have been prepared in accordance with Bangladesh

Accounting Standards and Bangladesh Financial Reporting Standards and as per the requirement of Companies Act 1994, the Securities and Exchange Rules 1987 and other relevant local laws and rules.

2.2 Basis of Measurement The financial statements have been prepared on the basis of historical cost

convention and accrual basis.

2.3 Reporting Currency and Level of Precision The financial statements are presented in Bangladesh Taka (BDT), which is the company’s

functional currency. All financial information presented in BDT have been rounded off to the nearest BDT except where indicated otherwise.

2.4 Use of Estimates and Judgments The preparation of financial statements in conformity with the Bangladesh

Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) requires management to make judgments, estimates and assumptions that affects the reported amounts of the assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the year reported. Actual results may differ from these estimates.

2.5 Going Concern The company has adequate resources to be in operation for a foreseeable future and

the Directors continue to adopt going concern basis in preparing the accounts. The current resources of the company provide sufficient fund to meet the present requirements of its existing business.

2.6 Reporting Period The financial period of the company covers one year from 1 January 2010 to 31

December 2010 consistently.


30

2.7 Foreign Currency Translation Transactions in foreign currencies are translated to BDT at the foreign exchange rate

ruling at the date of the transactions in accordance with provisions of IAS 21. Foreign currency gains and losses are reported on a net basis.

2.8 Transactions with Related Parties The company has carried out transactions with Apex Tannery Limited, Pioneer

Insurance Company Limited, Grey Advertising Bangladesh Limited and Apex Enterprises Limited in the normal course of business.

2.9 Comparative Information Comparative information have been disclosed in respect of the year 2009 for all

numerical data in the financial statements and also the narrative and descriptive information where it is relevant for understanding of the current period financial statements.

Figures of the year 2009 have been rearranged whenever considered necessary to ensure comparability with the current period.

2.10 Cash Flow Statement Cash flow statement is prepared in accordance with IAS 7 and it has been presented

under direct method as prescribed by the Securities and Exchange Rules 1987.

2.11 Revenue Recognition The Company recognizes revenue when risk of ownership has been transferred to the

buyer, which satisfies all the conditions for revenue recognition as provided in IAS 18.

2.12 Recognition of Property, Plant, Equipment and its Depreciation: i. Recognition and Measurement of Cost Property, plant and equipments are stated at cost less accumulated depreciation in

accordance with IAS 16. Cost represents cost of acquisition, purchase price and other directly attributable cost of bringing the assets to working conditions for its intended use. Expenditure for maintenance and repairs are treated as revenue expense, major replacements, renewals and betterment are capitalized.

ii. Depreciation During the year depreciation policy has been changed from reducing balance method

to straight line method.

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Full year’s depreciation has been charged on additions irrespective of date when the related assets are put into use and no depreciation has been charged on assets during the year of disposal. Depreciation is charged on all property and equipment on straightline basis over the estimated usefull lives of each part of an item of property, plant and equipment, since this reflects most closely the expected pattern of consumption of future economic benefits embodied in the assets.

Current depreciation rates are as follows:

Category Rate (%) Buildings 10% Plant & machinery 15% Furniture & fixture 20% Motor vehicles 20% Office equipment 20% Computers & printers 33.33% Outlet decoration 33.33%


31

Depreciation charges have been apportioned to production & administrative and

marketing expense on a consistent basis.

As a result of the change in depreciation policy, current year profit has been decreased by Tk. 83,482,074 and previous years’ retained earnings decreased by Tk. 192,252,783. All the necessary adjustments have been made in accordance with IAS 8.

2.13 Inventory Valuation Inventories comprise of raw materials, packing materials, work-in-process and finished

goods. They are stated at the lower of cost or net realizable value in accordance with IAS 2, after making reasonable allowance for any obsolete or slow moving items. The cost of inventories is assigned by using weighted average method.

2.14 Trade Receivable Trade receivables are carried at o riginal invoice amount considered good and collectible.

2.15 Concentration on Credit Risk Management believes that there was no significant concentration of credit risk in the

company’s receivables.

2.16 Cash and Cash Equivalents Cash and cash equivalent comprise cash in hand and cash at bank held and available for

use of the company without any restriction.

2.17 Creditors and Accruals Liabilities are recognized for amounts to be paid in future for goods and services received.

2.18 Provisions A provision is recognized in the balance sheet when the company has a legal or

constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation and accordingly provision for expenses has been made in the accounts.

2.19 Contingencies Contingencies arising from claims, litigations, assessments, fines, penalties, etc. are

recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

2.20 Taxation Current tax is the expected tax payable on the taxable income for the year, using tax

rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Sufficient provision has been made during the year as per Income Tax Ordinance 1984 amended on the basis of Finance Act 2010.

2.21 Contribution to Workers Profit Participation Fund The company has provided @ 5% of net profit before tax after charging the contribution to

WPPF as per provision of the companies’ profit (Workers Participation Act, 1968).

2.22 Earnings Per Share (EPS)

The company calculates earnings per share (EPS) in accordance with IAS 33. This has been calculated by dividing the net profit after tax for the year by the number of ordinary shares issued by the company.

2.23 Events after the Balance Sheet date Events after the balance sheet date provide additional information about the company’s

position at the balance sheet date as reflected in the financial statements. Events after the balance sheet date are non-adjusting events are disclosed in the notes when material.


32

3. FIXED ASSETS

Particulars Land Buildings Plant & Machinery

Vehicles Office Equipment

Computers & Printers

Furniture & Fittings

Outlet Decoration

Total 2010

Total 2009

Cost 103,051,290 242,405,933 399,988,712 16,878,083 70,476,583 10,315,890 88,932,129 232,936,408 1,164,985,028 945,883,547

Less: Depreciation 0 144,832,685 335,402,255 13,362,754 39,247,567 7,963,524 73,469,131 132,335,402 746,613,318 408,773,661

Written down value 103,051,290 97,573,248 64,586,457 3,515,329 31,229,016 2,352,366 15,462,998 100,601,006 418,371,710 537,109,886

SCHEDULE OF FIXED ASSETS AS AT 31 DECEMBER 2010

Sl. No.

Particulars Land Buildings Plant & Machinery

Vehicles Office Equipment

Computers & Printers

Furniture & Fittings

Outlet Decoration

Total 2010

Total 2009

Cost 1 As at 01.01.10 100,683,790 213,547,795 364,330,117 16,108,083 52,255,917 8,722,458 85,847,030 104,388,357 945,883,547 831,177,476

2 Addition this year

2,367,500 28,858,138 35,658,595 770,000 18,220,666 1,593,432 3,085,099 128,548,051 219,101,481 114,706,071

3 As at 31.12. 10 (1+2)

103,051,290 242,405,933 399,988,712 16,878,083 70,476,583 10,315,890 88,932,129 232,936,408 1,164,985,028 945,883,547

4 Depreciation

Rate (%) 0% 10% 15% 20% 20% 33.33% 20% 33.33%

5 During the year

0 15,507,679 28,745,925 1,934,807 10,928,690 2,736,349 8,087,955 77,645,469 145,586,874 55,701,347

6 As at 31.12.09 0 94,942,491 241,150,413 8,291,953 10,395,430 1,735,186 40,324,471 11,933,717 408,773,661 353,072,314

7 Prior years’ Adjustment

0 34,382,515 65,505,917 3,135,994 17,923,447 3,491,989 25,056,705 42,756,216 192,252,783 0

8 As at 31.12.10

(5+6+7) 0 144,832,685 335,402,255 13,362,754 39,247,567 7,963,524 73,469,131 132,335,402 746,613,318 408,773,661

Depreciation charged to production 64,544,335 Depreciation charged to marketing & administration 81,042,539 145,586,874


33

4. INVENTORIES Year Ended Year Ended

31 Dec. 10 31 Dec. 09 Taka Taka

Finished leather 265,755,889 253,200,882 Wet blue leather 39,825,251 47,020,205 Accessories & Components: Outsole components 139,083,699 111,469,750 Other components 321,597,804 220,416,852 Other a ccessories 38,472,757 45,133,680 Packing materials 58,553,921 35,609,521 Finished Stock: Finished shoes 789,714,113 229,367,902 Finished upper 121,243 0 Work in Process: Finished leather 423,711,643 266,401,091 Outsole 60,753,237 57,642,825 Other a ccessories 50,258,060 43,661,618 Packing materials 51,352,362 33,510,104 2,239,199,979 1,343,434,430

Stock Basis of Valuation Finished Leather Wet Blue Components : Valued at weighted average cost price Accessories Packing Materials

Finished Stock: Complete Shoe & Shoe Upper : Valued at average cost price (ex-factory cost price) Work in Process : Work-in-process includes direct materials and proportionate

cost of labor with other direct expenses based upon average cost price.

• Inventories were hypothecated to Janata Bank, Janata Bhaban Corporate Branch, Dhaka as security against working capital loan.

5. TRADE DEBTORS

Export bills receivable 654,078,940 466,104,038 Export incentive receivable 227,474,420 243,837,340

881,553,360 709,941,378

• Export bills receivable represent approximately 45 days CAD export bills under colle ction, a substantial portion of which has been realized by February 2011.


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6. ADVANCE, DEPOSIT & PREPAYMENTS Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Taka Taka L/C accounts (Goods-in-transit) 647,464,148 531,839,090 Advance income tax 42,540,821 30,200,917 Sundry advance 232,898,567 215,762,830 L/C margin deposit 104,051,033 44,817,931 Security deposits & demand note 1,625,056 1,650,056 Insurance premium prepaid 3,947,143 3,104,110 1,032,526,768 827,374,934 7. INVESTMENTS

Investment in CDBL 4,416,700 1,000,000 Fixed deposit 3,823,359 3,574,002 8,240,059 4,574,002

8. CASH AND BANK BALANCES Cash in Hand : Head office 1,159,231 2,459,647 Factory 6,346,438 352,399 Cash at Bank : Mercantile Bank, Gulshan, Dhaka 9,158,542 832,518 Dhaka Bank, Banani, Dhaka 0 18,426 Janata Bank, Gazipur 45,455 29,657 Mutual Trust Bank, Shafipur 101,279 3,607 State Bank of India, Dilkusha, Dhaka 0 77,430 Agrani Bank, Amin Court, Dhaka 6,361 6,361 Prime Bank, Elephant Road, Dhaka 1,493,379 5,051,168 Janata Bank, CD A/C, J. Bhaban Corp. Branch, Dhaka 18,854,671 12,434,165 Janata Bank, FC Euro, J. Bhaban Corp. Branch, Dhaka 32,818,059 19,948,231 Janata Bank, FC USD A/C, J. Bhaban Corp. Branch, Dhaka 15,107,478 9,668,334 Janata Bank, Kaliakoir 5,027 1,207,177 Bank Al Falah, Dhanmondi, Dhaka 33,047 47,679 Agrani Bank, Ramna, Dhaka 67,728 494,863 Mutual Trust Bank, Shafipur 606,464 0 Bank Asia, FC Euro A/C, Principal Branch, Dhaka 11,130,398 10,629,019 Bank Asia, STD A/C, Principal Branch, Dhaka 182,139 1,436,334 Bank Asia, RAD A/C, Principal Branch, Dhaka 32,325 0 Bank Asia, CD A/C, Principal Branch, Dhaka 3,888 0 97,151,909 64,697,015

• Cash balance was physically checked and verified and Bank balances were reconciled and found in order.


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9. WORKING CAPITAL LOAN Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Taka Taka The working capital loan has been taken from the following Banks :

Janata Bank, ECC A/C, J. Bhaban Corp . Branch, Dhaka 490,943,282 502,791,285 Bank Asia, OD A/C, CEPZ 270,266,204 301,802,924 Prime Bank, Elephant Road, Dhaka 141,331,336 112,714,313 Bank Al Falah, Dhanmondi, Dhaka 97,500,000 0 Janata Bank, Qurbani A/C, J. Bhaban Corp. Branch, Dhaka 252,929,902 201,426,667 Bank Asia , LTR, Principal Branch, Dhaka 182,314,673 66,505,062 Janata Bank, PAD, J. Bhaban Corp. Branch, Dhaka 376,211,317 119,847,501 Bank Asia , PAD, Principal Branch, Dhaka 2,660,255 89,660,983 City Bank, Gulshan, Dhaka 36,344,505 22,634,004 1,850,501,474 1,417,382,739 10. SUNDRY CREDITORS Suppliers, contractors & others 1,137,335,044 808,466,078 Printing & stationery 957,323 331,162 Clearing & forwarding 50,236,464 43,026,358 Outstanding expenses 307,780,062 45,742,159 Royalty payable 416,577,122 300,528,757 Audit fee 55,000 55,000

1,912,941,015 1,198,149,514

• Outstanding expenses represent accrued salary and wages for the month of December 2010 and other utility bills for the month of November and December 2010.

• Royalty and Commission amount were provided as per Royalty and Commission agreement approved by the regulatory authorities.

11. SHARE CAPITAL

Authorized Capital 500,000,000 500,000,000 5,000,000 shares @ Tk. 100/- each

Issued, Subscribed & Fully paid-up Capital 112,500,000 112,500,000 1,125,000 shares @ Tk. 100/- each Composition of shareholding: As on As on 28 Feb. 2011 15 March 2010 Sponsors 9.09% 9.09%

Investment Corporation of Bangladesh 8.42% 3.35%

Public 56.83% 19.34%

Local Financial Institutions 25.66% 68.22%


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Distribution schedule of each class of equity setting out the number of shareholders and percentage in the following categories:

Shareholders Number of Holdings Holdings % 2,294 Less than & equal 500 shares 133,688 11.88

115 501 shares to 5,000 shares 196,310 17.45

17 5,001 shares to 10,000 shares 115,995 10.31

8 10,001 shares to 20,000 shares 96,960 8.62

4 20,001 shares to 30,000 shares 103,393 9.19

3 30,001 shares to 40,000 shares 68,200 6.06

2 40,001 shares to 50,000 shares 85,560 7.61

2 50,001 shares to 100,000 shares 180,272 16.02 1 Over 100,000 shares 144,622 12.86 2,446 1,125,000 100.00

Pattern of Shareholding as on February 28, 2011 Shareholders Name Designation/Relationship Number of Shares (1) Syed Manzur Elahi Chairman 24,750 (2) Syed Nasim Manzur Managing Director 15,480 (3) Munize Manzur Khasru Director 1,500 (4) Syed Gias Hussain Deputy Managing Director 1,500 (5) Niaz Ahmed Choudhury Director 1,500 (6) Adelchi Sergio Director 1,500 (7) Apex Tannery Limited Associated Company 13,670 (8) Niloufer Manzur Wife of Chairman 42,330 1,02,230 12. TURNOVER Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Export: Shoe in Prs 4,336,624 3,640,216 Value in Taka 5,546,541,634 4,947,796,892 Average value in US$ 18.59 19.87 Shoe Upper in Prs 8,929 7,150 Value in Taka 6,652,200 5,047,720 Average value in US$ 10.05 10.17 Components in Prs 0 6,689 Value in Taka 0 969,860 Average value in US$ 0 2.12 Local: Shoe in prs 1,864,797 951,828 Value in Taka 1,407,921,774 880,258,959 Average value in Taka 755 925 6,961,115,608 5,834,073,431


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13. COST OF GOODS SOLD Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Taka Taka Opening stock 630,583,540 537,094,486 Add: Cost of production 6,063,419,542 4,697,653,066 Add: Cost of royalty/commission/design & development 486,000,855 279,299,937 Less: Closing stock 1,375,910,658 630,583,540 5,804,093,279 4,883,463,949

Cost of Production: Notes Leather consumption 18 2,940,652,541 2,351,001,905 Accessories & components 19(a+b) 2,144,347,211 1,644,429,780 Packing materials 20 209,980,587 160,837,667 Direct labour 340,004,825 248,882,712 Factory overhead 21 363,890,043 250,951,756 Depreciation 3 64,544,335 41,549,246 6,063,419,542 4,697,653,066

14. FREIGHT & FORWARDING ON EXPORT Air freight 1,512,826 2,811,849 Ocean freight 5,984,281 3,839,875 Export forwarding 25,500,484 21,392,897 Sample forwarding 2,381,314 1,781,429 35,378,905 29,826,050

15. MARKETING & ADMINISTRATION Salary & allowances 98,932,239 78,607,937 Conveyance 3,766,955 2,898,217 Staff welfare 3,090,839 3,058,145 Entertainment 2,279,243 2,179,243 Printing & stationery 7,664,137 3,841,246 Postage 946,694 773,878 Rent, rates & taxes 102,250,458 68,054,532 Telephone & fax charges 4,601,380 3,908,695 Office maintenance 27,377,014 19,582,781 Advertisement 54,076,706 21,079,126 Fuel & lubricant 3,363,769 2,468,513 Vehicle maintenance 3,561,093 2,056,845 Insurance premium 8,082,926 424,535 Repairs & maintenance 3,578,910 2,091,546 Export promotion 13,940,712 10,776,563 Outlet expenses 87,918,066 61,407,075 Travelling expenses 13,481,007 9,765,181 AGM expenses 1,202,138 740,000 Depreciation 81,042,539 14,152,101 521,156,825 307,866,159


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• Salary & Allowances increased due to new staff costs for new outlets and regular increments.

• Rent, rates & taxes increased due to increase in number of outlets, increase in rent of existing outlets and 15% VAT paid on rent as per Govt. new legislation.

• Office maintenance, printing & stationery and outlet expenses increased mainly for 14 new outlets opened during the year.

• Advertisement expenses increased mainly due to increased promotional acit ivity during Eid festivals.

• Conveyance increased due to continuous internal audit of local outlets throughout the country. • Travelling and export promotion expenses have gone up due to increased travel for sourcing materials at

lower cost and finding new markets for our products.

16. LEGAL & AUDIT FEE Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Taka Taka

Legal fees & charges 540,000 1,157,500 Audit fee 55,000 55,000 595,000 1,212,500

17. OTHER INCOME Interest on fixed deposit 484,504 259,037 Dividend on CDBL investment 100,000 250,000 584,504 509,037

18. LEATHER CONSUMPTION Opening stock 300,221,087 286,225,174 Purchase during the year 3,034,243,432 2,364,997,818 Less: Closing stock 393,811,978 300,221,087 Consumption 2,940,652,541 2,351,001,905 19. ACCESSORIES AND COMPONENTS CONSUMPTION

(a) Accessories and Components (Import) Opening stock 320,596,036 286,714,248 Purchase during the year 2,048,896,305 1,586,303,223 Less: Closing stock 345,031,897 320,596,036 Consumption 2,024,460,444 1,552,421,435

(b) Accessories and Components (Local) Opening stock 56,424,246 49,819,946 Purchase during the year 129,003,727 98,612,645 Less: Closing stock 65,541,205 56,424,246 Consumption 119,886,768 92,008,345 20. PACKING MATERIALS CONSUMPTION Opening stock 35,609,521 21,320,687 Purchase during the year 233,275,307 175,126,501 Less: Closing stock 58,904,241 35,609,521 Consumption 209,980,587 160,837,667


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21. FACTORY OVERHEAD Year Ended Year Ended 31 Dec. 10 31 Dec. 09 Taka Taka Salary & allowances 134,830,998 95,712,129 Medical expenses 487,153 235,141 Factory maintenance 28,179,765 12,903,918 Power, fuel & water 84,304,375 51,392,888 Staff uniform 702,429 364,948 Paper & periodicals 14,334 11,175 Insurance premium 7,288,105 5,184,904 Repairs & maintenance 54,802,935 44,766,572 Conveyance 859,256 672,179 Entertainment 321,315 230,363 Printing & stationery 2,845,549 1,896,649 Vehicle maintenance 1,675,490 1,008,488 Guest house expenses 2,191,936 1,685,977 Rent, rates & taxes 44,262,775 34,047,000 Telephone, telex & fax charges 1,123,628 839,425 363,890,043 250,951,756

• Salary and allowances increased due to annual increment given to employees and increase in number of staff.

• Repairs and maintanance expenses increased mainly for using spares parts in various machines at factory.

GENERAL: i. Director remuneration represents remuneration paid to two Directors

ii. There is no contingent liability of the Company at the date of Balance Sheet.

iii. In the course of making payments to suppliers against services, supplies, etc. the company has deducted tax at source as per income tax law and deposited to Bangladesh Bank in time.

iv. During the year 6 Board Meetings were held and 6 Resolutions by circulation were passed. All Directors attended except one Director was absent in four meetings, one Director was absent in three meetings and two directors were absent in one meeting who were granted leave of absence.

v. The Board of Directors proposed 40% cash dividend for the year at the Board Meeting held on March 24, 2011.

vi. There has been no claim against the company not acknowledged as debt by the company. vii. The company has no aggregate amount of contract for capital expenditure to be executed and not provided

for in the accounts.

viii. There was no Bank Guarantee issued by the company on behalf of their Directors or the company itself except for bank loans.

ix. No brokerage was paid against sales during the year under audit.

x. Auditors are paid only statutory audit fee approved by the shareholders in the last Annual General Meeting.

xi. There was no foreign exchange remitted to the relevant shareholders during the year under audit.

xii. No amount of money was expended by the company for compensating any member of the Board for special service rendered.

Documents

Annual Report 2010 Dt- 17-04-11 Finaly Published