Apex Tannery Report on Corporate Social Responsibilities ... • Al-Arafah Islami Bank Ltd. ......

39th Annual General Meeting of the Company held on 4 October, 2015

A partial view of the Shareholders at the 39th Annual General Meeting

Apex Tannery LimitedAnnual Report 2016

A partial view of the Shareholders at the 39th Annual General Meeting

Annual Report 2016Apex Tannery Limited

Our Vision, Mission, Values and Objectives 04Corporate Directory 05Directors and Management Team 06

Profi le of Management Team 10Profi le of Directors 07

Report of the Directors 11Financial Highlights 19Financial Highlights (Graphical presentation) 20Statement of Value Addition 21Report on Corporate Social Responsibilities (CSR) 22Report on Corporate Governance 24Corporate Governance Compliance Report 27Pattern of Shareholding 36Audit Committee Report 37Auditors’ Report 40Statement of Financial Position 41Statement of Comprehensive Income 42Statement of Cash Flow 43Statement of Changes in Equity 44Notes to the Financial Statements 45Notice of the AGM 62Attendance slip and Proxy form 64

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OUR VISION, MISSION, VALUES AND OBJECTIVES

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OUR VISIONOur vision is to attain 100% customer satisfaction worldwide through continual quality improvement of our products.OUR MISSIONTo understand and satisfy customer’s wants and needs, we always try to add value, reduce costs and provide innovative thinking for improvement of our product quality, with world class compliance and working standards. OUR VALUESTo our customers we offer

• A commitment to provide best quality product and timely delivery• Production of world-class quality leather, meet the requirements of customers with

competitive price and up to date fashion trends • Quick response to the expectations of our valued customers in terms of quality and

product developmentTo our employees we offer

• A desirable and rewarding place to work• Provide motivation for team work and career development • The opportunity to grow to employee’s maximum potential• Sufficient offsite and on the job training

To our shareholders we offer• Attractive return with minimum risk of their investment• A commitment to continuous improvement and adding value through all activities and

managing resourcesTo our suppliers we offer

• Easy terms of trade• Payment within due time

OUR OBJECTIVES• 100% on time delivery of the services to our valued customers• 100% accuracy in documentation• 100% customers acceptance of our services as valid and usables in accordance with

their requirements• Overall reduction of cost by 2% every year• Reduction of customer complaints by 10 % every year.

Annual Report 2016Apex Tannery Limited04

CORPORATE DIRECTORY

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BOARD OF DIRECTORSChairmanSyed Manzur Elahi Managing DirectorMd. Rahmatullah DirectorsSyed Nasim ManzurMd. HedayetullahMd. Iftikhar-uz-zamanFaruq Ahmad SiddiqiSayed Alamgir Farrouk Chowdhury

AUDIT COMMITTEEChairmanFaruq Ahmad Siddiqi

MembersSyed Nasim Manzur Md. HedayetullahSayed Alamgir Farrouk Chowdhury

MANAGEMENT COMMITTEEChairmanSyed Manzur ElahiMembersMd. RahmatullahMd. HedayetullahAnsarul IslamM. Abdul MajedAnup Kumar Mukherjee

HUMAN RESOURCES COMMITTEEChairmanMd. HedayetullahMembersAnsarul Islam M. Abdul Majed Anup Kumar MukherjeeMd. Golam Sarwar

COMPANY SECRETARYJagadish Kumar Bhanja

AUDITORSMalek Siddiqui WaliChartered Accountants

CORPORATE GOVERNANCE AUDITORARTISANChartered Accountants

CHIEF FINANCIAL OFFICERAnup Kumar Mukherjee

TAX ADVISERKhandker Fazlul Quadir

LEGAL ADVISERMohsen RashidAdvocate, Supreme Court

BANKERSAgrani Bank Ltd.Amin Court Corp. Branch, Motijheel C/A, Dhaka-1000

REGISTERED OFFICE127 Hazaribagh T/ADhaka-1209

FACTORYUnit I127 Hazaribagh T/A,Dhaka-1209Unit IIShafipur Kaliakoir, Gazipur


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DIRECTORS AND MANAGEMENT TEAM

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Syed Manzur ElahiChairman

Syed Nasim ManzurDirector

Faruq Ahmad SiddiqiIndependent Director

Md. HedayetullahDirector

Sayed Alamgir Farrouk ChowdhuryIndependent Director

Md. RahmatullahManaging Director

M. Abdul MajedExecutive Director

Anup Kumar MukherjeeChief Financial O�cer

Jagadish Kumar BhanjaCompany Secretary

Ansarul IslamExecutive Director

Md. Iftikhar-uz-zamanDirector


PROFILE OF DIRECTORS


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Chairman• Parliamentary Standing committee for

ministry of Information • F B Footwear Ltd.• Footbed Footwear Ltd.

President• Dhaka Mohanagar Awami League (North)

Managing Director• Daichipex Textile Mills Ltd.• Apex Property Development Ltd.

Director• Pioneer Insurance Company Ltd.

Member• Central working committee, Bangladesh

Awami League• Parliamentary Standing Committee on

Ministry of Post Telecommunication & Technology.

• Bangladesh Jatiya Sangshad (1986, 1988, 1996, 2008 to till date)

Chief Adviser• Bangladesh Finished Leather, Leathergoods

and Footwear Exporters Association• Dhaka Mahanagar Samity (Dhaka Samity)

Founder• A.K.M.Rahmatullah University College,

Beraid, Gulshan, Dhaka• Roushan Ara Girls High School, Beraid,

Gulshan, Dhaka

Education Bachelor of Arts from Chittagong University.

Chairman• Apex Footwear Ltd.• Apex Investments Ltd.• Apex Enterprise Ltd.• Quantum Consumer Solutions Ltd.• Blue Ocean Footwear Ltd.• Apex Pharma Ltd.• Grey Advertising Bangladesh Ltd.Director• International Publications Ltd. (Financial Express)• Mutual Trust Bank Ltd.• Central Depository Bangladesh Ltd. (CDBL)• Credit Rating Agency of Bangladesh Ltd. (CRAB)Trustee• East West UniversityOther Activities• Former Advisor, Caretaker Government of

Bangladesh, 1996 and 2001• Former Director, Bangladesh Krishi Bank• Former Director, Export Promotion Bureau• Former Director, Bangladesh Bank• Former President, Metropolitan Chamber

of Commerce and Industry• Former Director, Sonali Bank Ltd.• Former President, Bangladesh Employers

Association• Former Vice Chairman of the Bangladesh

Association of Publicly Listed Companies (BAPLC)

EducationB.A. (Distinction) in 1962 from St. Xavier’s College, Kolkata & M.A. (Economics) in 1964 from Dhaka University.


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Syed Manzur ElahiChairman

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Md. HedayetullahDirector

Syed Nasim ManzurDirector

President• Metropolitan Chamber of Commerce and

Industry (MCCI)Chairman• Landmark Footwear Ltd.Adviser• Leathergoods and Footwear Manufacturers

& Exporters Association of Bangladesh.Managing Director• Apex Footwear Ltd.Founding Director• Quantum Consumer Solutions Ltd.• Blue Ocean Footwear Ltd.• Apex Investments Ltd.• Guardian Life Insurance Ltd.Director• Apex Pharma Ltd.• Grey Advertising Bangladesh Ltd.• Apex Enterprise Ltd.• Pioneer Insurance Co. Ltd.• International Publications Ltd.• FRIENDSHIP (An Internationally acclaimed

Non Government Organization which provides health and educational service in remote and inaccessible chars of the northern region of the Country)

• Bangladesh Business LimitedGuest Speaker• The National Defence College (NDC)

Mirpur, Dhaka.Education Graduated in Economics in Entrepreneurial

Management from the Wharton School of the University of Pennsylvania, USA in 1990.

Chairman• Hedayetullah Securities Ltd.

Vice Chairman• Mutual Trust Bank Ltd.

Managing Director• FB Footwear Ltd.• Footbed Footwear Ltd.

Director• Daichipex Textile Mills Ltd.• Apex Property Development Ltd.

Education B.Sc (Honors) in Leather Technology from

the British School of Leather Technology, Northampton, UK & M. A. in international Business from Webster University, Regents College, London, United Kingdom.


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Faruq Ahmad SiddiqiIndependent Director

Mr. Iftikhar-uz-zamanDirector

Sayed Alamgir Farrouk ChowdhuryIndependent Director

Retired Secretary to the Govt. of Bangladesh• Ministry of Health and Family

Welfare• Ministry of Commerce• Ministry of Local GovernmentFormer President• National Tennis FederationFormer Vice President• Bangladesh National Football

and Cricket FederationFormer Chairman• Selection Committee for the

Bangladesh National Cricket and Soccer teams

Former Commissioner• Rajshahi DivisionFormer Director General• Industries and FoodFormer Advisor• Bangladesh Enterprise

Institute and FBCCIFormer Partite consultant• CIDA, CUTS, EU, DFID, Oxford

Policy Management, OPM, USAID

Education Masters Degree in

Economics from University of Dhaka in 1964 and Masters Degree in Economics from Williams College, USA in 1978.

Chairman• ICB Capital Management Ltd.

Managing Director• Investment Corporation of

Bangladesh(ICB)

Director• Linde Bangladesh Ltd• Glaxo Smith Kline

Bangladesh Ltd. (GSK)• Reneta Ltd.• Credit Rating Agency

Bangladesh Ltd. (CRAB)• Credit Rating Information and

Services Ltd. (CRISL)• Standard Bank Ltd.• National Tea Company Ltd.• Central Depository

Bangladesh Ltd. CDBL)• CAMP Venture Capital &

Finance Ltd. ( CVCFL)

Trustee• Bangladesh Krishi Gobeshona

Endowment Trust (BKGET)

Past Responsibilities• Deputy Managing Director,

Janata Bank Ltd.• Deputy Managing Director, ICB.• General Manager, ICB.

Education BA (Hons), MA in Statistics

from University of Rajshahi.

Former Chairman• Bangladesh Securities

and Exchange Commission (March 2006 to March 2009)

Retired secretary to the Govt. of Bangladesh (2002 to 2006)• Ministry of Education• Ministry of Commerce• Ministry of Post &

Telecommunication

Member• National Board of

Revenue (1999-2001)

Independent Director• Al-Arafah Islami Bank Ltd.• Runner Automobile Ltd.

Education B. A. (Hons). M. A. English

Language and Literature from the University of Dhaka. (1967)


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PROFILE OF MANAGEMENT TEAM

M. A. MajedExecutive Director

Ansarul IslamExecutive Director

Anup Kumar Mukherjee FCAChief Financial Officer

Jagadish Kumar Bhanja FCSCompany Secretary

Past Responsibilities• Served under Orbital Commerce &

Agencies (BD) Ltd.

Education B.Com. from University of Dhaka.

Past Responsibilities• Head of Accounts and Finance, Sonargaon Textiles Ltd.• Chief Accountant, Quality Group• Chief Accountant, Fashion Group• Manager-Accounts and Finance, Shagufta Group• Dy. Manager-Audit & Consultancy, ACNABIN, Chartered Accountants• Finance Officer, CARE-Bangladesh

Education M.com., Chartered Accountant

Director• Pioneer Insurance Company Ltd.• Alliance Leathergoods & Footwear Ltd.• Alliance Focus Footwear Ltd.

Past Responsibilities• Company Secretary, Central Insurance

Company Ltd.• Senior Program-Coordinator, PROSHIKA.

(MUK)• Senior Officer(S-Grade) Grameen Bank.

Education B.Com. (Hons), M.Com in Accounting from

University of Rajshahi Chartered Secretary from the ICSB



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REPORT OF THE DIRECTORSDEAR SHAREHOLDERS,On behalf of your Directors, I have the pleasure in submitting the Report and Financial Statements for the year ended June 30, 2016.

PERFORMANCE REVIEWThe reduction in sales by about 43% mainly due to recession in EU, which is our main Market. You will recall that last year, we explained that due to the continuing recession in EU over the past 4 years, we diverted our marketing to China. Unfortunately, the situation did not improve as China’s inventories of leather are high leading to a decline in the production of shoes and leather goods. However, despite of negative growth in sales, the achievement was come as the management was able to reduce costs to a great extent. The main contributing factor of cost reduction was low cost of raw hides and skins in the 4th Quarter of the year.

PERFORMANCE SUMMARY YEAR ON YEAR + Increase This Year Previous Year - Decrease %• Sales (Taka in ‘000’) 2,158,363 3,771,638 (42.77)• Raw Cowhides purchase price (Taka/sft) 86.79 106.04 (18.15)• Raw Goatskins purchase price ,, 43.21 69.13 (37.49)• Cow leather selling price ,, 168.00 175.00 (4.00)• Goat leather selling price ,, 112.86 120.40 (6.26)• Chemical cost ,, 34.66 36.48 (4.99)• Operating expenses (Taka in ‘000’) 146,534 175,884 (16.69)• Gross profit ,, 252,681 273,390 (7.57)• Net profit ,, 90,994 95,269 (4.49)• Earnings per share (Taka) 5.97 6.25 (4.49)

INVENTORIES We normally purchase huge quantities of raw hides and skins during the Eid-ul-Azha festival, so that our production is not adversely affected due to low supply during the rest of the year. This year’s inventory represents 119 days of production.

APPROPRIATION OF PROFITS Year Ended Year Ended June 30, 2016 June 30, 2015Profit after tax 90,994 95,269Prior Year’s Retained Earnings (Post dividend) 383,353 356,664Balance of profit available for Appropriation 474,347 451,933

Proposed cash dividend 60,960 68,580Retained Earnings carried forward 413,387 383,353 474,347 451,933


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Taka in thousand

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DIVIDENDSDuring the year EPS of your Company was Taka 5.97. Directors decided in the Board Meeting held on August 16, 2016 to recommend dividend of Taka 4.00 per share of Taka 10/- each. After your approval in this General Meeting, the dividend will be paid to the Shareholders.

EMPLOYMENTAlthough the labour situation in the RMG sector was unsatisfactory, if not violent sometimes, the labour environment in the leather sector was quiet. Labour relation in your Company was cordial and morale of the workers was high. The breakdown of your Company’s human resources are:

This Year Previous Year Total TotalWorkers 611 657Staff 179 189Management 32 32

INDUSTRY OUTLOOK AND POSSIBLE FUTURE DEVELOPMENTS The EU recession and depressed demand in China, have adversely affected leather exports from Bangladesh. The management feels that, in order to improve the performance, the production of finished leather for Japan could be a solution.

The Centralized Effluent Treatment Plant (CETP), built by the Chinese for Government of Bangladesh is in the final stages of completion. The construction of our new tannery in Savar is going on in full swing and we hope to start commercial production by December, 2016. We are happy to inform you that about 340,000 square feet of the new tannery will be fully compliant with latest machineries, fire fighting equipments, rain water harvesting, workers dormitories, cross ventilation, ample natural light etc.

We are proud to inform you that the Savar tannery, when completed, will be one of the biggest and fully compliant factories in South Asia.

RISKS AND CONCERNSThe international and local media continue to remain highly critical of the adverse environmental situation in Hazaribagh, which we feel, is fully justified. No industry has the right to pollute the environment.

Because of the delay in shifting to Savar, the High Court has imposed a fine of Tk. 10,000/- per day till we start trial production in Savar. We hope to be in trial production by end of September, 2016.

DIRECTORS ELECTIONMr. Md. Rahmatullah and Mr. Md. Hedayetullah retire from the Board in terms of Articles of Association, and being eligible, offer themselves for re-election.

Mr. Md. Rahmatullah retires from the office of Managing Director in terms of section 109 & 110 of Companies Act 1994, and being eligible, offers himself for re-appointment.


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BOARD MEETINGS AND ATTENDANCEDuring the year four Board Meetings were held and the attendance by each Director was as follow:Name of Directors No. of Meetings AttendedSyed Manzur Elahi 4Md. Rahmatullah 4Syed Nasim Manzur 3Md. Hedayetullah 4Md. Fayekuzzaman 2Md. Iftikhar-uz-zaman 2Faruq Ahmad Siddiqi 4Sayed Alamgir Farrouk Chowdhury 4

The Directors who could not attend the meetings were granted leave of absence.

AUDIT COMMITTEEThe Audit Committee was set up to review the financial results, audit and compliance with the statutory and regulatory requirements. The Committee recommended to the Board of Directors, the appointment of the Company’s Auditors and reviewed the scope of internal audit. Audit committee report is annexed.

1. Faruq Ahmad Siddiqi Independent Director Chairman2. Syed Nasim Manzur Director Member3. Md. Hedayetullah Director & Head of Internal Audit Member4. Sayed Alamgir Farrouk Chowdhury Independent Director Member

CORPORATE & FINANCIAL REPORTINGThe Company has complied with all the requirements of Corporate Governance as required by the Bangladesh Securities and Exchange Commission.

Accordingly the Directors are pleased to confirm the following:(a) The financial statements together with the notes thereon have been drawn up in conformity with the

Companies Act 1994 and Securities and Exchange Rules 1987. These statements present fairly the Company’s state of affairs, the results of its operations, cash flows and changes in equity.

(b) Proper books of accounts of the Company have been maintained.(c) Appropriate accounting policies have been consistently applied in the preparation of financial

statements and the accounting estimates are based on reasonable and prudent judgment.(d) The International Accounting Standards, as applicable in Bangladesh, have been followed in

preparation of financial statements.(e) The systems of internal control are sound and have been effectively implemented and monitored.(f) The company has carried on transactions with Apex Footwear Limited, Mutual Trust Bank Ltd,

Guardian Life Insurance Ltd. and Pioneer Insurance Company Limited in the normal course of business.

(g) There are no significant doubts upon the Company’s ability to continue as a going concern.(h) The key operating and financial data for last five years is annexed.


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SHARE HOLDINGIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, pattern of shareholdings as of 30th June, 2016 are given in Annexure I.

REMUNERATION OF DIRECTORSIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, remuneration of directors for the year ended 30th June, 2016 are given in note number 39.

CORPORATE GOVERNANCE COMPLIANCE REPORTIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, “Corporate Governance Compliance Report” is annexed.

EXTERNAL AUDITORS APPOINTMENTM/S. Malek Siddiqui Wali, Chartered Accountants, Auditors retires at this Annual General Meeting and being eligible, offer themselves for re-appointment for the year 2016-2017.

ACKNOWLEDGEMENTThe Directors take this opportunity to acknowledge the continued support and efforts of all members of the company, as well as all customers, suppliers and associates during the past year. Our performance would not have been possible without their support.

On behalf of the Board,

August 16, 2016 Syed Manzur ElahiDhaka. Chairman.


FINANCIAL HIGHLIGHTS

Particulars 2016 2015 2014 2013 2012

Sales 2,158,363 3,771,638 3,793,167 3,248,799 3,067,208

Gross profit 252,681 273,390 225,764 253,309 271,157

Profit before tax 110,011 117,843 106,931 126,047 131,981

Net profit after tax 90,994 95,269 84,024 100,157 107,676

Authorized capital 500,000 500,000 500,000 500,000 500,000

Issued and paid up capital 152,400 152,400 152,400 152,400 152,400

Property, plant & equipment 270,744 270,134 277,953 280,531 241,175

Investment & non current assets 961,915 608,940 375,989 323,791 283,146

Current assets 917,218 1,144,001 1,109,035 1,112,356 1,313,429

Current liabilities 575,602 542,389 313,070 311,474 525,849

Net current assets 341,616 601,612 795,965 800,882 787,580

Dividend 60,960 68,580 68,580 60,960 53,340

Earnings per share (Taka) 5.97 6.25 5.51 6.57 7.07

Dividend per share (Taka) 4.00 4.50 4.50 4.00 3.50

Market value per share at year end (Taka) 139.10 110.70 142.60 86.70 103.10

Net asset value per share (Taka) 74.72 73.48 71.67 69.38 66.44

Net operating cash flow per share (Taka) 3.08 6.05 4.97 31.12 9.35

Price earnings ratio (Times) 23.30 17.71 25.88 13.20 14.58

Dividend yield ratio (%) 2.88 4.07 3.16 4.61 3.39

Current ratio 1.59 2.11 3.54 3.57 2.50

Quick ratio 0.54 1.14 2.10 2.28 1.00

Return on Shareholder’s fund (%) 8.30 8.87 8.02 9.77 11.01

Interest coverage ratio 4.38 3.23 3.70 3.34 2.79

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Profit before tax (Tk. in million)

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11895

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Net asset value per share (Tk.)

Market value per share (Tk.) at year end

103.10

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71.6773.48 74.72

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Components of EPS (Tk.)

Net operating incomeNet other income

FINANCIAL HIGHLIGHTS (GRAPHICAL PRESENTATION)


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STATEMENT OF VALUE ADDITION

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Year Ended Year Ended June 30, 2016 June 30, 2015 Value addedSales 2,158,363 3,771,638Bought in materials and services (1,847,100) (3,479,616) 311,263 292,022Other income 43,574 56,456Available for distribution 354,837 348,478

Distribution of value additionTo Government (Income Tax) 20,844 05.87% 23,066 06.62%To Employees & Workers (Salary, wages and other benefits) 210,617 59.36% 200,408 57.51%To Banks (Interest and charges) 34,209 09.64% 30,227 08.67%To Shareholders (Dividend) 60,960 17.18% 68,580 19.68% 326,630 92.05% 322,281 92.48%Retained for reinvestment and future growth 28,207 7.95% 26,197 07.52% 354,837 100.00% 348,478 100.00%

Distribution of Value Addition in 2015-2016

To Government 7%

Retained forreinvestment 8%

To Shareholders 19%

To Banks 9%

To Employees & workers 57%

To Government 6%

Retained forreinvestment 8%

To Shareholders 17%

To Banks 10%

To Employees & workers 59%

Distribution of Value Addition in 2014-2015


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Apex Tannery Limited believes in commitment to society by achieving sustainable growth, protect interest of stakeholders, continual quality improvement of business, enhance shareholders value and manage risks in an improved way.ATL maintain relationship, trust and commitment to stake holder's interest through:

Health care assistance to workers and people living in poverty Provide training on occupational health and safety for its employees Disaster relief to poor community people and slum dewllers Assist in education for poor community people and workers Donate to needy women for their marriage Donate to Charitable Organizations like Mosques, graveyards etc.

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REPORT ON CORPORATE SOCIAL RESPONSIBILITIES (CSR)

To develop Graveyard at Rupganj of Narayanganj, Freedom fighter Mr. Hazi Md. Montajuddin received a cheque from Executive Director Mr. Ansarul Islam. Freedom fighter Mr. Hazi Md. Abdul Ali and Mr. Md. Atiqur Rahman (Teacher) were present there.

Mrs. Fatima Begum of Hazaribagh received a cheque for her daughter’s education from Mr. M.A. Majed, Executive Director of the Company.


CSR activities conducted during the year:

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Executive Director Mr. M.A. Majed provided a cheque to Ms. Kamola of Hazaribagh as financial assistance for her mother’s treatment.

Executive Director Mr. M.A. Majed donated a cheque to Mrs. Nasima of Hazaribagh as financial assistance for her daughter’s marriage.

General Manager (Accounts) Mr. Santosh Kumar Biswas disbursed a cheque as financial assistance to Mr. Habibur Rahman of Hazaribagh for his treatment.

Executive Director Mr. M.A. Majed provided a cheque as financial assistance to Ms. Khaleda of Hazaribagh for her marriage.


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REPORT ON CORPORATE GOVERNANCE

Corporate Governance clearly defines the rights and responsibilities of the Board of Directors, Management, Shareholders and other Stakeholders. The Board supports Management, Internal and External Auditors and other related parties including the Shareholders. A good corporate reputation is the most valuable and competitive asset of a company. Apex Tannery Limited believes in the continued improvement of corporate governance. The Board of Directors and the Management Team of Apex Tannery Limited is committed to maintaining effective Corporate Governance through a culture of accountability and transparency.Board of DirectorsThe Board of Directors comprises of 07 (Seven) members including two Independent Directors. All Directors have sound knowledge in the area of tannery, managerial expertise and sound academic and professional knowledge. They are well conversant with corporate governance. Appointment of Board MembersThe Directors of the Board are appointed by the Shareholders in the Annual General Meeting who are accountable to the Shareholders.Appointment of Independent DirectorsThe Board of Directors appointed two Independent Directors. Shareholders approved appointment of Independent Directors in its 38th Annual General Meeting held on September 23, 2014 and 39th Annual General Meeting held on October 4, 2015. In selecting Independent Directors, the Company always look for individuals who possess experience; strong inter personal skill and independence. Independent Directors are considered by the Board to be independent of the Company and free of any business or other relationship that could interfere with the exercise of their independent judgment. The Board believes that their experience and knowledge assist in providing both effective and constructive contribution to the Board. The Role of the Chairman and Managing DirectorPosition of the Chairman and Managing Director (CEO) are clearly identified. The Chairman is responsible for leading the Board and its effectiveness. The Managing Director serves as the Chief Executive of the Company. Audit Committee The Audit Committee was established as a sub-committee of the Board and has jurisdiction over Apex Tannery Limited. The audit committee is comprised of four members of the Board including two Independent Directors one of them is the Chairman of the Committee. The Audit Committee assists the Board.Company SecretaryJagadish Kumar Bhanja has been appointed as the Company Secretary of the Company. He provides legal matters to the Board. Among other functions, the Company Secretary:

Bridges between the Board of Directors and Shareholders on strategic and statutory decision.Acts as a quality assurance agent in all information towards the Shareholders and BoardIs responsible for ensuring that the appropriate Board procedures are followed.Acts as the “Disclosure Officer” of the Company and monitors the compliance of the Acts, rules, regulations, notifications, guidelines, orders/directives etc. issued by the Bangladesh Securities and Exchange Commission, Stock Exchange (s) applicable to the conduct of the business activities of the Company.

The Company Secretary keeps the records of the Company’s compliance / noncompliance status of the conditions imposed by BSEC which has been shown in the compliance report on BSEC Notification.


Chief Financial OfficerAnup Kumar Mukherjee has been appointed as the Chief Financial Officer of the Company. He looks after the overall financial affairs of the Company. Among other functions, the Chief Financial Officer:

Prepares Quarterly, Half yearly and Yearly financial statements.Financial reporting procedures in line with the requirement of Bangladesh Accounting Standards.Reports financial position of the Company in its Board meeting.

Financial Reporting and TransparencyFinancial Statements have been prepared in line with the International Accounting Standards, Bangladesh Accounting Standards and other legislations as applicable in Bangladesh. Timely publication of quarterly, half yearly and annual financial statements with comprehensive details beyond the statutory requirement. Compliance with Applicable Rules and RegulationsThe Company’s business activities are guided and supervised by local laws and regulations:

The Companies Act 1994.The Bangladesh Securities and Exchange Commission. Listing rules of Dhaka and Chittagong Stock Exchange Limited.Bangladesh Accounting Standards.

Purchase CommitteeA purchase committee is functioning with a group of executives, headed by a senior most executive to examine the purchase proposal of goods. Among others, the followings are the main responsibilities of the Committee:

To evaluate the received proposal and find out the effectiveness of each proposal.To prepare a report on the basis of evaluation of the purchase proposal with recommendation and sent to concerned departments for obtaining approval from the competent authority.To supervise the entire activities against procurement

Statutory AuditStatutory Audit of the Company is governed by the Companies Act 1994. The Company Act provides guidelines for the appointment, scope of work and retirement of auditors. Shareholders appoint auditors and fix their remuneration in the Annual General Meeting.Internal AuditInternal Audit support the Company to achieve its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of its risk management and control. Internal Audit activity is governed by the Internal Team, which is approved by the Board. Internal ControlThe Company has an Internal Audit department consisting of five members and headed by the Head of Internal Auditor. The Internal control system is maintained and reviewed by an internal audit function that reports to Management and the Audit Committee.Internal Control mechanism is built by the Company’s systems and procedures to reduce the risk of error and fraud. It may be able to reduce the risk that financial statements contains. The Board of Directors ensures sound internal control to provide reasonable assurance regarding the achievement of the Company objectives in the areas of:

Effectiveness and efficiency of operations.Reliability of financial reporting.Compliance with laws and regulations.


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Code of ConductApex Tannery Limited has adopted Codes of Conduct for securing good business ethics and conduct in all aspects of the Company’s activities. The Code of Conduct is properly communicated to and with all employees and other activities, and is strictly required to abide by it.Management CommitteeThe day-to-day Management of the Company is entrusted with the Managing Director and the Management Committee. The Management Committee serves the interest of the Company and achieves sustainable growth. The members of the Management Committee are jointly accountable for the entire management of the Company and decide on the basic issues of business policy and corporate strategies. Restrictions on dealing in the Company’s share by insidersThe Company has established policy relating to trading shares by Directors, Employees and other insiders. The securities laws also impose restrictions on similar sort of transaction. Group Term Life Insurance PolicyThe Board of Directors has approved for Group Term Life Insurance Policy for employees of Apex Tannery Limited with Guardian Life Insurance Limited.Going ConcernThe Company has adequate resources to continue operational existence for the future. For this reason, the Company continues to adopt the going concern basis in preparing the financial statements.

Communication with Shareholders:

Accountable to:

Accountable to:

The Company encourages communication with shareholders throughout the year and welcomes their participation at shareholders meeting. The Company is transparent with the stakeholders, including the owners of the Company. Four times each year, Apex Tannery Limited reports to its shareholders regarding its business, financial position and earnings. These include:

Quarterly and Annual financial statementsAnnual General MeetingPrice–Sensitive Disclosure and other disclosure to the BSEC and Stock Exchanges

In additional information, the Company is under a legal and regulatory requirement to publish via the newspaper. Apex Tannery Limited believes in transparency and accountability to the society as a whole through establishment of an efficient and effective Corporate Governance procedure.

Shareholders

Board of Directors

Management


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SHARE HOLDINGIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, pattern of shareholdings as of 30th June, 2016 are given in Annexure I.

REMUNERATION OF DIRECTORSIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, remuneration of directors for the year ended 30th June, 2016 are given in note number 39.

CORPORATE GOVERNANCE COMPLIANCE REPORTIn accordance with the requirement of the Bangladesh Securities and Exchange Commission, “Corporate Governance Compliance Report” is annexed.

EXTERNAL AUDITORS APPOINTMENTM/S. Malek Siddiqui Wali, Chartered Accountants, Auditors retires at this Annual General Meeting and being eligible, offer themselves for re-appointment for the year 2016-2017.

ACKNOWLEDGEMENTThe Directors take this opportunity to acknowledge the continued support and efforts of all members of the company, as well as all customers, suppliers and associates during the past year. Our performance would not have been possible without their support.

On behalf of the Board,

August 16, 2016 Syed Manzur ElahiDhaka. Chairman.

CORPORATE GOVERNANCE COMPLIANCE REPORT

Status of compliance with the conditions imposed by the Commissions Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07th August, 2012 issued under section 2CC of the Securities and Exchange Ordinance, 1969 (Report under Condition No.7.00)

ConditionNo.

Title Compliancestatus

Remarks(If any)

1 Board of Directors

Independent Directors

1.1

1.2

Board’s SizeThe number of the Board members shall not be less than 5 (five) and more than 20 (twenty)

(i)

(ii)

(ii) a)

(ii) b)

(ii) c)

(ii) d)

(ii) e)

(ii) f)

(ii) g)

At least one fifth (1/5) of total number of directors shall be Independent Director

For the purpose of this clause “independent director” means a director:

Does not hold any share or holds less than 1% shares of the total paid-up shares of the CompanyWho is not a sponsor and not connected with any sponsor/director/ shareholder who hold 1% or more shares of the total paid-up shares on the basis of family relationship Does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companiesNot a member, director or officer of any stock exchangeNot a shareholder, director or officer of any member of stock exchange or an intermediary of the capital marketNot a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of any statutory audit firmNot be an independent director in more than 3 (three) listed companies

Complied

Complied

Complied

Complied

The Apex Tannery Limited Board is comprised of 7 (Seven) Directors

There are two Independent Directors in the Board of Apex Tannery Limited, namely: Mr. Faruq Ahmad Siddiqi and Mr. Sayed Alamgir Farrouk Chowdhury.The Independent Directors have declared their compliances.

DO

DOComplied

DOComplied

DOComplied

DOComplied

DO

DO

Complied

Complied


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Qualificatation of Independent Director

Chairman of the Board and Chief Executive Officer

1.3

1.4

There was no vacancy in the position of Independent DirectorEvery Director has signed a confirmation as to its complianceThe Independent Directors (IDs) are in their first term of office

The qualification and background of Indepe ndent Directors justify their ability as suchExisting Independent Directors are Bureaucrat having more than 12 (Twelve) years experience

Chairman of the Board and CEO are different individuals. The roles and responsibilities of Chairman and the CEO are approved in Board meeting

The Directors report comply with the Guidelines

ConditionNo.


Remarks(If any)

(ii) h)

(ii) i)

(iii)

(iv)

(v)

(vi)

(i)

(ii)

(iii)

Not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a bank or a Non-Banking Financial Institution (NBFI)Not been convicted for a criminal offence involving moral turpitudeAppointed by the Board of Directors and approved by the shareholders in the AGMThe post of Independent Director can not remain vacant for more than 90 (ninety) days

Board shall lay down a code of conduct of all Board members and annual compliance of the code to be recordedTenure of office of an Independent Director shall be for a period of 3 (three) years, which may be extended for 1 (one) term only

Shall be a Knowledgeable individual with integrity who is able to ensure compliance with financial, regulatory and corporate laws and can make meaningful contribution to businessShould be a Business Leader/Corporate Leader/Bureaucrat/University Teacher with Economics or Business Studies or Law background/Professionals like Chartered Accountants, Cost and Management Accountants, Chartered Secretaries. Must have at least 12 (twelve) years of corporate management/professional experiencesIn special cases the above qualifications may be relaxed subject to prior approval of the Commission

Chairman and CEO shall be filled by different individuals. Chairman shall be elected from among the Directors. The Board of Directors shall clearly define respective roles and responsibilities of the Chairman and the CEO.

Industry outlook and possible future developments in the industry

Complied The IndependentDirectors havedeclared their compliances.

Complied DO

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Not applicable

In practice

The Directors’ Report to Shareholders1.5

(i)


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The Directors report comply with the guidelines

DoDo

Do

DoDo

Do

Do

Do

DoDoDo

Do

DoDoDoDo

Dividend has been declared. Mentioned in the Directors ReportDislosed in Directors Report Attached in Annexure-1

Attached in Annexure-1

Complied

CompliedComplied

Not applicableComplied

Not applicable

Not applicable

Not applicable

Complied

CompliedCompliedComplied

Complied

CompliedCompliedCompliedComplied

Complied

Complied

Complied

Complied

ConditionNo.


Remarks(If any)

Segment-wise or product-wise performance;

Risks and ConcernsDiscussion on cost of goods sold, Gross Profit Margin and Net profit MarginDiscussion on continuity of any Extra-ordinary gain or loss Disclosure for related party transactionsUtilization of proceeds from public issues, rights issues and/or through any others Explanation if the financial results deteriorate after the company goes for IPO, RPO, Rights Offer and Direct ListingExplanation about significant variance occurs between Quarterly Financial performance and Annual Financial StatementsRemuneration to directors including independent directorsFairness of financial statementMaintenance of proper books of accountApplication of appropriate accounting policies and estimatesFollowed IAS, BAS, IFRS, and BFRS in preparation of the financial statementsSoundness of internal control systemAbility to continue as a going concern Significant deviations from the last yearKey operating and financial data of at least preceding 5(five) yearsReasons for not declared dividend

Number of Board meetings held during the year and attendancePattern of shareholdings and name wise details disclosing aggregate number of shares:Parent/Subsidiary/Associated Companies and other related parties (Name wise Details)

(ii)

(iii)(iv)

(v)

(vi)(vii)

(viii)

(ix)

(x)

(xi)

(xii)(xiii)

(xiv)

(xv)(xvi)(xvii)(xviii)

(xix)

(xx)

(xxi)

(xxi) a)


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Attached in Annexure-1

DoDo

DoDoDoDo

The Company has appointed CFO, CS, and Head of Internal Audit. There are clearly defined roles, responsibilities and duties which have been approved by the Board as per requirement of BSEC notification

In practice

Already in placeIn practice

Do

The Audit Committee is composed of 4 (four) membersThe members of the Audit Committee are appointed by the Board who are Directors and which includes 2 (Two) Independent Directors

Complied

CompliedComplied

CompliedCompliedCompliedComplied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

ConditionNo.


Remarks(If any)

Directors, CEO, CS, CFO, HIA and their spouses and minor children (Name wise details)Executives (name wise details)Shareholders holding ten percent (10%) or more voting interest (Name wise details)Director appointment/re-appointment:A brief resume of the directorExpertise in specific functional areasHolding the directorship and the membership of committees of the board other than this company

The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit (Internal Control and Compliance) and a Company Secretary (CS). The Board of Directors should clearly define respective roles, responsibilities and duties of CFO, The Head of Internal Audit and the CS;

The Chief Financial Officer (CFO) and the Company Secretary (CS) of the Company shall attend the meetings of the Board of Directors

The company shall have an Audit Committee as a sub-committee of the Board of DirectorsAssistance of the Audit Committee to the Board of DirectorsThe Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee shall be clearly set forth in writing.

Compositions (At least three members should be in Audit Committee)

Appointment of Members of the Audit Committee (Members should appointed by the Board with at least one Independent Director)

(xxi) b)

(xxi) c)(xxi) d)

(xxii)(xxii) a)(xxii) b)(xxii) c)

Chief Financial Officer (CFO), Head of Internal Audit (HIA), Company Secretary (CS)

2

Audit Committee

Constitution of the Audit Committee

3

3.1

1

2

(i)

(ii)

(iii)

(i)

(ii)


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Chairman of the Audit Committee:3.2

Role of the Audit Committee3.3

Based on the academic qualification and professional experience, the Board reviewed and considered that all the existing members of the Audit Committee are “Financially Literate” and they have “Related Financial Management experience” as per BSEC notification.The Board appointed Audit Committee member in due time.In practice

Do

Mr. Faruq Ahmad Siddiqi has been appointed as Independent Director who is the Chairman of Audit Committee.In practice

In practiceDo

Do

Do

Do

Do

Complied

Complied

Complied

Complied

Complied

Complied

CompliedComplied

Complied

Complied

Complied

Complied

ConditionNo.


Remarks(If any)

Qualification of Members of the Audit Committee (Members should be “financially literate” and at least one (01) member shall have accounting or related financial management experience)

Casual vacancy in Audit Committee shall be filled by the Board

The Company Secretary shall act as the Secretary of the committeeThe quorum of the Audit Committee (AC) meeting shall not constitute without at least 1 (one) Independent Director

The Board of Directors shall select 1 (one) member of the Audit Committee to be Chairmen of the Audit Committee, who shall be an Independent Director

Chairman of the Audit Committee shall remain present in the Annual General Meeting (AGM)

Oversee the financial reporting processMonitor choice of accounting policies and principlesMonitor Internal Control Risk management processOversee hiring and performance of external auditorsReview the annual financial statements before submission to the board for approval;Review the quarterly and half yearly financial statements before submission to the board for approval

(iii)

(iv)

(v)

(vi)

(i)

(ii)

(i)(ii)

(iii)

(iv)

(v)

(vi)


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Reporting of the Audit Committee

Engagement of External/ statutory auditors

3.4.1

3.4.2

3.5

4.

In practice

Do

Do

Do

In practice

There was no reportable case of conflict of interest in the year 2015- 2016.

Do

Do

Do

Do

Do

The Audit Committee report is disclosed in the Annual Report and signed by the Chairman of the Audit Committee.

In practice

Do

Do

Do

Complied

Complied

Complied

Not applicable

Complied

Not applicable

Complied

Not applicable

Not applicable

Not applicable

Not applicable

Complied

Complied

Complied

CompliedComplied

ConditionNo.


Remarks(If any)

Review the adequacy of internal audit functionReview statement of significant related party transactionsReview Management Letters/ Letter of Internal Control weakness issued by statutory auditorsDisclosure about the uses/ applications of funds raised by IPO/RPO/ Right Issue

The Audit Committee shall report on its activities to the Board of DirectorsThe Audit Committee shall immediately report on the following findings to the Board:

Report on conflicts of interest to the Board of DirectorsWill report any suspected or presumed fraud or irregularities or material defect in the internal control system to the BoardWill report any suspected infringement of laws, including securities related laws, rules and regulations to the BoardWill report any other matters which shall be disclosed to the Board of Directors immediately

Non-engagement of Appraisal or valuation services or fairness opinionsNon-engagement in designing Financial information system and implementationNon-engagement in Book-keeping Non-engagement in Broker-dealer services

(vii)(viii)

(ix)

(x)

(i)

(ii)

(ii) a)

(ii) b)

(ii) c)

(ii) d)

(i)

(ii)

(iii)(iv)

Reporting to the Authorities (BSEC)If any materials impact on the financial condition & results of operation, unreasonably ignored by the Board of DirectorsReporting to the Shareholders and General Investors:Report on activities carried out by the Audit Committee, including any report made to the Board of Directors under condition 3.4.1 (ii) above during the year, shall be signed by the Chairman of the Audit Committee and disclosed in the annual report of the issuer company


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Subsidiary Company:5.

In practiceDo

Do

Do

Do

Apex Tannery Limited does not have any subsidiary company.

Certified by ARTISAN, Chartered AccountantsPublished with the Directors’ Report

CompliedCompliedComplied

Complied

Complied

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

6.

ConditionNo.


Remarks(If any)

Non-engagement in Actuarial servicesNon-engagement in Internal audit servicesNon-engagement in services that the Audit Committee determinesNo partner or employees of the external audit firm’s shall possess any share of the company they audit at least during the tenure of their audit assignment of that companyAudit/certification Services on compliance of Corporate Governance as required under clause (i) of condition # 7

Composition of the Board of Directors

At least 1 (one) Independent Director to the subsidiary companySubmission of minutes to the holding company

Review of minutes by the holding company

Review of Financial Statements by holding company

Obtained certificate about compliance of conditions of Corporate Governance GuidelinesDirectors shall state in the Directors’ report about the compliance with the conditions of the Corporate Governance Notification

(v)(vi)(vii)

(viii)

(ix)

(i)

(ii)

(iii)

(iv)

(v)

(i)

(ii)


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(i) a) The CEO & CFO will certify to the Board that they heve

these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading

Compliedstatements

(i) b) The CEO & CFO will certify to the Board that they heve

of the company’s a� airs and are in compliance with existing accounting standards and applicable laws

Complied Do

(ii) There are, to the best knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violation of the Company’s code of conduct

Complied Do

Reporting and Compliance of Corporate Governance:7.


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CEO AND CFO’s CERTIFICATION TO THE BOARD

Dated : 16 August, 2016

The Board of DirectorsApex Tannery Limited127, Hazaribagh T/ADhaka-1209

Md. Rahmatullah Anup Kumar Mukherjee FCA

Chief Executive O� cer Chief Financial O� cer

Dear Sir,

(1) We have reviewed financial statements of the company for the year ended 30th June, 2016 and to the best of our knowledge and belief.

(a) These statements do not contain any materially untrue statements or omit any material fact or contain statements that might be misleading.

(b) These statements together present true and fair view of the company’s a�airs and are in compliance with Bangladesh Accounting Standards (BAS) and other applicable laws.

(2) There are, to the best of our knowledge and belief, no transaction entered into by the Company during the year which is fraudulent, illegal or violation of the company’s code of conducts.

ARTISANCHARTERED ACCOUNTANTS

Certificate of Compliance to the Shareholders of APEX TANNERY LIMITED

On the Conditions of Corporate Governance Guidelines

BSEC BHABAN (Level-10), 102, Kazi Nazrul Islam Avenue Kawran Bazar, Dhaka-1215Tel: 8189883-7Fax: 8180187Mobile # 01922797851e-mail: [email protected]: www.artisan-ca.com

Dhaka, 18 August 2016 Md. Selim Reza FCA FCSPartner

ARTISANChartered Accountants

We have reviewed the statement of compliance of Conditions of Corporate Governance guidelines prepared by the Management of APEX TANNERY LIMITED to comply with the Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 7th August, 2012 of Bangladesh Securities and Exchange Commission (BSEC), where the company is listed.The responsibility for compliance with the Conditions of Corporate Governance Guideline is that of the Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the statement of compliance reflects the status of the Company’s compliance with the provisions of the conditions of Corporate Governance guidelines and report if it does not. Based on our review, we certify that nothing has come to our attention except as stated in status of Compliance statement which causes us to believe that the Statement of Compliance does not appropriately reflect the Company’s compliance, in all material respects, with the best practices contained in the Conditions of Corporate Governance as applicable to the Company for the year ended June 30, 2016.


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PATTERN OF SHAREHOLDINGAs of June 30, 2016

Annexure – I(a) Parent/Subsidiary/Associated companies and other related parties (name wise details): N/A

(b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details):

(c) Executives (Top five salaried employees of the company, other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit):

SLNo.

Name Number of Shareholding Name of Spouse Shares held

by the spouse/ Children

Name Designation Shares held

01 Directors: i Syed Manzur Elahi 3,85,550 Mrs. Niloufer Manzur -ii Md. Rahmatullah 3,04,800 Mrs. Halima Rahmatullah 1,43,500iii Syed Nasim Manzur 3,24,100 Mrs. Samia Huq -iv Md. Hedayetullah 3,04,950 Mrs. Afia Hedayetullah -v Md.Iftikhar-uz-zaman (MD of ICB) 64,34,550 Mrs. Shayla Zaman -vi Faruq Ahmad Siddiqi (Independent Director) - Begum Shamsur Nahar -vii Sayed Alamgir Farrouk Chowdhury (Independent Director) - Mrs. Israt Alamgir -02 Chief Executive Officer: Md. Rahmatullah 3,04,800 Mrs. Halima Rahmatullah 1,43,500 03 Head of Internal Audit and Director : Md. Hedayetullah 3,04,950 Mrs. Afia Hedayetullah -04 Chief Financial Officer: Anup Kumar Mukherjee - Mrs. Swapna Mukherjee -05 Company Secretary: Jagadish Kumar Bhanja - Mrs. Nanda Bhanja -

M. A. Majed Executive Director 4,200

Ansarul Islam Executive Director -

Syed Abdul Matin General Manager (Finance) 50

Md. Sayeed Hossain General Manager (Commercial) -

Md. Nazrul Islam Khan General Manager (Production) -

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AUDIT COMMITTEE REPORT

Faruq Ahmad SiddiqiSyed Nasim ManzurMd. HedayetullahSayed Alamgir Farrouk Chowdhury Jagadish Kumar Bhanja

Independent DirectorDirectorDirector & Head of Internal AuditIndependent DirectorCompany Secretary

Chairman of Audit Committee Member of Audit Committee Member of Audit CommitteeMember of Audit CommitteeSecretary of Audit Committee

Background In accordance to the best practices of Corporate Governance, the Board of Directors of Apex Tannery Limited established an Audit Committee on April 24, 2006 in its 19th Board Meeting as per Circulation of BSEC Vide order no SEC/CMRRCD/2006-158/ Admin/02-06 dated 9 January, 2006 and Status of compliance with the conditions imposed by the Commissions Notification No. SEC/CMRRCD/2006-158/ 129/Admin/43 dated 03 July, 2012 issued under section 2CC of the Securities and Exchange Ordinance, 1969:The Audit Committee supports the Board in fulfilling its responsibilities more efficiently.Composition of the Audit Committee The Audit Committee is now composed of the following members:

The Chief Financial Officer attends the meeting by invitation only as and when necessary. The Company Secretary functions as the Secretary of the Audit Committee.Meeting During the year ended 30th June, 2016, the Audit Committee held four meetings. Proceedings of the Audit Committee Meetings were reported regularly to the Board of Directors. The details of attendance of the Audit Committee Members have been shown below:Audit committee meeting and attendance during the year ended 30 June, 2016

Name of Members No. of Meeting Held No. of Meeting attendedFaruq Ahmad Siddiqi 4 4Syed Nasim Manzur 4 3Md.Hedayetullah 4 3 Sayed Alamgir Farrouk Chowdhury 4 4

The Members who could not attend the meetings were granted leave of absence.

Role of the Audit Committee The Audit Committee assisted the Board of Directors in fulfilling its responsibilities regarding the Company’s accounting and financial reporting process by monitoring the following: AU

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The integrity of the Company’s financial statementsThe independence, qualifications and performance quality of its external auditorsThe Company’s system of internal controlsThe performance of the Company’s internal audit processThe Company’s compliance with laws, regulations and codes of conduct with a view to safeguard the interest of all stakeholders of the Company

Summary of ActivitiesThe Audit Committee carried out the following activities during the financial year ended June 30, 2016Regulatory ComplianceThe Committee examined whether the Company‘s procedures are in place to ensure compliance with

The laws and regulations framed by the regulatory Authorities (BSEC,DSE,CSE and RJSC)Internal regulations approved by the Board of Directors.

The Company is duly following the rules and regulation of the Regulatory bodies and also strictly follows areas with conflict of interest. The Committee was satisfied that the Company substantially complied with these regulatory requirements Financial ReportingThe Committee assisted the Board of Directors and the management to carryout their responsibilities of preparing true and fair financial statements in accordance with the books of accounts and Bangladesh Accounting Standards by:

Reviewing the adequacy and effectiveness of the internal control system and procedures in order to provide reasonable assurance that all transactions are accurately and completely recorded in the books of account.Reviewing the integrity of the process by which financial statements are prepared from the books of accountReviewing the process by which compliance of provision of Bangladesh Accounting Standards.

The Committee also reviewed:The quarterly and annual financial statements of the Company prior to recommending them for the approval by the Board.The annual audited financial statements of the company with external auditors prior to submission to the Board for approval. The review focused particularly on changes of accounting policy and compliance with applicable accounting standards as adopted in Bangladesh and other legal & regulatory requirements.

Internal ControlThe Committee examined whether the management has set up the appropriate compliance culture across the Company in order to ensure that all employees have a clear understanding of their roles and responsibilities. The Committee reviewed the arrangements made by the management for building up a suitable Management Information System (MIS) including computerized systems and its applications thereof. Internal AuditThe Committee reviewed and discussed the relevant reports of special investigations which were submitted by the Audit Team. They are as follows:

The annual audit plan for adequacy of scope and comprehensive coverage of these activities of the Company.

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The audit programs, resources requirements for the year and assessed the performance of the internal audit functionsThe internal audit reports, audit recommendations and management responses to these recommendations and actions taken to improve the system of internal control and procedures.Exercise Internal Audit of Apex Tannery Limited. Review the effectiveness of Internal Audit functions including performance and compliance with professional standards. Examine audit findings and material weakness and monitor implementation of audit action plans.

The Committee advised the management to take effective steps for rectification of all the lapses and weaknesses identified by internal audit and to take utmost care, so that such weaknesses and lapses shall not be repeated in future. Department heads attended the meetings when their reports were discussed.External AuditThe Committee met with the external auditors at the conclusion of the annual audit and exchanged views on their Audit Report. The Committee reviewed the findings and recommendations made by the external auditors in order to remove the weaknesses as detected in the external auditing process.The Committee reviewed the performance of the External Auditors and recommended to the Board on their appointment and fees. Approval of Financial StatementsThe Audit Committee reviewed and examined the Annual Financial Statements for the year ended 30 June, 2016 prepared by the Management and audited by the External Auditors Malek Siddiqui Wali, Chartered Accountants and recommended to place the same before the Board for consideration.The Board approved the same at its 278th meeting held on 16 August, 2016.AcknowledgementThe Audit Committee expressed of sincere thanks to the Chairman and members of the Board, management and the Auditors for their support in carrying out its duties and responsibilities effectively.On behalf of the Audit Committee,

Faruq Ahmad SiddiqiChairman of Audit CommitteeA

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AUDITORS’ REPORT To the Shareholders of Apex Tannery Limited

We have audited the accompanying statement of Financial Position of “Apex Tannery Limited” as at 30th June, 2016 and the related Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes for the year then ended, and a summary of significant accounting policies and other explanatory notes.Management’s Responsibilities for the Financial StatementsThe Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Accounting Standards (BAS)/ Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, Bangladesh Securities and Exchange Commission Rules 1987 and other applicable laws and regulations and for such Internal control as management determines, which is necessary to enable the presentation of financial statements that are free from material misstatement, where due to fraud or error.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 where 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 auditor’s 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 consider internal control relevant to the entity’s 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 entity’s 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.OpinionIn our opinion, the Financial Statements prepared in accordance with Bangladesh Accounting Standards/ Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the company’s affairs as of 30th June, 2016 and of the results of its operations and its cash flows for the period then ended and comply with the Companies Act 1994, relevant schedule of Bangladesh Securities and Exchanges Commission Rules 1987 and other applicable laws and regulations.We also report that

a) 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;

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

c) The company’s Statement of Financial Position, Statement of Comprehensive Income dealt with by the report are in agreement with the books of accounts;

d) The expenditures incurred and payments made were for the purpose of the company’s business.

Dated: Dhaka Malek Siddiqui WaliAugust 16, 2016 Chartered Accountants

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APEX TANNERY LIMITEDStatement of Financial Position as of June 30, 2016

Md. Rahmatullah Md. Iftikhar-uz-zaman Jagadish Kumar BhanjaManaging Director Director Company Secretary

Signed in terms of our annexed report of even date.

Dated: Dhaka Malek Siddiqui Wali August 16, 2016 Chartered Accountants

Taka in thousand As of As of Notes June 30, 2016 June 30, 2015AssetsNon-current assets

Property, plant and equipment 4 270,744 270,134Capital work-in-progress 5 577,002 223,074Advance for Land at Savar 6 57,431 57,431Investments 7 49,374 52,764Deferred tax assets 8 7,364 5,537 961,915 608,940

Current assets Inventories 9 607,810 525,785Trade and other receivables 10 139,112 163,829Advances, deposits and prepayments 11 128,581 120,455Cash & cash equivalents 12 41,715 333,932

917,218 1,144,001Total Assets 1,879,133 1,752,941

Equity and LiabilitiesShareholders’ equity

Share capital 13 152,400 152,400Share premium 425,333 425,333Dividend equalization fund 44,888 44,888Retained earnings 474,347 451,933Fair valuation surplus of investment 14 41,818 45,208 1,138,786 1,119,762

Non-current liabilitiesRetirement benefit obligations 15 104,803 90,790Government Grant 16 59,942 -

164,745 90,790Current liabilities

Short-term loan 17 - - Working capital loan 18 392,889 423,488Trade payables 19 43,797 42,300Other payables 20 86,841 19,255Provision for income-tax 21 52,075 57,346 575,602 542,389

Total Equity and Liabilities 1,879,133 1,752,941Net asset value per share (NAVPS) Tk. 74.72 73.47

The annexed notes form an integral part of these financial statements. For and on behalf of the Board of Directors

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Taka in thousand Year Ended Year Ended Notes June 30, 2016 June 30, 2015

Sales 23 2,158,363 3,771,638Cost of sales Cost of goods sold 24 (1,867,181) (3,431,702)Freight & forwarding 25 (38,501) (66,546) (1,905,682) (3,498,248)Gross profit 252,681 273,390Operating expenses Administrative expenses 26 (41,958) (40,399)Marketing expenses 27 (88,766) (118,525)Directors' remuneration (10,260) (10,260)Legal & audit fees 28 (547) (513)Depreciation (Schedule-A-01) (5,003) (6,187) (146,534) (175,884)Operating Profit 106,147 97,506Bank interest expenses & charges 29 (34,209) (30,227)Non operating incomeOther income 30 43,574 56,456Profit for the year 115,512 123,735Contribution to workers’ profit participation fund (5,501) (5,892)Profit before income tax 110,011 117,843Income taxCurrent tax expenses 31 (20,844) (23,066)Deferred tax income 32 1,827 492 (19,017) (22,574)Net profit after tax 90,994 95,269Other Comprehensive IncomeFair valuation surplus of investments (unrealized) (3,390) 807Total comprehensive Income 87,604 96,076EPS without fair valuation surplus (Tk.) 33 5.97 6.25 The annexed notes form an integral part of these financial statements. For and on behalf of the Board of Directors

APEX TANNERY LIMITEDStatement of Comprehensive Income for the year ended June 30, 2016

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Taka in thousand Year Ended Year Ended June 30, 2016 June 30, 2015

A. Cash flow from operating activities Collections from turnover/bills receivable and other income 2,224,533 3,823,445 Payments for purchase of leather, chemicals, spare-parts, payments of creditors and other expenses (2,118,950) (3,664,501)Interest paid (34,209) (30,227)Payments to workers’ profit participation fund (5,837) (4,878)Income tax paid (18,629) (31,695)Net cash generated by operating activities 46,908 92,144

B. Cash flow from investing activities Acquisition of property, plant and equipment (18,998) (12,550)Capital work-in-progress (283,011) (223,074)Advance payment for land at Savar - (16,397) Net cash used in investing activities (302,009) (252,021)

C. Cash flow from financing activities Loans received/(paid) (30,599) 193,312Government Grant 59,942 -Dividend received/(paid) (66,459) (66,400)Net cash used in financing activities (37,116) 126,912Increase / (decrease) in cash and cash equivalents (A+B+C) (292,217) (32,965)Opening cash and cash equivalents 333,932 366,897

Closing cash and cash equivalents 41,715 333,932Net operating cash flows per share (NOCFPS) Tk. 3.08 6.05

The annexed notes form an integral part of these financial statements. For and on behalf of the Board of Directors

APEX TANNERY LIMITEDStatement of Cash Flow for the year ended June 30, 2016

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APEX TANNERY LIMITEDStatement of Changes in Equity




Taka in thousandFor the year ended June 30, 2016

Taka in thousandFor the year ended June 30, 2015

Share Share Dividend Retained Fair Particulars Capital Premium Equalization Earnings Valuation Total Fund Surplus

As at June 30, 2015 152,400 425,333 44,888 451,933 45,208 1,119,762Net Profit 90,994 - 90,994Cash dividend for 2014-2015 (68,580) - (68,580)Fair valuation surplus (3,390) (3,390)As at June 30, 2016 152,400 425,333 44,888 474,347 41,818 1,138,786

Share Share Dividend Retained Fair Particulars Capital Premium Equalization Earnings Valuation Total Fund Surplus

As at June 30, 2014 152,400 425,333 44,888 425,244 44,401 1,092,266

Net Profit 95,269 - 95,269Cash dividend for 2013-2014 (68,580) - (68,580)Fair valuation surplus 807 807As at June 30, 2015 152,400 425,333 44,888 451,933 45,208 1,119,762

The annexed notes form an integral part of these financial statements. For and on behalf of the Board of DirectorsST

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Annual Report 2016Apex Tannery Limited44 t

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APEX TANNERY LIMITEDNotes to the Financial Statements for the year ended June 30, 2016

1. Reporting entitya) Company profile

Apex Tannery is the largest tannery in Bangladesh and one of the largest in South Asia. It is a 100% export oriented company. The Company is using state of the art machineries from Italy, France and Germany. Apex Tannery Limited was incorporated as a private limited company on 26th day of July 1976 under Companies Act 1913 and was converted into a public limited company in 1986. The shares of the Company are publicly traded at Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The address of the registered office is 127 Hazaribagh T/A, Dhaka-1209.

b) Nature of businessThe principal activities of Apex Tannery are to produce high quality leather, by using Italian chemicals, technology, complying with world fashion standards and specifications. Its annual capacity is about 26 million Sft. of finished goat and cow leather. Apex exports to Europe, China, South America and all major leather market of the world. It has two manufacturing facilities; Unit I situated at Hazaribagh and Unit II situated at Shafipur, Gazipur both engaged in processing and finishing cow and goat leather for 100% export. Unit II has been leased out to Apex Footwear Ltd. for 10 years from 01.10.2011.

2. Basis of preparation of financial statements a) Statement of compliance

The financial statements have been prepared in accordance with Bangladesh Accounting Standards (BAS), Bangladesh Financial Reporting Standards (BFRS), Companies Act 1994, The Securities and Exchange Rules, 1987 and other applicable laws and regulations.

b) Basis of measurementThe financial statements have been prepared on historical cost basis exceptI. Note 7 : Investment in marketable securities which is measured at fair valueII. Note 15 : Retirement benefit obligations

c) Date of authorizationThe board of directors has authorized these financial statements on August 16, 2016

d) Functional and presentation currencyThese financial statements are presented in Bangladesh Taka which is the company’s functional currency.

e) Use of estimates and judgmentsThe preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an on going basis. Revisions of accounting estimates are recognized in the period in which the estimates are revised or any future periods affected. In particular, information about significant areas of estimates and judgments in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes:

I. Note 8 Deferred tax assetsII. Note 9 Inventory valuationIII. Note 21 Provision for tax


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f) Reporting periodThe reporting period of the company covers one year from July 1, 2015 to June 30, 2016.

3. Significant accounting policiesThe accounting policies set out below have been applied consistently to all period presented in these financial statements.

a. Property, plant & equipmentI. Recognition and measurement: Property, plant & equipment (PPE) are initially measured at

cost. After initial recognition an item of PPE carried at cost less accumulated depreciation in accordance with BAS 16 "Property plant & equipment". Cost of PPE represents cost of purchase price, import duties and non refundable purchase taxes after deducting trade discounts and rebates and any cost directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management.

II. Subsequent cost: The costs of the day-to-day servicing of PPE are recognized in the Statement of Comprehensive Income. The costs of replacing of PPE are recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably.

III. Depreciation: The Company uses reducing balance method to depreciate property, plant & equipment. No depreciation is charged on Land and Land development. Depreciation of an asset begins when it is available for use i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale ( or included in a disposal group that is classified as held for sale) in accordance with BFRS 5 and the date that the assets are derecognized. The rates of depreciation and category of property, plant and equipment are as follows: Building 10%Plant & machinery 15%Furniture & fittings 10%Vehicles 20%Depreciation has been charged to cost of goods sold & administrative expenses consistently.

b. InventoriesInventories comprise of raw materials, work-in-process and finished goods, chemicals and spare-parts. They are stated at a lower of cost and net realizable value, in accordance with BAS 2 "Inventories". The cost of inventories is measured by using the weighted average cost formula. The cost of inventories represents all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and selling expenses.

c. Trade and other receivablesThese are carried at original invoice value considered good and collectible.

d. Cash and cash equivalentsCash and cash equivalents comprises cash in hand, cash at Bank and FDR which is readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value.

e. Trade and other payablesThese are recognized for amounts to be paid in the future for goods and services.


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f. Income TaxesI) Current Income Tax

The corporate tax rate for publicly listed companies is 25%. However companies deriving income from export are entitled to exemption of 50% tax on such income. Since the company is 100% export-oriented, 50% of trading income will not be subject to tax under paragraph 28 of Part A of the Sixth Schedule of the IT Ordinance, 1984. The provision made has been calculated on the above basis, which is adequate.

II) Deferred Income TaxDeferred tax is recognized on differences between the carrying amounts of assets and liabilities for financial reporting purpose and the corresponding tax bases used for taxation purpose. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized.

g. Employee BenefitsThe Company maintains both defined contribution plan and defined benefit plan for its eligible permanent employees.

I) Defined contribution plan (Provident fund)The Company operates a contributory Provident fund for its eligible permanent employees. The fund is approved by the National Board of Revenue (NBR). The fund is administered by a Board of Trustee and is funded by contribution partly from the employee and partly from the Company at predetermined rates. The contribution is invested separately from the Company’s assets.

II) Contribution to workers’ profit participation/ welfare funds:The Company provides 5% of its profit before tax as a contribution to workers profit participation/ welfare funds in accordance with the Bangladesh Labour Act 2006 (as amendment in 2013).

III) Defined benefit plan (Gratuity)The Company maintains an unrecognized gratuity fund for its permanent employees, under which an employee is entitled to the benefits depending on the length of services and last drawn basic salary.

h. Statement of Cash FlowStatement of Cash flow is prepared in accordance with BAS-7 under direct method and as outlined in the Securities and Exchange Rule, 1987.

i. Transaction with related partiesThe company has carried in arms length transactions with Apex Footwear Limited, Pioneer Insurance Company Limited, Mutual Trust Bank Ltd. and Guardian Life Insurance Ltd. in the normal course of business.

j. Foreign currency transactionTransactions in foreign currencies are converted into Bangladesh Taka at the exchange rate prevailing on the date of transaction in accordance with provisions of BAS 21 "The effects of changes in foreign currency rates".

k. Revenue recognitionI. Sale of goods: The Company recognizes revenue when risk and rewards associated with

ownership has been transferred to the buyer, which satisfied all the conditions for the revenue recognition as provided in BAS 18 "Revenue Recognition".

II. Dividend income is recognized when the right to received payment is established III. Interest income is recognized when accrued on a time proportion basisIV. Rental Income Recognition when accrued on the tenancy agreement basis


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l. Earnings per share (EPS)The Company calculates Earnings per share (EPS) in accordance with BAS 33 "Earnings per share" which has been shown on the face of Statement of Comprehensive Income.

m. Components of the Financial StatementsAccording to the Bangladesh Accounting Standard (BAS) 1 “presentation of Financial Statements”, the complete set of Financial Statements includes the following components:i. Statement of Financial Position as at June 30, 2016.ii. Statement of Comprehensive Income for the year ended June 30, 2016.iii. Statement of Changes in Equity for the year ended June 30, 2016.iv. Statement of Cash Flow for the year ended June 30, 2016.v. Accounting policies and explanatory notes.m. Subsequent Disclosure of events occurring after the Reporting periodThere is no adjusting event between the end of the Reporting period and the date when Financial Statements are authorized for issue of such importance non-disclosure of which would affect the availability to the user of the financial statement to make proper evaluation and decision.

n. ImpairmentThe carrying amount of assets other than inventories and deferred tax assets are reviewed at each financial position date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated. An impairment loss is recognized in the Statement of Comprehensive Income when the carrying amount of the asset exceeds its recoverable amount.

o. Segment reportingThe Company’s operation predominantly comprises only one segment i.e. Leather; hence no segment reporting is felt necessary.

As of As of June 30, 2016 June 30, 2015 Taka Taka4. PROPERTY , PLANT AND EQUIPMENT

Details of Property, plant and equipment and depreciation as of June 30, 2016 are shown in the annexed “Schedule -A”

Opening Balance (At Cost) 878,677,445 866,127,059Add: Addition during the year 18,998,030 12,550,386 897,675,475 878,677,445Less: Transferred during the year - -Closing Balance (At Cost) 897,675,475 878,677,445Less: Accumulated Depreciation 626,931,545 608,543,437Written Down Value 270,743,930 270,134,008

5. CAPITAL WORK-IN-PROGRESS 577,002,237 223,073,548

This represents construction cost of new factory building at Savar and acquiring machineries which are under progress and not put to use during the year under audit. Construction work has started from March 2015.


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As of As of June 30, 2016 June 30, 2015 Taka Taka6. ADVANCE FOR LAND AT SAVAR 57,431,401 57,431,401

The amount paid to Bangladesh Small and Cottage Industries Corporation (BSCIC) against 300,000 SFT Land at BSCIC Leather Industrial Park, Savar, Dhaka.

7. INVESTMENTSApex Footwear Limited (136,700 shares @ 319.40) 43,661,980 47,052,140Central Depository Bangladesh Limited (571,181 shares @ 10.00) 5,711,810 5,711,810

49,373,790 52,763,950

Investment in shares of Apex Footwear Limited has been recorded at fair value as per BAS-39. The quoted price was Taka 319.40 per Taka 10 each share as at June 30, 2016 and company’s cost price for 136,700 shares was Taka 13.49

8. DEFERRED TAX LIABILITIES (ASSETS) (7,364,081) (5,537,353)Deferred tax assets (13,100,375) (11,348,739)Deferred tax liabilities 5,736,294 5,811,3868.1 Deferred tax assetsProvision for gratuity (13,100,375) (11,348,739)8.2 Deferred tax liabilitiesProperty, plant & equipment 5,736,294 5,811,386

9. INVENTORIES

Goatskins - Raw 290,733 15,337,377 18,863,289- Wetblue 581,290 33,475,540 41,661,975 - Work in Process 109,953 6,829,115 12,081,944- Crust/Finished 629,405 42,799,517 47,476,643

Cowhides - Raw 439,696 40,452,014 42,416,121- Wetblue 1,109,449 126,992,139 93,144,288- Work in Process 245,133 30,264,642 18,847,105- Crust/Finished 685,465 97,212,485 96,661,495

Chemicals 193,726,244 133,621,683Spare-parts 20,720,306 21,010,760

607,809,379 525,785,303

• Inventories are valued at lower of cost price and net realizable value.• Inventories at the end of the year are equivalent to 119 days consumption based on current

year’s cost of goods sold. • A team, consisting of Auditors and Management staff, carried out physical verification of the

inventories as of June 30, 2016.• Inventories were hypothecated to Agrani Bank Ltd., Amin Court Corporate branch as security

of working capital loan.


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As of As of June 30, 2016 June 30, 2015 Taka Taka10. TRADE AND OTHER RECEIVABLES

Export bills receivable 133,564,509 155,612,462Rental income receivable 5,000,000 5,000,000Interest receivable 547,283 3,216,578

139,111,792 163,829,040

• Most of the above bills receivable remained from the sales of June 2016 and were considered good which will be collected within 90 days.

• Rental income receivable from Apex Footwear Limited.

11. ADVANCE, DEPOSITS & PREPAYMENTS L/C accounts (Goods in transit) 25,086,750 9,075,084 Advance income-tax 93,471,542 100,957,226Advance rent 1,461,833 1,566,833Advance to staff and workers 1,122,813 559,250Advance to suppliers & Contractors - 1,163,652Bank guarantee margin 776,340 731,764Security deposit 6,661,907 6,401,200

128,581,185 120,455,009

• L/C accounts (goods-in-transit) represent cost incurred on import of chemicals, spare parts which will be adjusted against respective inventory items.

• Advance income taxes are made to statutory authorities.• Rent agreement made with Rana Leather Industries Ltd. for using their premises.• Advance due from staff & workers are regularly being realized through their salaries.• In the opinion of the Directors, all current assets, investments, loans and advances have, on

realization in the ordinary course of business, a value at least equal to the amounts at which they are stated in the Statement of Financial Position.

• There is no amount of loans and advances due for payment for a period of more than 12 months from the date of Statement of Financial Position.

• There is no aggregate amount due from Directors, Officers of the Company or by any associated companies.

• There are no claims against the company, which can be acknowledged as bad debt.

12. CASH AND CASH EQUIVALENTSCash in hand

Head Office 237,164 5,439,561Factory 263,355 204,544

Cash at BanksAgrani Bank Ltd. 17,576,138 34,604,455Rupali Bank Ltd. 16,196 17,346Mercantile Bank Ltd. 4,947,444 3,366,651 Mutual Trust Bank Ltd. 7,406,395 325,830State Bank of India 4,150,251 4,235,866

FDR 7,118,319 285,737,430 41,715,262 333,931,683

● Cash balances were physically verified and bank balances were reconciled.


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As of As of June 30, 2016 June 30, 2015 Taka Taka13. SHARE CAPITAL

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

Issued, subscribed & fully paid-up capital 152,400,000 152,400,000

Distribution schedule showing the number of shareholders and their share holdings in percentage has been disclosed below:

Number of share Range of Holdings Total Holdings % Holders 7,907 Less than & equal 5,000 shares 4,036,663 26.48 178 5,001 shares to 50,000 shares 1,971,889 12.94 11 50,001 shares to 100,000 shares 837,975 5.50 6 100,001 shares to 200,000 shares 846,261 5.55 1 200,001 shares to 300,000 shares 284,000 1.86 4 300,001 shares to 400,000 shares 1,014,600 6.67 1 400,001 shares to 500,000 shares 4,13,223 2.71 2 500,001 shares to 1000,000 shares 1,387,389 9.10 2 over 1000,000 share 4,448,000 29.19 8112 15,240,000 100.00

14. FAIR VALUATION SURPLUS OF INVESTMENTS

Investment in shares of Apex Footwear Limited: Fair valuation surplus as of 30-06-2015 45,208,057Fair value of 136,700 shares @ 344.20 as of 30-6-2015 47,052,140Fair value of 136,700 shares @ 319.40 as of 30-6-2016 43,661,980 3,390,160Fair valuation surplus as of 30-06-2016 41,817,897

15. RETIREMENT BENEFIT OBLIGATIONSOpening balance 90,790,015 79,688,421Provision for the year 16,223,321 12,824,631Payments during the year (2,210,233) (1,723,037)Closing balance 104,803,103 90,790,015

16. GOVERNMENT GRANT 59,941,946 -

The amount received from Bangladesh Small and Cottage Industries Corporation (BSCIC), Govt. of Bangladesh out of total Tk. 10,04,05,367.45 for the purpose of shifting compensation. According to BAS 20 (Bangladesh Accounting Standard 20), when conditions of future performance-(1) Completion of construction work of Factory Building and (2) Starting of commercial production at Savar are met, the amount of grant will be deducted in arriving at the carrying value of the Asset (Factory Building), in which case the grant is recognized in income over the life of the asset by way of a reduced depreciation charge.


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As of As of June 30, 2016 June 30, 2015 Taka Taka

17. SHORT-TERM LOAN 50 50

Short-term loan taken from Agrani Bank Ltd., Amin Court Corporate Branch, Motijheel C/A, Dhaka-1000 as KORBANI ADVANCE for procurement of raw hides and skins after Korbani. This loan was sanctioned by Agrani Bank Ltd. against existing fixed assets and inventory as securities.

18. WORKING CAPITAL LOANAgrani Bank Ltd. 392,888,714 423,488,039

The Company has taken cash-credit (hypothecation) facilities from Agrani Bank Ltd., Amin Court Corp. Branch, Motijheel C/A, Dhaka-1000 against existing fixed assets and inventories as securities. Apart from the above, company has no other short term credit facilities.

19. TRADE PAYABLES Hides & Skins 43,796,927 42,300,011

This represents the amount payable for raw skins & hides.

20. OTHER PAYABLES Contribution to WPP & WF 6,624,210 6,961,012Liabilities for freights, spare parts & other expenses 9,111,149 12,140,758Liabilities to Suppliers of Building Materials 70,917,900 - Audit fees 187,500 153,333 86,840,759 19,255,103

• Payment against outstanding expenses were made subsequently in due time. For other credits, payments are generally made by due date.

• There are no liabilities for expenses due more than 12 months.• In the opinion of the Directors, no liabilities in the Statement of Financial Position are at a value

less than the amount at which it is repayable at the date of the Statement of Financial Position.

21. PROVISION FOR INCOME TAXBalance as per last year 57,345,956 60,013,469Add: During the year 20,843,735 23,066,073 78,189,691 83,079,542Adjustment of income tax for assessment year 2012-2013 - (25,733,586)Adjustment of income tax for assessment year 2013-2014 (26,114,417) - 52,075,274 57,345,956


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Year Ended Year Ended June 30, 2016 June 30, 2015 Taka Taka

22. PROPOSED DIVIDEND 60,960,000 68,580,000

The Board of Directors proposed dividend @40% for the year at the Board Meeting held on August 16, 2016. The proposed dividend is not recognized as a liability at the Statement of Financial Position date in accordance with Bangladesh Accounting Standard (BAS) 10 “ Events after the Reporting Date”.Bangladesh Accounting Standard (BAS) 1 “Presentation of Financial Statements” also require that the dividend proposed after the Statement of Financial Position date but before the financial statements are authorized for issue, be disclosed either on the face of the Statement of Financial Position as a separate component of equity or in the notes to the financial statements.The provision of Companies Act, 1994, requires that dividend stated to be in respect of period covered by the financial statements and that are proposed or declared after the Statement of Financial Position date but before approval of the financial statements should be either adjusted or disclosed. Considering the requirements of BAS-1, BAS-10 and Companies Act 1994, proposed dividend has been disclosed in the financial statements.

23. SALES Sft. Taka Taka

Finished Cow Leather 11,488,637 1,930,145,353 3,105,350,707Finished Goat Leather 2,022,129 228,217,522 666,287,095 13,510,766 2,158,362,875 3,771,637,802

24. COST OF GOODS SOLDOpening stock 1,218,685 144,138,138 115,783,500Add: Cost of production 13,606,951 1,863,054,609 3,460,056,617Less: Closing stock 1,314,870 140,012,002 144,138,138Cost of goods sold 13,510,766 1,867,180,745 3,431,701,979

Cost of productionGoatskins consumed 34 91,374,876 311,852,899Cowhides consumed 35 1,025,699,365 2,017,914,642 Chemicals consumed 36 471,614,334 859,612,385Spare parts consumed 37 17,607,968 21,070,852Packing materials 3,372,680 4,966,773Direct labour 96,735,547 99,910,579Depreciation (Schedule A-01) 10,368,910 10,766,092Factory overhead 38 146,280,929 133,962,395

1,863,054,609 3,460,056,617


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25. FREIGHT & FORWARDING 38,501,061 66,545,992

• Freight and forwarding represents cost of shipment of finished leather.

26. ADMINISTRATIVE EXPENSESSalary & allowances 26,352,916 21,941,201Gratuity 2,028,389 5,121,923Staff welfare 2,838,164 3,000,084Telephone, telex & fax 171,945 186,106Repairs & maintenance 262,630 219,830Printing & stationery 161,396 196,032Postage 11,194 39,137Vehicle maintenance 1,790,253 1,515,222Fuel & lubricant 1,901,412 1,755,171Electricity & water 1,359,561 1,100,503Social responsibilities (CSR) 1,280,828 1,150,223Renewal & registration 844,646 1,010,784Advertisement 659,095 998,235Entertainment 166,681 233,868AGM and EGM expenses 1,006,366 930,813Forms & fees 297,166 309,667Membership subscription 385,395 333,455Board meeting fees 440,400 356,500

41,958,437 40,398,754

• Salary & allowances increased because of annual increment• Repairs & maintenance increased due to repairs of Air Conditioners• Vehicle maintenance increased because of aged vehicles and increase in quantity of vehicles • Fuel & lubricant increased due to increase of fuel price• Electricity & water increased due to rate increase • Corporate Social Responsibilities (CSR) expenses increased because of more activities on

CSR incurred during the year• Membership subscription increased due to increase of subscription fees

27. MARKETING EXPENSESSales commission 75,344,036 104,304,311 Sales promotion 13,421,613 14,220,033

88,765,649 118,524,344

• Details of sales commission paid to agents are given on the next page.


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Sales commission:We certify that the local & foreign agents, whose details are given below, have no connection whatsoever with any Director.

Local/Foreign Agent Address Amount in TakaABC Leather House # 50/1(1st floor) Road # 11/A, Dhanmondi, Dhaka-1209. 8,055,966Abedin Corporation House # 50/1(1st floor) Road # 11/A, Dhanmondi, Dhaka-1209. 6,478,910Ashok Lal Lala A-15, Sector-9, Noida, India. 3,595,170Conceria Everest AG Castano Primo, Itally 2,631,257Cheng Hui Shan No. 24, Alley-2, Lane – 104, wenhua S. Rd. Nantow, Taiwan 1,892,074Kema Trading 77, Hazaribagh T/A, Dhaka 4,146,807Europa International House # 61, Road # 4, Block # B, Section -12, Mirpur, Dhaka 185,961Ecoton Leather 29/F, Sanataughor (1st floor), Hazaribagh, Dhaka-1209 143,805Euro Asia Baitul Khair (2nd floor), Room # 20, Purana Paltan, Dhaka 174,183Lee Je Yong 191-28, Kyohgsinri Nammyeon Yongju-City, Korea 416,513Schmenger Zweibrucker Strabe 29, 66953 Pirmasens, Germany 2,087,955Shampan Trading Corp. 49 Hazaribagh T/A, Dhaka-1209. 9,911,449Dairath Co. Ltd. Vill: Chamta, PO: Puran Dinara Hat. PS: Naria, Dist.: Shariatpur 269,421Fair International 86, Shere-e-Bangla Road, Dhaka-1209 91,360Famaz International Via Grande, 22-24 Santa Croce, Italy 9,08,060PRP International 594/C, Khilgaon Police Line, Khilgaon, Dhaka-1219 4,231,654Ridge International 87/1, Moneshwar Road, Dhaka-1209. 6,299,154Rimex International H # 28, R # 11, Block # Kha, P.C. Culture Housing, Mohammadpur, Dhaka 528,087CDF S.R.L. Via Consortile Zona A.S.L, S.N.C 81032 Carinaro (CE), Italy 848,845Colomer Japan Co. Ltd. 1-23-2, Ishihara, Sumida-KU, Post code 130-0011, Tokyo, Japan 88,159 Megumi International 66/14, West Razabazar (1st floor), Dhaka. 3,097,933 Universal Leather Corp. 27 Dilkusha C/A, 5th Floor, Dhaka-1000 1,370,228Panna Zaman & Co. House # 390, Road # 29, New DOHS Mohakhali, Dhaka-1206 45,948World Trade Leather 68/7/A, Jigatala (3rd floor), Dhaka-1209. 444,003 Inleather Via Di Pelle, 2956029 B. Croce Sull Arno (PI), Italy 349,272Leather Export Co. 86 Sher-e-Bangla Road, 2nd floor(North side), Zigatola, Dhaka 87,122Global Leather House # 86, Road # 17, Section # 14, Uttara Model Town, Dhaka 85,431Yip Yan Fai House # 8, Narcissua path, Phase 1E, Palm Springs, Hong kong 673,719Innovate Future Co. 93/1/A, Tin Mazar Road, Hazaribagh, Dhaka-1209 37,171J.M. Corporation 20, Hazaribagh, Dhaka 1,543,035Kashem Enterprise 68/7/A, Jigatala (3rd floor), Dhaka-1209. 558,581Keywin Trading Corp. Concord Tower, 123 Kazi Nazrul Islam, Avenue, Dhaka. 10,841,407Md. Babul 202, New Paltan Line, Azimpur, Dhaka-1205 1,253,442PHU Focus 30-234 Krakow UL, Krowej Jadwigi 303 F/A, Poland 1,815,592Bangla Leather Corp. 124 Hazaribagh T/A, Room # 43-44, Dhaka-1209 156,362 7,53,44,036


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Year Ended Year Ended June 30, 2016 June 30, 2015 Taka Taka28. LEGAL & AUDIT FEES

Legal fees (Professional fees) 360,000 360,000Audit fees 187,500 153,333

547,500 513,33329. BANK INTEREST EXPENSES AND CHARGES

Bank interest 33,212,471 29,312,280Bank charges 996,306 914,535

34,208,777 30,226,815

• Bank interest and charges increased due to the Company availed more amount of loan during the year under audit as compared to the previous year.

30. OTHER INCOME Dividend income-Cash 2,121,421 2,179,803Interest on FDR 15,464,898 28,863,885Rental income 30,000,000Less: Depreciation (Schedule A-02) 3,016,321Rent, rates & taxes 187,070Insurance premium 808,858 (4,012,249) 25,987,751 25,412,062

43,574,070 56,455,750

• Cash dividend amounting Taka 2,121,421 included cash dividend from Apex Footwear Limited Tk. 683,500 and Tk. 1,437,921 from Central Depository Bangladesh Limited. Rental income of Unit II was received / receivable from Apex Footwear Limited as monthly rent @ Tk. 2,500,000.

31. CURRENT TAX EXPENSES Rate of Tax Taxable Profit Tax Tax

On export profit after 25% on 50% 80,450,348 10,056,293 9,061,125adjustment of gratuity of incomeOn other incomeDividend on investment (Cash) 20% 2,121,421 424,284 435,961Rental income 25% 25,987,752 6,496,938 6,353,016Interest on FDR 25% 15,464,898 3,866,225 7,215,971 124,024,419 20,843,740 23,066,073

32. DEFERRED TAX EXPENSES (INCOME) Deferred tax assets closing (7,364,081) (5,537,353) Deferred tax assets opening 5,537,353 5,045,074Total (1,826,728) (492,279)

33. EARNINGS PER SHARE (EPS)COMPONENTS OF EARNINGS PER SHARE ARE AS FOLLOWS:Earnings per share without fair valuation surplus of investment:Net operating income 3.82 3.46 Net other income 2.15 2.79Earnings per share (Tk.) 5.97 6.25


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Year Ended Year Ended June 30, 2016 June 30, 2015 34. GOATSKINS CONSUMED (RAW & WETBLUE) Sft. Taka Taka

Opening stock (raw) 273,381 18,863,289 12,694,732Add: Purchase this year 1,722,247 74,409,700 330,562,273Less: Closing stock 290,733 15,337,377 18,863,289 1,704,895 77,935,612 324,393,716Add: Opening stock (wetblue) 555,493 41,661,975 32,577,536Less: Closing stock 581,290 33,475,540 41,661,975 1,679,098 86,122,047 315,309,277Add: Opening WIP 152,936 12,081,944 8,625,566Less: Closing WIP 109,953 6,829,115 12,081,944 1,722,081 91,374,876 311,852,899

35. COWHIDES CONSUMED (RAW & WETBLUE)Opening stock (raw) 411,807 42,416,121 29,951,337Add: Purchase this year 12,317,130 1,069,000,646 2,054,086,427Less: Closing stock 439,696 40,452,014 42,416,121 12,289,241 1,070,964,753 2,041,621,643Add: Opening stock (wetblue) 802,968 93,144,288 73,812,674Less: Closing stock 1,109,449 126,992,139 93,144,288 11,982,760 1,037,116,902 2,022,290,029Add: Opening WIP 147,243 18,847,105 14,471,718Less: Closing WIP 245,133 30,264,642 18,847,105 11,884,870 1,025,699,365 2,017,914,642

36. CHEMICAL CONSUMED

Opening Stock 133,621,683 139,461,034Add: Purchase this year 531,718,895 853,773,034 Less: Closing stock 193,726,244 133,621,683 471,614,334 859,612,385 Chemical purchase during the year:

MT USD Euro Taka Taka

Imported 3,974 3,875,412 2,422,400 499,739,540 746,264,522Local 261 00 00 31,979,355 107,508,512

4,235 3,875,412 2,422,400 531,718,895 853,773,034

37. SPARE-PARTS CONSUMEDOpening stock 21,010,760 23,246,078Add: Purchase this year 17,317,514 18,835,534Less: Closing stock 20,720,306 21,010,760 17,607,968 21,070,852


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Year Ended Year Ended June 30, 2016 June 30, 2015 Taka Taka38. FACTORY OVERHEAD

Salary & allowances 66,611,784 57,205,708Gratuity 7,119,927 6,112,210Staff welfare 2,317,889 2,198,739Entertainment 1,205,861 1,261,695Postage 166,714 166,440Printing & stationery 340,164 457,413Repair & maintenance 11,941,101 11,177,430Insurance premium 8,761,784 7,559,535Telephone & fax 212,013 195,162Vehicle maintenance 2,605,093 2,065,210Carriage inward 8,826,279 11,823,555Power, gas & water 31,690,863 29,427,873Consumable store 469,425 576,759Rent, rates & taxes 3,724,676 3,469,904Conveyance 287,356 237,751Miscellaneous expenses - 27,011 146,280,929 133,962,395

• Salary & allowances, gratuity and Staff welfare increased because of annual increment • Repair & maintenance expenses increased due to overhauling of Generator• Insurance premium increased due to holding of more inventory as well as credit facilities• Telephone expenses increased due to more communication was incurred with customers during the period• Vehicle maintenance increased due to old age of vehicles • Power, gas & water increased because of rate increase• Rent, rates & taxes increased due to increase of Municipal Tax and factory rent• Conveyance increased due to fare increase

39. AGGREGATE AMOUNT PAID TO THE DIRECTORS AND KEY MANAGEMENT PERSONNEL


Directors Meeting Fees 440,400 356,500 Remuneration 10,260,000 10,260,000

Key Management Personnel Salary & allowance 21,591,450 18,849,544

40. DISCLOSURE AS PER SCHEDULE XI PART II OF THE COMPANIES ACT 1994.

40.1 EMPLOYEE POSITION The Company engaged 822 employees of which 454 is permanent employees and 368 is casual and temporary workers as required. All employees received total salary of above Tk. 36,000.00 per annum.


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40.2 PRODUCTION CAPACITY UTILIZATION

Particulars Sft. per year %Installed Capacity 18,500,000 71.00Rented Capacity (Wet blue only) 7,500,000 29.00Total Capacity 26,000,000 100.00Actual Production 13,606,951 52.33

41. RELATED PARTY DISCLOSURESThe Company carried out a number of transactions with related parties in the normal course of business, The nature of transactions and their values are shown below:

Name of the Related Parties Nature of Transactions Value in Tk. Balance in Tk.Apex Footwear Ltd. Lease Rental 30,000,000 5,000,000Apex Footwear Ltd. Dividend received 6,83,500 -Pioneer Insurance Company Ltd. Fixed Assets & LC Related 8,761,784 - Mutual Trust Bank Ltd. Current Deposit 145,083,000 7,406,395 Guardian Life Insurance Ltd. Group Insurance 630,809 -

42. FOREIGN CURRENCY TRANSACTIONDuring the year foreign currency transaction was as follows:

2015-2016 2014-2015 Euro USD Euro USD

Materials and Others 2,422,400 3,875,412 3,538,673 5,711,248Export Earnings - 27,919,813.63 - 49,233,533.99

43. GENERAL

43.1 All financial information presented in Taka have been rounded off to the nearest Taka, Taka in Thousand (000).

43.2 Figures of the year 2014-2015 have been rearranged whenever considered necessary to ensure comparability with the current period.

44. CONTINGENT LIABILITIESThere was no sum for which the company was contingently liable as on June 30, 2016.


59

Jagadish Kumar BhanjaCompany Secretary


Md. Iftikhar-uz-zaman Director

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61

Notice is hereby given that the 40th Annual General Meeting of Apex Tannery Limited will be held on Sunday, October 02, 2016 at 10:00 a.m. at the Gulshan Shooting Sport Federation, Gulshan-1, Dhaka-1212, to transact the following business:

1 To receive and adopt the Audited Accounts for the year ended June 30, 2016 and the Reports of the Auditors and Directors thereon2 To declare dividend3 To elect Director4. To appoint Managing Director5. To appoint auditors for the year 2016-2017 and fix their remuneration

By Order of the BoardSeptember 8, 2016127 Hazaribagh T/A Dhaka-1209 (Jagadish Kumar Bhanja FCS) Company Secretary

Notes:September 8, 2016 is the record date. Shareholders whose names will appear in the Members register of the Company or in the Depository Register on that date will eligible to attend at the Annual General Meeting and receive dividend .A member entitled to attend and vote at the Annual General Meeting may appoint a proxy in his stead. The proxy form, duly stamped must be deposited at the Corporate Office of the Company not later than 48 (forty eight) hours before the time fixed for the meeting. Annual report and proxy form can be available on the website www.apextannery.com. Admission to the hall will be only on production of the attendance slip sent with the notice.In compliance with the Bangladesh Securities and Exchange Commission Circular No. SEC/ CMRRCD /2009-193/154 dated 24 October, 2013 no Gift/ Gift Coupon/ Food Box/Biscuit Box/Cash or Cash kinds shall be distributed at the Annual General Meeting.

NOTICE OF ANNUAL GENERAL MEETING

NO

TIC

E O

F A

NN

UA

L G

ENER

AL

MEE

TIN

G


1.

2.

3.4.

Notes


63

APEX TANNERY LIMITED

APEX TANNERY LIMITED

PROXY FORM

ATTENDANCE SLIP

Register Folio/BO ID No.

Signature

AffixRevenueStamp of Tk. 20.00

PRO

XY F

OR

MA

TTEN

DA

NC

ES S

LIP

I/Weofbeing a Member of Apex Tannery Limited, hereby appoint Mr./Ms. of as my /our proxy to attend and vote for me/us and on my/our behalf at the 40th Annual General Meeting of the company to be held on Sunday, October 02, 2016 at 10:00 a.m. and/or at any adjournment thereof.

As witness my hand this day of 2016.

Signature of Proxy

Signature of the Shareholder

No. of shares held

Register Folio/BO ID No.

Note: A Member entitled to attend and vote at the General Meeting may appoint a proxy to attend and vote on his behalf. The proxy form duly completed must be deposited at the registered office of the Company not later than 48 hours before the time fixed for the meeting.

I do hereby record my attendance at the 40th Annual General Meeting being held on Sunday, October 02, 2016 at 10:00 a.m. at Gulshan Shooting Sport Federation, Gulshan-1, Dhaka-1212.

Name of member/proxy

Note: Shareholders attending meeting in person or proxy are requested to complete the attendance slip and hand it over at the entrance of the meeting hall.


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