“if you have any query about this document, you may consult issuer

INFORMATION MEMORANDUM

OF

KYCR COIL INDUSTRIES LIMITED

for

Public offering of 30,000,000 ordinary shares of Tk. 10/- at an issue price of Tk. 90 each including premium of Tk. 80 per share

under book building method.

Credit Rating Status

Rating Company Credit Rating Information and Services Limited (CRISL)

Long Term AA-

Short term ST-3

Date of Rating: 01 November 2010

Manager to the Issue

Rahman Chamber (3rd floor)

12-13 Motijheel C/A, Dhaka- 1000 Tel: 9515468,9515469 Fax: 88-02-9515467

TABLE OF CONTENTS Page No

Section I: Definition and Elaboration 5

General information 7

Section II: Capital Structure & Use of IPO Proceeds 7

Summary of Annual General Meeting of KYCR Coil Industries Limited 8

Use of IPO proceeds and utilization plan 8

Section III : Description of business 10

Overview of the Group 10

The Project 10

Nature of Business 11

Description of Products 11

Process Flow Charts 12

Details of Manufacturing of Products (Galvanized Products) 14

Market Overview 16

Strengths of KYCR Coil Industries Limited 17

Internal Controls & Corporate Practices 20

Relative contribution of Products contributing more than 10% of the total revenue 20

Associate, Subsidiary/Related Holding Company 21

Competitive condition in business 21

Sources and availability of raw materials and principal suppliers 21

Distribution of product/services 22

Sources of, and requirement for power, gas and water or any other utilities 22

Customers providing 10% or more revenues 22

Contract with principal customers and suppliers 22

Material patents, trademarks, licenses or royalty agreements 23

Number of Employees 23

Capacity and current Utilization 23

Section IV: Description of property 24

Section V: Financial Condition and Plan of Operation 25

Internal and external sources of fund 25

Material Commitment for Capital Expenditure 25

Causes for any Material Change from Period to Period 25

Seasonal aspect of the company’s business 27

Known trends, events or uncertainties 27

Changes in the assets of the company used to pay off any liabilities 27

Loan taken from holding/parent company or subsidiary company 27

Loan given to holding/parent company or subsidiary company 27

Future capital expenditure 28

VAT, income tax, customs duty or other tax liability 28

Operating lease agreement 28

Financial lease and other financial commitment 28

Personnel related scheme 28

Revaluation of Assets 29

Transaction with subsidiary/holding company or associate companies 29

Auditors’ certificate regarding allotment of shares to sponsor shareholders 30

Material information which is likely to have an impact 30

Section VI: Directors and officers 31

Information regarding directorship 31

Directors' involvement in other organization 31

TABLE OF CONTENTS Page No

Family relationship among Directors and top five officers 32

Short bio-data of the directors 32

Credit Information Bureau (CIB) report 32

Description of senior executives and department heads 33

Section VII: Involvement of Directors and officers in certain legal proceedings 34

Certain Relationships and Related Transactions 34

Directors' facilities 35

Executive Compensation 35

Remuneration paid to top five salaried officers 35

Aggregate amount of remuneration paid to directors and officers 35

Remuneration paid to directors who was not an officer of the company 35

Future compensation to Directors or Officers 35

Options granted to Directors, officers and employees 36

Transaction with the Directors and subscribers to the Memorandum 36

Tangible assets per share 36

Ownership of the Company’s securities 36

Shares held by Directors/shareholders 36

Shareholding structure for 5% or more 37

Securities owned by the officers 37

Section VIII: Determination of offering price 38

Indicative Price for Book Building Purpose 38

Determining price under Book Building Method 42

Section IX: Allotment, Subscription and Market 44

Market for the securities being offered 44

Description of Securities outstanding or being offered 44

Debt securities 45

Section X: Risk factors & management perceptions about the risks 46

Section XI: Corporate Directory 49

Section XII: Auditors’ Report and related certificates 50

Audited Financial Accounts 51

Auditors’ Report under section 135(1), Para 24(1) of part II of schedule III to

Companies Act, 1994 80

Ratio Analysis 84

SECTION I DEFINITION AND ELABORATION

Term Description

AGM Annual General Meeting

Banker to the Issue means banks so named in the Information Memorandum to collect money as subscription against security

Bidder means the eligible institutional investors;

Book Building Method

means the process by which an issuer attempts to determine the price to offer its security based on demand from institutional investors;

CDBL Central Depository Bangladesh Limited

CI Corrugated Iron

CIB Credit Information Bureau of Bangladesh Bank

Commission/fees means any money paid to any person in connection with public offering

of security under these Rules;

CR Cold Rolled

CRCA Cold Rolled Close Annealed

CRFH Cold Rolled Full Hard

CSE Chittagong Stock Exchange Limited

Cut-off Price means the lowest price offered by the bidders at which the total issue

could be exhausted;

DSE Dhaka Stock Exchange Limited

EGM Extra Ordinary General Meeting

EIIs Eligible Institutional Investors

EPS Earnings Per Share

Floor price means the lowest price of the price band within which the eligible institutional investors shall bid for security under Book-Building Method

GCI Galvanized Corrugated Iodized

HR Hot Rolled

Indicative price means the price which the issuer indicates in the draft Information Memorandum taking input from the eligible institutional investors on which the bidders bid for final determination of price;

Initial Public Offer/IPO

means first offering of security by an issuer to the general public

ISSUE Book Building of Shares of KYCR

KW Kilo Watt

KYCR KYCR Coil Industries Limited

NAV Net Asset Value

Non-Resident Bangladeshi (NRB)

means an expatriate Bangladeshi or who has dual citizenship or possesses a foreign passport bearing an endorsement from the concerned Bangladesh Embassy to the effect that no visa is required for him to travel Bangladesh

NOF Non-Oxidizing Furnace

Term Description

Price Discovery means a method of determining the price for a specific security through demand and supply factors related to the market

Information Memorandum

means any document prepared for the purpose of communicating to the general public an issuer's plan to offer for sale of its security under the prescribed Regulations;

Public Issue means public issue of security through initial public offering or repeat public offering

R & D Research & Development

Registrar to the Issue

means the merchant banker or any person employed by the issuer

registered with or approved by the Commission for carrying on the activities in relation to an issue including collecting applications from investors, keeping record of applications and money received from investors, keeping record of applications and money received from investors or paid to the seller of security, assisting in determining the basis of allotment of security, finalizing the list of persons entitled to

allotment of security and processing and dispatching allotment letters, refund orders or certificates and other related documents

RJSC Registrar of Joint Stock Companies & Firms

Road Show means presentation by an issuer of security to potential investors about its issuance of security

SEC The Securities and Exchange Commission

Securities Shares of KYCR

Securities Market The Stock Market of Bangladesh

VAT Value Added Tax

General information

i. Alliance Financial Services Limited (AFSL) have prepared the Information Memorandum based on information provided by KYCR Coil Industries Limited (KYCR) (the Issuer Company) and also upon several discussions with the Chairman, Managing Director, Directors and concerned executives of the issuer company. The Directors of KYCR Coil Industries Limited and Alliance Financial Services Limited collectively and individually, having made all reasonable inquiries, confirm that to the best of their

knowledge and belief, the information contained herein is true and correct in all material aspects and that there are no other material facts, the omission of which would make any statement herein misleading.

ii. No person is authorized to give any information or to make any representation not

contained in this Information Memorandum and if given or made, any such information and representation must not be relied upon as having been authorized by

the issuer company or issue manager.

iii. The Issue as contemplated in this Information Memorandum is made in Bangladesh and is subject to the exclusive jurisdiction of the Courts of Bangladesh. Forwarding this Information Memorandum to any person resident outside Bangladesh in no way implies that the issue is made in accordance with the laws of that country or is

subject to the jurisdiction of the laws of that country.

iv. A copy of this Information Memorandum may be obtained from the Corporate Head Office of KYCR Coil Industries Limited, Alliance Financial Services Limited, the Underwriters and the Stock Exchanges where the securities will be listed.

SECTION II CAPITAL STRUCTURE & USE OF IPO PROCEEDS

Particulars No of shares Amount

Paid up Share Capital as on 31 December 2009 65,120,000 651,200,000

Bonus Share Issued in 2010 65,120,000 651,200,000

Paid up share Capital as on 31 October 2010 130,240,000 1,302,400,000

Proposed IPO (Initial Public Offering) 30,000,000 300,000,000

Total Capital after IPO 160,240,000 1,602,400,000

Summary of Annual General Meeting of KYCR Coil Industries Limited

AGM Date of AGM AGM Date of AGM

1st AGM 31 December 1996 9th AGM 30 December 2004

2nd AGM 31 December 1997 10th AGM 29 September 2005

3rd AGM 31 December 1998 11th AGM 18 September 2006

4th AGM 31 December 1999 12th AGM 30 September 2007



7th AGM 31 December 2002 15th AGM 25 August 2010

8th AGM 31 December 2003

USE OF IPO PROCEEDS AND UTILIZATION PLAN Entire proceeds of the IPO shall be utilized for the proposed addition of CR Coil unit-2, introduction of Color Coating Line, expansion of Galvanizing Line and the balance amount shall be used as working capital as well as repayment of bank loan of the company.

CR Coil Mill

The new unit will be equipped with 1250mm single stand 6hi CVC cold rolling mill with annual rated capacity of 120,000 MT per annum. This will increase the current capacity by two fold and will allow KYCR to provide wider ( 1250mm) width material for better positioning in the International market for wider width product range. Currently, no other mill in Bangladesh

offers 1250mm CR and honing into this capacity and product range expansion, KYCR will be able to market its product for more diverse customer and product range, domestically and globally.The plant will be installed in the same site of the existing one, to be imported from Deniali, Italy as a turnkey basis. Total cost of the plant estimated to be Tk 1509.68 million and expected to commence operation within December 2012.

Color Coating Line Colour coated sheets will allow KYCR to offer a product base that has a specialized market. In addition, having colour coated product in the existing product portfolio will allow the Company to

capture more market share of our dealers and customers, which is currently being catered by other colour coated manufacturers. The state of the art colour line will also have the technology to offer panel and other household finished application that will allow KYCR to offer higher value added products to its market. The line will have production capacity of 36,000 TPA based on ref. size of 0.50 mm thickness X 1250 mm wide @20.4 mm line speed @ 6000 working hours. It will also be installed in the same factory site at an estimated cost of Tk 510.16 million.

Galvanizing Line

A second unit of fourth generation NOF ( Non Oxidized Furnace) technology having wider width and heat based Coat Galvanizing Line with Strip thickness from 0.10 to 0.60 and strip width of 650 mm to 1250 mm to be implemented. Machineries of the plant will be brought from Germany/India at an estimated cost of Tk 485.65 million. This plant will not only produce superior quality galvanized sheet, but will also meet the company’s drive to offer fully

environment-friendly product as well as manufacturing process. It is expected to go into operation within December 2011. Proposed expenditure plan is summarized as follows:

Sl.

No. Utilization of Funds

Amount (million)

Tk.

Implementation

Target

1 CR Mill-2nd unit 1,509.68 December 2012

2 Color Coating 510.16 December 2011

3 Galvanizing Line 485.65 December 2011

4 Working Capital/ re-payment of bank

loan Balance amount Continuous

SECTION III DESCRIPTION OF BUSINESS Overview of the Group KDS Group is one of the most renowned business and industrial conglomerates of Bangladesh, based mainly in the port city of Chittagong having extensive operations throughout the country. It has also established offices and agencies in Singapore, Hong Kong and is expanding into United Kingdom, thereby paving the path into becoming a Bangladeshi based multinational.

The group was founded in 1983, through the establishment of one of the first garments industries of Bangladesh, and over the last 27 years, through innovation, dynamism, untiring effort and dedication, the business in terms of assets and revenues have grown exponentially by sometimes over 500% a year. The fields of business have also extended from being just apparel exports to a whole array of other industries. Today the total group can proudly declare over USD 350 million of annual revenues in total, with over 8000 employees, staff and workers.

KDS values human capital and is therefore committed to attract, groom and nurture talent through competitive compensations and benefit packages apart from investing in training of its potential employees under local as well as foreign trainers. KDS has engaged the internationally renowned organizational development consultants “Ernst & Young” to develop upgraded Human Resource Management practices such as appraisal through the Balance Score Card method, talent mapping, etc.

The Group adheres to international compliance requirements closely, and has taken many social initiatives for the betterment of the lives of its workforce, going even beyond foreign requirements. KDS is always keen on taking new challenges and initiatives supported by the robust financial appetite it enjoys along with the open support of all major financial institutions in Bangladesh based on their healthy business track record with each of them. KDS group has interests in various sectors that includes but does not limit by the following:

Apparel/Garments Other trading operations Insurance

Private Port – Inland Container Depot

Information & Communication Technologies

Investment Management

Textiles IT Training Services Banking

Apparel Trims & Packaging Shares and securities trading Steel

The Group is also extensively involved with a large number of activities in relation to corporate social responsibility and philanthropic initiatives.

The Project The Company “KYCR Coil Industries Limited”, was incorporated in Bangladesh on 04th November 1995 as a Private Limited Company registered under the Company Act, 1994 bearing

registration number CHC-2071 of 1995. The Company’s Registered office is at 1, Hajji Amir Ali Chowdhury Road, Khatungonj- Chittagong, with factory at Boro Kumira, 25 kilometers away from Chittagong main city. The plant has been setup as a backward integration effort to provide necessary raw material for the company’s own Galvanizing plant as well as the surplus to other consumers in the industry. The plant notably is the only European plant of its kind in the country, supplied by SMS

DEMAG Germany, a world leader in this sector. The brand name of its corrugated sheet product is popularly known as “MURGI” or “HEN”.

The Complex which is built on a 11.0421 acre site, houses pickling line, 6 Hi CVC cold rolling Mill

Slitting and rewinding line with an annual capacity of 120,000 Metric Tons of CR Coil,100% Hydrogen based 4-base Annealing with 21,000 Mt. annual capacity, 4-hi Skin Pass mill,multi-slitter line and Coil to coil/coil to sheet fully automated NOF TYPE Galvanizing plant for 70000 MT. Commissioned under direct supervision and technical assistance of SMS DEMAG Germany, the result is a continuous and efficient supply of flawless quality product unrivalled by any other in the industry, thus enabling us to be the most reliable supplier of cold rolled sheet in the region. The Company has got its office in Chittagong city and also got liaison office at Dhaka.

Sales are generally done through more than 800 active dealers across the country.

Events Dates Incorporation as a Private Company 04 November 1995 Acquisition of CR Coil Plant (SMS, Demag, Germany) 2001 Commercial Operation of CR Coil Plant 01 February 2002 Commercial Operation of NOF Plant 2008

Entry to Export Market 2005 Conversion into Public Limited Company 31 July 2010

Nature of business The main objectives of the company is to own and establish mills, factories and workshop for manufacturing CR Coil, GCI Sheet, Galvanized plain Sheet etc. of all kinds and description; and

to purchase or import raw materials to manufacture the same and its by-products and marketing the products and by-products locally and abroad.

Description of Products The Company maintains its standards in the manufacturing of the products. The Company ensures qualities to meet the international standards such as ASTM, JIS, SI & BS etc. The Company produces various types of steel products that are as follows:

Sl. No.

Product Form/Grade Thickness Width

1 Cold Rolled Full Hard (CRFH)

Coil/JIS G 3141 SPCC -1B/1D for base metal uses (main input) of galvanizing plant to produce GP/GCI

sheet to use for roofing and fencing/doors etc

0.095 mm to 0.45 mm

762 MM. to 1050 MM.

2 Cold Rolled Close Annealed (CRCA)

Coil and Sheet/ JISG 3141 SPCC-SD/SB for various appliances like barrels & drum/containers, automobile

body, electric panels and engineering fabrications.

0.3 MM to 1.6 MM

660 mm to 1050 mm

3 Galvanized steel sheet in coil and sheet

Sheet & Coil/ JIS G3302 SGCH FULL HARD ZINC COATED Z- 90GSM TO Z-180 GSM, REGULAR SPANGLE, CHROMATED AND

DRY,BRIGHT FINISH.

0.11 MM to 0.5 MM

762 MM to 1050 MM

NOT IN BANGLADESH

Steel Manufacturing

Plant Iron ore/ limestone etc. Hot Rolling

Plant Hot Rolled COIL

Cold Rolling Plant Cold Rolled Coil

Zinc for galvanization Galvanization Plant

NOF Galvanized

Corrugated Sheet

4 Galvanized Plain and Corrugated Sheet

Sheet/ JIS G3302 SGCH FULL HARD ZINC COATED Z- 90GSM TO Z-180 GSM,REGULAR

SPANGLE,CHROMATED AND DRY,BRIGHT FINISH.

0.11 MM to 0.5 MM

600 MM to 815 MM where length is 6’ to 12’

Process Flow Charts Following flowchart shall explain the broad path of formation of GCI (Galvanized Corrugated Iodized) sheet starting from the iron ore.

As shown above, Hot Rolled coils that are imported goes through cold rolling plant to produce cold rolled coils. The coils are then taken for galvanizing in the galvanizing plant along with zinc

that results in output “GP (Galvanized Plain) sheet” that goes to shearing line for 6 ft to 12 ft.(L)Again, these cut sheet goes to FORMING MACHINE where GCI(CORRUGATED SHEET) are produced as a final product to use for roofing and fencing etc.. Corrugated sheet”.

Galvanizing NOF Line

BP coils are used as raw materials for galvanizing under NOF technology. Following such, surface cleaning is done by non-oxidizing furnace at 950 deg C. Then it goes through molten zinc bath for galvanizing at 460 deg C. For non-oxidization, it goes into the passivation section and after drying, it is recoiled or sheared. Finally, corrugation is carried out in different width as per parties demand.

Process Flow Chart for CRCA Product

(Cold Rolled Sheet in Coil JISG 3141 SPCC – 1B/1D )

Hot Rolled Coils are used as input (raw materials) for manufacturing Cold Rolled Close Annealed (CRCA) product. Following thus, pickling and mill rolling is carried out followed by rewinding, annealing, Skin Pass, and Cold Rolled Slitting.

Hot Rolled Coils are pickled (Acid cleaning that removes Scale from the surface of the strip) and processed into cold rolled (reducing the thickness) sheets. Annealing is carried out in a closed atmosphere of hydrogen and/or other non-oxidizing gases. It softens the product back up whilst protecting it from oxidization. The product then goes through Skin Pass Mill (process of removing yield point elongation of Annealed sheet) for improving surface finish and flatness of the strip. In this phase, rust

preventive oil is used and also the shape is controlled.

Process Flow Chart for RIM Product

EDD Grade HRC

Input

Pickling Rewinding 6 HI Mill

Rolling

Annealing

4 Hi Skin Pass CRCA

Coil(Output)

CR Slitter

Packing

Output

RIM Grade

HRC Input Pickling Annealing 6 HI Mill

Rolling 4 Hi Skin Pass

CR Multi Slitter

Packing

It is a similar process as CRCA product manufacturing except the input material which is RIM grade HRC input, no rewinding, and it goes through CR Multi Slitter.

Process Flow Chart for CRFH Coil (End Use Galvanizing):

To manufacture CRFH Products, rolling is carried out after pickling the raw materials and following such, Rewinding & side trimming is carried out in order to produce the output.

Currently, the company is manufacturing CRFH, CRCA, GPFH, GP, and GCI products. It is producing corrugated galvanized sheets from Cold Rolled (CR) Steel Sheets of various thicknesses, length and width. Presently, the company has got four manual and an automatic galvanizing lines with a total production capacity of about 70,000 MT of galvanized sheets of various sizes per annum. GCI (Galvanized Corrugated) sheets are being widely used in Bangladesh as roofing materials and also for making the sidewalls of the huts. Present annual

quantity of production of the company is approximately 60,000 Metric Tons of corrugated sheet. The primary raw materials for production are Cold rolled sheet and Zinc to provide anticorrosive coating on that sheet. The CR (Cold Rolled) sheet is the product of Cold Rolling mill. Only few companies established CR mills earlier in the country and KYCR was one of the followers. Previously, all the GCI sheet manufacturers used to import CR sheet as raw material. Recently, few indigenous sources are

available for the CR Sheet. CR sheets are produced from HR (Hot Rolled) sheets which are the output of full-fledged steel plant. Till date no such plant is available in the country and companies manufacturing CR sheet, imports the HR sheet from foreign countries like Japan, Thailand, China and Korea.

Details of Manufacturing of Products (Galvanized Products)

Corrugated galvanized sheet is fabricated from the Cold rolled steel sheet of varying thicknesses. Some of the specifications of the HR Coil, being imported by the CR Plant are as follows.

i) 1.6 mm x 800 mm ii) 1.8 mm x 915 mm iii) 2.0 mm x 915 mm

DD/EDD Grade

HRC Input

Pickling Rewinding & Side

Trimming

6 HI Mill Rolling

Output CRFH Coil

Packing

In the Cold rolling plant the HR Coils are rolled in the room temperature to reduce the thickness. The degree of reduction depends on the number of passes, i.e. the number of times the sheet is rolled. For example the 1.8 mm HR sheet may be converted into CR sheet of following thickness

in mm.

0.156 0.160 0.170 0.176 0.180 0.186 0.190 0.196 0.200 0.210

If the thickness of the sheet is 2.0 mm or 1.6 mm then reduction of thickness may take place as follows.

For 1.6 mm thick sheet

0.120 0.125 0.130 0.140 0.150

For 2.0 mm thick sheet

0.220 0.230 0.240 0.250 0.260 0.270 0.280 0.290 0.300 0.310

0.320 0.330 0.340 0.350 0.360 0.370 0.380 0.390 0.400

There is no scope of change of the original width i.e. 840 mm in the first case and the original width of CR coil would be carried throughout the entire transformation. So it is clear that the width of the galvanized sheet would be identical as that of the CR coil. Once galvanization process is complete, the sheet is passed through the corrugation machine and then effective

width of the coil is reduced by some proportion as explained below.

The reduction of width will depend on the depth of corrugation, but we can assume a reduction of 12%-15% of the original width. The depth of corrugation is varied as per the requirements of

the final width. However it may be mentioned that for effectiveness, a minimum corrugation is required beyond which the sheet will not serve its purpose of protection. The range of thickness for the CR sheet starts from as low as about 0.095 mm and ends at 0.45 mm depending on the thickness of original HR sheet used. The lower thickness variety is generally used for sidewalls, boundaries etc. whereas comparatively thicker materials are used for construction of roof. Sheets are available in five lengths between 6 ft and 10 ft, with

increment of 1 foot. Width of the sheet also varies from 27 inch to 32 inch as explained above. Generally the width increases with the thickness as we can see that 1.6 mm HR has got a width of 780/800 mm whereas width of 2.0 mm HR sheet is 915 mm. Normally the sheets are sold in pieces, Baans, and Pcs Tons. Baan is a unit exclusively used for corrugated sheets, which denotes a running length of 72 feet. In case of 6 ft sheet, 12 sheets make a Baan. However, for 7 feet sheets, only 10 sheets make a Baan using rounding off

technique.

840 mm

720 mm

(approx.)

Galvanization is done by platting a very fine zinc layer on the sheets to protect corrosion. There are two types of galvanization as per the technology of galvanization line. One is continuous and another is discrete type of operation, called CGL and GL respectively. CGL manufacturing is

continuous operation with very little manual interference. The entire roll of CR sheets are galvanized and then cut into pieces with required length. Whereas in GL, roll of sheets are cut first and then galvanized manually controlling the zinc consumption. Market demand also varies for different types of thicknesses. Demand of lower thickness is higher in the market compared to thicker variety. If we consider sheet thickness up to 0.2 mm, the market share will be about 70% of the total, when remaining 30% will cater for the balance

part. As already mentioned that Galvanized Corrugated sheets are widely used in Bangladesh primarily as roofing materials. At least 75% of the household uses GC sheets for some application or the other. These sheets are also used for making wall of the houses, boundaries etc. being the most economic option.

CONTROLLED ANNEALING The CRFH coils coming out from 6 HI Mill exhibit high hardness of the order of 90 to 95 HRB, which is practically impossible for the forming industry to go for their application. The material is then subjected to ANNEALING to get following properties: 1. Required ductility is achieved to facilitate drawing or any other kind of forming operations.

2. Uniform grain size imparts uniform properties through out the Sheet (recovery, re-crystallization & grain growth takes place) 3. Required mechanical & physical properties are achieved. (The tight wound coils are annealed in a protective atmosphere in a Bell Type annealing furnace

where temperature and protective gas are controlled through high-tech electronic instruments to ensure perfect grain refinement and brightness to the strip) SKIN PASS MILL The purpose of skin passing is to give a controlled light cold reduction. Generally 1% to 3% cold reduction is given to the strip by this operation. Gauge correction is never the intension of skin

passing operation. When annealed strip is given skin pass reduction, the operation imparts to the annealed strip a certain degree of hardening while restoring the softness of the core. Also the surface finish of the strip is improved by skin passing operation. CR SLITTER CR Slitter and side trimming line ensures different widths of the coils, tailor made by the

customer's use with crack free edges. The sheet surfaces are continuously and meticulously checked to keep up the standard of quality. MARKET OVERVIEW This is a product for consumption by the masses, since 75% household uses GC sheet in some form or other. There are not many distinctive factors with respect to quality of the product for

major five/six manufacturers and hence main criterion for decision making is the price. Unhealthy price war is always going in the market and the market is mainly controlled by the dealers and not the manufacturers.

Products are sold by manufacturer’s name as well as brand name. Major available brands in the market vis-à-vis manufacturers’ names are as follows.

Brand Name of the Manufacturer

GARU Abul Khair Steel Mills Limited

HORSE PHP NOF Continuous Galvanizing Mills Limited

MURGI KYCR Coil Industries Limited

MORUG S. Alam Steels Limited

RANI Apollo Ispat Complex Limited

TOP Karnafully Galvanizing Mills Limited

Total number of Corrugated Galvanized sheet manufacturer is more than forty in Bangladesh.

However, only about 25% of them are major suppliers in the market. Rests are either local or insignificant players. Following are the names of some major manufacturers in the market in order of market share. We have formulated the market share % of each company in terms of their Capacity as well as production.

Source: BCRCMEA (Bangladesh C.R. Coil Manufacturers & Exporters Association) Report The brand is of more significance than the company to the customers. A single manufacturer

may produce more than one brands and supply those in the markets concerned. Popularity or market share of the brand/manufacturer varies from one region to another. Moreover the product is highly seasonal as the consumption picks up during the months November to April. Price varies throughout the year as the product is seasonal. Market Price practically does not seemingly move in a logical sequence. Manufacturers revise their price every now and then depending on their stock and booking position. As a result competition is very high in this market and margins also coming down sharply.

Strengths of KYCR Coil Industries Limited

The Company has latest machineries and equipment to carry out the factory operations as well as administrative activities. The Company has a great amount of investment in the machineries and equipment that are productive and effective as well. The CR plant that is unique in the country gives the company an edge over its competitors. Besides, NOF technology and heavy

Name of the Organization

Capacity (MT)

Production

(MT)

AK steel 240,000 200,000

PHP 200,000 120,000

KYCR 120,000 75,000

S.Alam 100,000 50,000

Apollo 100,000 50,000

Karnafully 60,000 50,000

0

50,000

100,000

150,000

200,000

250,000

AK steel PHP KYCR S.Alam Apollo Karnafully

Capacity/ Production

capital expenditures on brand new machineries provide the company with competitive edge in the industry. Existing Controls used in Operations

AEC: Automatic Edge Drop Control AFC: Automatic Flatness Control AGC: Automatic Gauge Control ATC: Automatic Temperature Control CVC: Continuous Variable Crown HGC: Hydraulic Gap Control

IRB: Intermediate Roll Bending MZC: Multi Zone Cooling WRB: Work Roll Bending

Company’s Current Strengths (KYCR Coil Industries Limited) 1. Human Capital

i. Appropriate Skills employed for each functional activity that is being benchmarked

against the best in the industry.

ii. Suitability of employee and the designated tasks are always monitored.

iii. A pool of experienced professionals is available with the Company as its management

carries out extensive programs to recruit, train, select and motivate individuals of

various backgrounds across the country.

2. Financial Resources

i. It has very well-built relationship with the providers of finances to the company.

ii. Effective Management is carried out for Cash and other resources.

3. Machinery and Equipment

i. The company has all brand new machineries purchased from various sources. The

Plant that was imported from Germany.

ii. Depreciation charges are made in terms of the machinery’s estimated economic useful

life and its price competitiveness in the respective marketplace.

iii. At regular intervals, maintenance and necessary shut-down is carried out.

4. Material

i. Backward integration has already been carried out in order to get the accurate raw

materials at the right time and place.

ii. Relationship with the suppliers of HR coil has been very sound in the long run so far.

iii. Low cost of raw materials result in more added profits in the financial context.

iv. Accurate and timely supply of the raw materials has always been the quest for the

company and it has enjoyed smooth supply of such materials over the last few

decades and remained unchanged.

5. Process

i. Traditional method such as manual involvement is being focused into sophisticated

processes whilst the company is expanding its base where large sum of capital

expenditures are incurred for capital intensive facilities/equipment.

ii. Quality certificate i.e ISO certificate is available with the Company and up to date.

Quality does bring a change among the consumers regarding the preference in the

marketplace and hence Total Quality Management practice is carried out as a part of

contemporary management practices. Quality is never compromised so that the

customers receive value added products from the Company.

6. Management Information System

i. Information is sought out at every layer of the organization on a regular basis and

timely accurate information serves the key turn for every successful decision

preciously and concisely.

ii. For catering the information requirement, the company employed required hardware

equipment and software facilities; which are KICKS and Troyee. The software serves

various modules and applications throughout the functional departments.

iii. The information can be filtered as ERP system is available for a bird eye view as well

as close watch on each and every transaction and it captures information processed in

each and every functional area and matches with decision support system and

management information system. ERP system at the Company brings all the activities

in a single tray and helps management take prompt yet an informed strategic

decision.

7. Management

i. Management delegates the authority and responsibility to the subordinates who in

turn execute the actual implementation. Even though this has become a practice, the

Company has advanced itself by capturing raw data and information from the bottom

layer of the organization. In this way, it works as a feedback mechanism which would

ultimately work as feed-forward.

8. Culture

i. Organizational Culture is made up of the individuals working in the Company. The

norms, ethics, value, etc. fall in the category in which normal practices such as

working hours, approaches in the meeting/seminar/discussion, etc. are evaluated and

compared with the competitors whilst keeping in mind the welfare of the consumers

of the company’s products.

Besides, the Company has heavy capital investment for the development of Information Technology. The IT development in the Company has been provided below:

Information Technology The Company uses total 384 KBPS dedicated internet bandwidth in factory and Head office. The head office and factory are connected via radio link. The intranet bandwidth of this connectivity is 2 mbps.

ERP Software: The company uses an ERP (Enterprise Resource Planning) named KICKS and TROYEE which are Integrated Client Server Application for assisting all the departments of KYCR Steel Industry for precise and instantaneous reporting, decision making, optimizing business cost and interdepartmental coordination. Oracle 9i database is used in backend and Oracle developer 2000 is used as front end of Kicks and troyee is in SQL server.

Corporate Social Responsibility, Philanthropic Initiatives & Other Significant Involvement For the last two decades, the current Managing Director of the Group “Mr. Khalilur Rahman” has

been involved in various organizations, clubs & societies and founded school, college and other learning centers. He founded Khalil Mir Girls School, Khalil Mir Degree College, Khalilur Rahman Shishu Niketon, Saberia Khalilia Senior Madrasha, Khalilur Rahman Mohila Degee College, Khalilur Rahman students Welfare Trust and Shandhir Gousia Tayobia Dilwara Begum Senior Madrasha, etc. Furthermore, he is a member of few governing bodies; namely S A Noor High School, Hulain Saleh Noor College, and Mafijur Rahman Girls High School.

Besides, He is holding membership with Chittagong Metropolitan Chamber, Chittagong Press Club, Chittagong Club, Chittagong Institute, and Bhatiary Golf & Country Club, Chittagong. He is the President of Amir Market & Khatnganj business Community as well as Patya Foundation; Ex-vice President of BGMEA (Bangladesh Garment Manufacturer & Export Association); Chairman of Pragati Insurance Company Limited, Bangladesh CI Sheet Manufacturers & Exporters Association and Bangladesh CR Coil Manufacturers & Exporters Association; Executive Member of Bangladesh CI Sheet & GP Sheet Manufactures Association.

Internal Controls & Corporate Practices

The Company KYCR Coil Industries Limited employs robust internal controls:

(1) Supervision at each layer of the Organization

Management has delegated certain skilled individuals to ensure that the new entrants including rookies in the Company are well trained and motivated on a continuous basis. Factory Supervision is crucial for the company and therefore the Company employed experienced personalities recruited locally and internationally as well.

(2) Operations

Operations are handled by the experienced individuals and reporting is made at every single interval. The procedures for operational activities are identified and strictly adhered to as per guidance provided by the middle layer of the management.

(3) Accounting

Inventory calculation, Customer Records, Credit Status, Sales Ledger, etc. are carried

out through software applications which integrate all the business processes in a chain.

(4) Physical Assets

These are safeguarded by the security locks, passwords, locks on doors and other defense mechanism. Regular Checks are also carried out in order to ensure that the assets are safe and the registered individual is responsible in answering the risk and

expected outcome if need arises.

(5) Management Review Management review is carried out on appropriate intervals so as to prevent, detect and correct any error that has occurred or may occur in the forthcoming period. The review can be either financial or non-financial or a combination of both.

(6) Information Strategy

The Company has its own strategy of being up to date in the industries concerned so

that more significant contribution can be made for the shareholders of the company as well as other stakeholders.

Relative contribution of Products contributing more than 10% of the total revenue

The relative contribution to sales and income of each product that accounts for more than 10%

of the Company’s total revenue during the period ended 31 October 2010 are mentioned below:

As on 31 October 2010

Sl. No. Name of the products

Contribution to sales (Tk.) (%)

Local Export Total

1 CRC 1,261,691,967 40,012,038 1,301,704,005 24%

2 CI & GP Sheet

3,562,380,936 565,303,265 4,127,684,201 76%

Total 4,824,072,903 605,315,303 5,429,388,206 100%

Associate, Subsidiary/Related Holding Company

The company has no associates, subsidiary/related holding company.

Competitive condition in business Major competitors of the Company with their capacity and production are given below:

Name of the Organization Capacity (MT) Production (MT)

1.AK steel Products Ltd 240,000 200,000

2. PHP Re-Rolling Mills 200,000 120,000

3. KYCR Coil Industries Ltd 120,000 75,000

4. S.Alam Cold-Rolled Mills Ltd. 100,000 50,000

5. Apollo Ispat Ltd 100,000 50,000

6. Karnafully Steel Mills Ltd 60,000 50,000

Total Capacity &

Production

820,000 545,000

Source: BCRCMEA (Bangladesh C.R. Coil Manufacturers & Exporters Association) Report Sources and availability of raw materials and principal suppliers

Sl

no

Name of Principal

suppliers Address

Name of the raw

Materials

1 KOBE STEEL/ Metal One Corporation

3-23-1, Shiba, Minato-Ku, Tokyo 105-0014 Japan.

Prime Hot Rolled Steel Sheet in Coil (HR Coil)

2 Steel Authority Of India Ltd

Central Marketing Organisation Ispat Bhawan" 40, Jawaharlal

Nehru Road Kolkata-700

071,India


3 NIPPON STEEL JAPAN/Marubeni-Itochu Steel Inc.

Nihonbashi 1-Chome Bldg, 4-1 Nihonbshi 1-Chome, chuo-Ku,

Tokyo, 103-8247, Japan


4 POSCO/Sk Networks Co Ltd

Sk Myung-Dong Bld, 199-15,

Ulchi Ro 2-Ga, Chung-Gu, Seoul, korea


5 Stemcor (S.E.A) Pte Ltd.

350 Orchard Road Unit 20-04 Shaw House Singapore


6 Eco Tropical Resources Pte Ltd

531 Upper Cross Street 03-45 Hong Lim complex, Singapore

Lme Registered Brand SHG Zinc Ingots

7 G-Steelmet Pte Ltd 050531.3Shenton Way, Shenton

House 08-09, Singapore 068805

Lme Registered Brand SHG

Zinc Ingots

Distribution of product/services

The product distribution is mainly depends on the dealers, distributed within the country. The major dealers interact directly with the company’s sales executives for purchasing the product.

Then they distribute products amongst sub-dealers who in turn sell those to retailer.

Presently at the time of preparation of this manual there are more than 800 active dealers in the country, who do business with KYCR throughout the year, irrespective of season. Besides, there are some who do business during the season only, i.e. between December and May. The Region wise number of dealers are given below:

Belts Region Number of Parties

Sylhet B.Baria, Hobigong, Sylhet 97

Bogra Bogra, Pabna 53

Rajshahi Nator, Noagaon, Nababgong 30

Barishal Barishal, Perozpur, Faridpur, Patuakhali 65

Dhaka Dhaka, Narayangonj, Gazipur 96

Mymenshing Mymenshing, Tangail 40

Chittagong Chittagong, Cox’s Bazar, Chandpur 142

Rangpur Rangpur, Thakurgaon 47

Comilla Comilla, Noakhali 147

Faridpur Razbari, sariatpur 33

Khulna Khulna, Jessore, Meherpur, Kustia, Chuadanga, Magura, Jhenaidha

51

Sources of, and requirement for power, gas and water or any other utilities

Power is very much essential for the factory operation. Any power interruption may cause the Company to lose smooth production.

Power: The Company has accorded consent from Power Development Board (PDB) for a capacity of 10 MW. Besides, HT line 33 KV is also available for the Company. For NOF plant,

captive power plant (by Gas Generator) having capacity of 2 MW was installed and currently running at 50% utilization.

Gas: Karnafully Gas Distribution Company Limited provides uninterrupted gas supply to the Company.

Water: The Company has unlimited water supply from own installed deep tube-well at all times throughout the factory and office premises.

Customers providing 10% or more revenues

No single customer provides 10% or more of the total revenue generated by the Company.

Contract with principal customers and suppliers

The company does not make any specific agreement with the suppliers. However, when the purchase order is raised, contract is made specifying the delivery amount, timing of delivery, advance deposit amount, credit terms and other conditions.

However, it has contracts with its specific customers; usually having one year of validity of agreement. Currently, the company has 89 numbers of customers who are from different regions/belts but have contractual agreements with the Company on following conditions as on

31 October 2010.

Nature of Credit: Cheque, Bank guarantee, FDR Limit: Tk. 500,000 to Tk. 15,000,000

Material patents, trademarks, licenses or royalty agreements

The Company has numerous licenses including patent/trademark for the brand “HEN” or “ Murgi”. Fire License is available with Company that is up to date. Moreover, it complies with the environmental compliances as it obtains environmental certificate from time to time. Also, to run the factory operations, management updates the Factory license regularly. Besides, Boiler License is also updated by the Company at regular intervals.

Every year the Company updates Trade License from the respective regulatory authority at

regular intervals. Trademark license has always been updated on a year to year basis. In addition, the Company has ISO certification that is valid up to February 07, 2012.

It is also worth mentioning that the Company has updated license for warehousing (Bond) after the HR Coil is imported from abroad.

Number of Employees

Number of Employee 31.10.2010

Number of employees whose salary below Tk 3,000 per month -

Number of employees whose salary above Tk 3,000 per month 380

Total 380

Capacity and current utilization of the facility

CR Plant 31.10.2010

Installed Capacity (MT) Annual 120,000

Installed Capacity (MT) for the period 100,000

Actual Equivalent production (MT) 60,095

Capacity Utilized 60.10%

NOF Plant

Installed Capacity (MT) Annual 70,000

Installed Capacity (MT) for the period 58,333

Actual Equivalent production (MT) 45,410

Capacity Utilized 77.85%

SECTION IV DESCRIPTION OF PROPERTY

A) The Company owns the following fixed assets at written down value as on 31 October 2010

(As per audited accounts)

Name of the Assets Written Down Value after revaluation

As on 31 October 2010

Free Hold Land 772,947,000

Building and civil construction 686,666,575

Plant & Machinery 819,679,874

Office Equipment 483,530

Computer 2,959,009

Electric Installation & Air condition 24,572,040

Fire Extinguisher 109,461

Weight Scale 1,513,728

Furniture & Fixtures 2,201,115

Motor Vehicles 17,494,866

Total 2,328,627,198

B) All the above-mentioned assets are situated at Company’s Factory site at Juramtal ,Baro

Kumira, Sitakunda, Chittagong, Bangladesh as well as at head office premises and are in good

operating condition. C) All the assets of the company are in its own name except 10.5921 acres of land out of 11.0421 acres, Capital Machinery , factory building with related structure are mortgaged with following Banks:

Janata Bank Limited AB Bank Limited State Bank of India

Mutual Trust Bank Limited South East Bank Limited Mercantile Bank Limited

Standard Chartered Bank Limited

Social Islami Bank Limited Shahjalal Islami Bank Limited

Jamuna Bank Limited

D) No assets were taken under lease agreement.

E) No reconditioned or second hand plant and machinery are being used by the company.

SECTION V FINANCIAL CONDITION AND PLAN OF OPERATION

Internal and external sources of fund (as per audited accounts)

Internal Sources of Cash 31-10-2010

Taka 31-12-2009

Taka 31-12-2008

Taka 31-12-2007

Taka

Paid-up Capital 1,302,400,000 651,200,000 651,200,000 651,200,000

General Reserve - 202,085,763 - -

Retained Earning 1,139,748,194 1,251,145,146 999,618,113 872,487,020

Tax holiday reserve - - 202,085,763 202,085,763

Sub Total: 2,442,148,194 2,104,430,909 1,852,903,876 1,725,772,783

External Sources of Cash

Long term Liabilities - - 126,220,207 85,389,163

Short term Bank Loan 3,395,411,672 3,045,195,337 2,503,498,192 2,261,790,781

Sub Total 3,395,411,672 3,045,195,337 2,629,718,399 2,347,179,944

Grand Total 5,837,559,866 5,149,626,246 4,482,622,275 4,072,952,727

Material Commitment for Capital Expenditure

The company does not have any such commitment for capital expenditure except capital expenditure that is expected to be incurred with the financing from IPO proceeds .

Causes for any Material Change from Period to Period

(as per audited accounts) Particulars 31-10-2010

Taka 31-12-2009

Taka 31-12-2008

Taka 31-12-2007

Taka

Sales 5,429,388,206 4,348,942,559 2,582,068,789 2,117,127,407

Less: Cost of sales 4,782,515,074 3,917,942,273 2,354,515,889 1,930,323,567

Gross profit 646,873,132 431,000,286 227,552,900 186,803,840

Less: Administrative, Finance & Selling Expenses

101,473,697 33,314,790 26,398,252 16,169,477

Less: Amortization of Preliminary Expenses

- 593,574 -

Other Income 5,395,907 5,392,528 2,255,101

Net Operating Profit before WPPF

550,795,342 402,484,450 203,409,749

Less: WPPF 27,539,767

Profit/(Loss) before Taxes 523,255,575 402,484,450 203,409,749 170,634,363

Less: Income tax expenses 185,538,290 150,957,417 76,278,656 63,987,886

Profit/(Loss) After Tax 337,717,285 251,527,033 127,131,093 106,646,477

The last three years and ten month’s financial performance shows a gradual growth on a year to

year basis clearly demonstrating success in perusing aggressive growth plan by the Company. The turnover of the company has been increasing constantly and the gross profit has also been increased substantially. WPPF has been charged in the year 2010 when it was implemented. Profit After Tax is also showing a positive trend over the last years as mentioned above.

Graphical Presentation of KYCR’s Performance from 2005 to 2010

Net Asset Value (NAV)

Explanation on the Graphical Presentation (as above)

Since the year 2005 until 2009, the share capital of the company remained the same; i.e. Tk.651,200,000. In 2010, share capital of the company was increased to Tk.1,302,400,000 which has been reflected in the Financial Statements of October 2010. Net Asset Value has been calculated for all the years from 2005 till 2010 and it shows a steady and consecutive growth over the years until the year 2009. Due to issue of bonus shares in the year 2010 that is reflected in the October 2010 Accounts, NAV has declined slightly; since the

denominator (number of shares) has been increased significantly. Nevertheless, NAV of 2010 (for the 10 month period) seems to be very much strong if compared to the previous years as shown above.

Earnings Per Share (EPS)

Year EPS

2005 2.77

2006 3.97

2007 1.64

2008 1.95

2009 3.86

31 October 2010 2.59

Explanation on the Graphical Presentation (as above)

Basic Earnings Per Share (EPS) for the years 2005 was Tk.2.77 and increased to Tk.3.97 in the year 2006 due to the tax holiday. However, in 2007, the tax holiday was expired and taxation was charged on the earnings which is one of the critical factors that triggered EPS to decline to Tk.1.64. Movement in the cost of production does not necessarily trigger any significant variation compared to all the years listed above. Following the year 2007, EPS strengthened throughout the years until 2009. Also, the EPS reported for 10 month period stands at Tk.2.59 which was derived after deducting the Worker’s Profit Participation Fund (WPPF), introduced in

the very same year 2010.

2.78

3.97

1.641.95

3.86

2.59

0

0.5

1

1.5

2

2.5

3

3.5

4

EPS

2005 2006 2007 2008 2009 31 Oct

2010

Year

EPS

20.88

24.8526.5 28.45

32.3229.74

0

5

10

15

20

25

30

35

NAV

2005 2006 2007 2008 2009 31-Oct-

10

Year

NAV

Year NAV

2005 20.88

2006 24.85

2007 26.50

2008 28.45

2009 32.32

31 October 2010 29.74

Turnover

Explanation on the Graphical Presentation (as above) The Sales revenue was decreased in 2006 as compared to the performance in 2005, but took a positive upturn since 2006 and showed continuous growth until the year 2009. Sales revenue for

only 10 month period as on 31 October 2010 is still showing upward trend compared to 2009. Seasonal aspect of the company’s business

The product is highly seasonal; consumption picks up from the month of November to April and pick comes during January-February. It then starts declining from June onwards which continues till September. Being seasonal, price also varies widely throughout the year. Prices become high

and sometime go bizarre without logic during the season, and sharp fall may be noticed, once season is over.

Known trends, events or uncertainties Known events that may affect the business operations of the company are:

1. Introduction of Government policy that may have adverse impact on the company operations. 2. Shortage of supply of power and other utilities required for the manufacturing of products. 3. Political and Labor Unrest 4. Natural Disaster 5. Entrant of Financially viable entities in the sector 6. Government intervention at different stages of the relevant industry. 7. Implementation of new legislation that may affect company’s affairs and most importantly,

8. The unavailability of raw materials on a regular basis (Level of scarcity of resources must be taken into consideration) Changes in the assets of the company used to pay off any liabilities No asset of the company used to pay off any liabilities.

Loan taken from holding/parent company or subsidiary company

No loan was received from any holding/parent company or subsidiary company. Loan given to holding/parent company or subsidiary company No loan has been given to any holding/ parent company or subsidiary company.

Year Turn over (million)

2005 3354.16

2006 2013.9

2007 2117.13

2008 2582.07

2009 4348.94

31 Oct 2010 5429.39

Turn over (million)5429.39

4348.94

3354.16

2013.9

2117.13

2582.07

0

1000

2000

3000

4000

5000

6000

2005 2006 2007 2008 2009 31 Oct 2010

Year

Turn

over

(ml)

Future capital expenditure

No future capital expenditure is planned except as noted under the heading “Material

commitment for capital expenditure”.

VAT, income tax, customs duty or other tax liability

VAT

The Company has 18 cases pending with the VAT authority against disputes arose during the period from 2005 to 2010. All the cases relate to Duty differences, Audit demand, Price

declaration, Tariff value, etc. The Honorable High Court issued stay order against all of them except 3 cases which are in Appellate Tribunal and awaits for final hearing. A provision for contingent liability has been created against these cases.

Income tax The IT assessment for the all years to 2008 (IT Assessment year 2009-2010) have been

completed and agreed with the Tax Authorities while the return for 2009 has been filed and pending for assessment. Company paid Tk 167,507,130 as advance, which will be adjusted with above provision on finalization of assessment for the year 2009. Customs duty or other liabilities No customs duty or similar liabilities of the company are outstanding as on 31st October 2010

except for the normal course of business. Operating lease agreement

KYCR Coil Industries Limited did not have any operating lease agreement with any organization on 31st October 2010.

Financial lease and other financial commitment KYCR Coil Industries Limited did not have any Financial Lease agreement with any organization at 31st October 2010. Personnel related scheme The Company believes in supporting its employees and is offering incentives and motivation for

its continued profitability and prosperity. It provides the employees the following schemes & benefits:

(a) EBF (Employees benefit fund)

The management of the Company contributes 2% and the employees contribute 5% for the entitlement of the benefits. The benefits are only for the employees who work more than 5 years in the Company.

(c) Workers’ Profit Participation Fund

In the year 2010, the Company has introduced Workers’ Profit Participation Fund (WPPF) which is reflected in the 31st October 2010 Accounts. (a) Other Benefits and Allowances

The Company provides medical allowances to its employees. Furthermore, it also allows leave encashment benefits, insurance, etc. to the employees.

Revaluation of Assets

The Company made revaluation of its assets in FY 2010 and reflected in the Financial Statements of that year. Particulars of the valuer and summary of report are as follows:

Name : Shafiq Bashak & Co. Qualification : A firm of Chartered Accountants Work done (report date) : 20 September, 2010 Reason for Revaluation : To incorporate the fair present value of the major

assets of the company in the financial statements.

Other major works done by the valuer

As a Chartered Accountants Firm it did valuation jobs in addition to normal audit works namely : (i) IFIC Bank Ltd (ii) Desh Garments Ltd (iii) Pacific Industries Ltd (iv) Therapeutics (BD) Ltd (v) National Banks Ltd (vi) Lloyds (vii) Land & Building of Glaxo Wellcome Bd. Ltd (viii) Merimo Ltd .CEPZ (ix) Bangladesh Welding Electrodes Ltd. (x) Land & Building of Hoechst Bangladesh Ltd.

Itemizing showing comparison Itemizing showing comparison

Particulars

Asset Value Before

Revaluation (Tk.)

Revalued Amount (Tk.)

Revaluation Surplus

(Tk.)

Free Hold Land 30,607,953 772,947,000 742,339,047

Building and civil construction 198,978,066 704,840,300 505,862,234

Plant & Machinery 641,683,119 826,497,512 184,814,393

Electric Installation &Air condition

12,534,784 25,000,000 12,465,216

Weight Scale 508,852 1,540,000 1,031,148

Motor Vehicles 17,796,359 17,812,935 16,576

Total 902,141,429 2,348,637,747 1,446,528,614

Methodology of Valuation There are a couple of internationally recognized methodologies commonly applied for valuation of property, plant & equipment. Out of these, market value method, considered most

appropriate, was applied for revaluation of KYCR Coil Industries Ltd. market value method essentially estimates the cost of replacing the tangible assets of business. The replacement cost takes into account the market value of various assets required to be acquired to create the infrastructure exactly similar to that of the company being revalued. Alternatively, this methodology can also determine the money value which can be realize by selling off all tangible assets of a company.

Transaction with subsidiary/holding company or associate companies The Company carried out a number of transactions with related parties in the normal course of business.

(as per Audited Accounts)

Auditors’ certificate regarding allotment of shares to promoters or sponsor shareholders for any consideration other than in cash.

This is to certify that as per share register and other relevant records maintained by KYCR Coil Industries Limited, the company did not allot any shares for consideration other than in cash to any shareholders including its promoters and/or sponsor shareholders up to 31 October 2010 except 65,120,000 bonus share.

Sd/- Dated, Chittagong Hoda Vasi Chowdhury & Co 03 January 2011 Chartered Accountants Material information which is likely to have an impact

There is no other material information which is likely to have an impact on the offering or change the terms and conditions under which the offer has been made to the public.

Sl Name of Parties Relationship Types of

Transaction 31.12.06 Taka 31.12.07 Taka 31.02.08 Taka

31.12.09

Taka

31.10.10

Taka

1 KY Steel Mills Ltd. Sister

Concern

Sales of

CR Coil

321,634,359 485,945,210 351,131,079 173,788,110

368,362,261

2 Steel Accessories Ltd. Sister

Concern

Loan and

Investment

39,855,679

62,134,505

81,226,526 163,350,778 148,826,920

SECTION VI DIRECTORS AND OFFICERS

Information regarding directorship

Sl

No.

Name of Director

Position

Age

(Years)

Date of

becoming

director for the

first time

Date of

expiry of

current term

1 Mr. Khalilur Rahman Managing Director

65 Since Inception *

2 Mr. Salim Rahman Chairman 37 Since Inception *

3 Ms. Tahsina Rahman

Director 29 13.07.2010 *

*According to Articles of Association of the company, one-third of the directors or if their number is not three or multiple of three then the number nearest to one-third shall retire from office by rotation at the Annual General Meeting.

Directors' involvement in other organization

Name of the directors Name of the Company Relationship

Mr. Khalilur Rahman

KDS Garments Ltd KDS Apparels Ltd KDS Hi-tech Garments (BD) Ltd KDS Fashion Ltd KDS Textile Mills Ltd

KDS Cotton Poly Thread Ind. Ltd KY Steel Mills Ltd Steel Accessories Ltd KDS Logistics Ltd Vortex Multi Ind. Ltd Sykes Securities Ltd KIY Steel Ind. Ltd.

Chairman Chairman Chairman Chairman Managing Director

Managing Director & Chairman Chairman Chairman Chairman Chairman Director Chairman

Mr. Salim Rahman

KDS Garments Ltd KDS Apparels Ltd KDS Hi-tech Garments (BD) Ltd KDS Fashion Ltd KDS Textile Mills Ltd KDS Accessories Ltd KDS Poly Industries Ltd

KDS Cotton Poly Thread Ind. Ltd Steel Accessories Ltd KDS Logistics Ltd Vortex Multi Ind. Ltd Sykes Securities Ltd

Managing Director Managing Director Managing Director Managing Director Director Chairman Chairman

Director Managing Director Managing Director Director Chairman

Ms. Tahsina Rahman

N/A N/A

Family relationship among Directors and top five officers

Name Position Relationship

Mr. Khalilur Rahman MD Father of Mr. Salim Rahman

Mr. Salim Rahman Chairman Son of Mr Khalilur Rahman

Ms. Tahsina Rahman

Directors Wife of Mr. Salim Rahman

Short bio-data of the directors

Mr. Khalilur Rahman, Managing Director

MR. KHALILUR RAHMAN is a seasoned and experienced businessman. He is running several industrial units as their Managing Director viz. (1) KDS Garment Industries Limited (2) KDS Cotton Poly Thread Industries Limited (3) KYCR Coil Industries Limited (4) KDS Textile Mills Limited. Besides, he has got a enormous experience in various manufacturing sectors as a

Chairman viz., Garment Division, Accessories Division, Steel Division, IT Sector, Textile, Agro processing Sector, Telecommunication Sector, Power Plant Sector, Shipping (Inland Container Depot), Fuel & Oil Sector, Securities Sector, Banking Sector, Insurance Sector. He has been rewarded different types of award from home and abroad for his valuable contribution in industrial sector of Bangladesh i.e. (1) President Gold Trophy for Highest Export in Readymade Garments from 1985 to 1998. (2) Supplier of the year 2005 Award Received

from WALMART, CANADA, and WALMART, UK GEORGE. (3) VENDOR EXCELLENCE AWARD - 2004 from Charming Shoppes, Inc. USA (4) Business Innovative Director, Texas, USA (5) Award of KMART Apparels Corporation, USA 1998,1999 & 2000 etc. A large number of non-profit and entirely charitable educational institutions has been founded by Mr. Khalilur Rahman. He is a resourceful member of the company and enjoying his status as a CIP which is recognized by Bangladesh Government. He is an ex-vice president of BGMEA

(Bangladesh Garment Manufacturer & Export Association). Mr. Salim Rahman, Chairman He has completed MBA from USA and acting as a Director in the company. He has been actively involved with different sectors like Garment, Accessories, steel, IT, Textile, Agro processing, telecommunication, Power plant, Shipping, Fuel & oil, Securities, Banking and Insurance.

Besides KDS Group, he is also working as a Managing Director viz., (1.) DK Power Plant Limited (Proposed), (2) Raman CNG Co. Ltd., (3) SKY Securities Limited. He is also involved with many social organizations and activities.

Ms. Tahsina Rahman, Director She is a graduate from University of Science and Technology Center. Currently, she is doing her

MBA at IUB. She has approximately five years of experience with different organizations and currently holding the responsibility as a director of the Company. Credit Information Bureau (CIB) report

Neither the company nor any of its directors or shareholders who holds 5% or more shares in the Paid in Capital of the issuer is loan defaulter in terms of the CIB report of Bangladesh Bank.

Description of senior executives and department heads

Name Designation Education Qualification Experience

Mr. Khalilur Rahman MD B.Com (Management) The founder of

KDS Group

Mr. Munir Hussain Khan Director & CEO MBA from University of

Phoenix, Arizona

17 Years

Mr. Gurdeep Singh Head of Plant Graduate-Mechanical

Engineer 29 Years

Mr. Moddassar Ahmed Siddique

Sr. General Manager- Finance & Accounts

Chartered Accountant (FCA)

14 Years

Mr. M.A. Chowdhury General Manager-

Sales & MKT M.A. (Political Science) 10 Years

Mr. Amir Hossain Plant Head-

Galvanizing Plant BSC in Engineering &

Technology- BUET

25 Years

Section VII Involvement of Directors and officers in certain legal

proceedings No director or officer of the Company was involved in any of the following types of legal proceedings in the last ten years:

(a) Any bankruptcy petition filed by or against company of which any officer or director of the issuer company filing the Information Memorandum was a director, officer or partner at

the time of the bankruptcy.

(b) Any conviction of director, officer in a criminal proceeding or any criminal proceeding pending against him.

(c) Any order, judgment or decree of any court of competent jurisdiction against any director, officer, permanently or temporarily enjoining, barring, suspending or otherwise

limiting the involvement of any director or officer in any type of business, securities or banking activities.

(d) Any order of the Securities and Exchange Commission, or other regulatory authority or

foreign financial regulatory authority, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or banking activities.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transaction with related parties

Neither any proposed transaction nor had any transaction during the last two years, between the issuer and any of the following persons:

(a) Any director or executive officer of the issuer;

(b) Any director or officer;

(c) Any person owning 5% or more of the outstanding shares of the issuer; (d) Any member of the immediate family (including spouse, parents, brothers, sisters, children,

and in-laws) of any of the above persons. (e) Any transaction or arrangement entered into by the issuer or its subsidiary for a person who

is currently a director or in any way connected with a director of either the issuer company or any of its subsidiaries/holding company or associate concerns, or who was a director or connected in any way with a director at any time during the last three years prior to the issuance of Information Memorandum.

(f) Any loan either taken or given from or to any director or any person connected with the

director, any loan taken from any such person who did not have any stake in the issuer, its holding company or its associate concerns prior to such loan.

(g) Any director holding any position, apart from being a director in the issuer company, society, trust, organization proprietorship or partnership firm.

Except the transactions shown under “Related Parties Transactions”, note -27 of audited accounts 31 October 2010 and directors facilities shown hereunder.

Sl. No

Name of the Parties

Relationship Types of

Transaction

Closing

Balance as at

31.10.2010 Taka

Closing

Balance as at

31.12.2009 Taka

1 KY Steel Mills Ltd. Sister Concern Sales of CR Coil 368,362,261 173,788,110

2 Steel Accessories Ltd.

Sister Concern Loan and

Investment 148,826,920 163,350,778

Total 517,189,181 337,138,888

Directors' facilities

The Directors of KYCR does not enjoy any facilities except Board meeting fee and full time car facilities .

EXECUTIVE COMPENSATION

Remuneration paid to top five salaried officers

Sl. No.

Name Designation From 01.01.10 to 31.10.10

Amount in Tk.

1 Mr. Munir Hussain Khan Director & CEO 20,90,000

2 Mr. Gurdeep Singh Plant Head 35,00,000

3 Mr. Moddassar Ahmed Siddique

Sr. General Manager- Finance & Accounts

10,00,000

4 Mr. M.A. Chowdhury General Manager-

Sales & MKT 10,72,560

5 Mr. Amir Hossain Plant Head- Galvanizing

Plant 7,37,800

Aggregate amount of remuneration paid to directors and officers (As per audited accounts)

Group Amount paid

01.01.10 to 31.10.10

Amount paid 01.01.09 to

31.12.09

Directors’ Remuneration 320,000 384,000

Officers’ salaries, benefits & bonuses including management emoluments

60,836,555 65,227,425

Remuneration paid to directors who was not an officer of the company

None of the directors enjoys any remuneration except board meeting fees.

Future compensation to Directors or Officers

There is no contract with any director or officer for future compensation.

Pay increase intention The company is yet to finalize its personnel policy. However, Periodical review of salaries and

benefits of the employees will be made depending on the growth of the company’s operation.

OPTIONS GRANTED TO DIRECTORS, OFFICERS AND EMPLOYEES

The company has not granted any option to directors, officers or employees.

TRANSACTION WITH THE DIRECTORS AND SUBSCRIBERS TO THE MEMORANDUM

(a) The Directors and subscribers to the memorandum have not received any benefits except board meeting fees, directly or indirectly during the last five years. The issuer also has not received any assets, services or other considerations from its Directors and subscribers to the memorandum expect fund against allotment of shares.

(b) No assets were acquired or are planned to be acquired from the Directors and subscribers to the memorandum.

TANGIBLE ASSETS PER SHARE

Particulars 31-10-2010

Taka

Share Capital (As per B/S) 1,302,400,000

Revaluation Reserve 1430576602

Retained Earnings 1,139,748,194

General Reserve -

Net Assets 3,872,724,796

Less: Intangible Assets ( Preliminary Expenses) -

Net Tangible Assets 3,872,724,796

Total Ordinary Shares 130,240,000

Net tangible assets per share ( Tk. 10 per Share) 29.74

OWNERSHIP OF THE COMPANY’S SECURITIES AS ON 31ST OCTOBER 2010

Shares held by Directors/shareholders

Sl. No Names of the

Shareholders Status

Total No. of

Share Issued

Shareholding

Position

1 Mr. Khalilur Rahman MD 12,000,000 9.21%

2 Mr. Salim Rahman Chairman 18,000,000 13.82%

3 Mr. Tahsina Rahman Director 10,000,000 7.68 %

4 KDS Hi - Tech Garments

(BD) Ltd. Shareholder 28,000,000 21.50 %

5 KDS Garments Industries Ltd.

Shareholder 22,240,000 17.08 %

6 KIY Steel Industries Ltd. Shareholder 3,000,000 2.30%

7 KY Steel Mills Ltd. Shareholder 37,000,000 28.41 %

Total 130,240,000 100%

Shareholding structure for 5% or more as on 31 October 2010

Sl. No Names of the Shareholders

Status Total No. of

Share Issued Shareholding

Position

1 Mr. Khalilur Rahman MD 12,000,000 9.21%

2 Mr. Salim Rahman Chairman 18,000,000 13.82%

3 Mr. Tahsina Rahman Director 10,000,000 7.68 %

4 KDS Hi - Tech (BD) Ltd. Shareholder 28,000,000 21.50 %

5 KDS Garments Industries Ltd.

Shareholder 22,240,000 17.08 %

6 KY Steel Mills Ltd. Shareholder 37,000,000 28.41 %

Total 127,240,000

Securities owned by the officers No officer own shares of the company as on 31 October 2010 except Mr. Khalilur Rahman , Managing Director.

Section VIII

DETERMINATION OF OFFERING PRICE

The Fair Value will be determined by the Issuer in consultation with Issue Manager on the basis of assessment of market demand for the offered Equity Shares by the Book Building Process. The face value of the Equity Shares is Tk. 10/- . Investors should read the following summary along with the risk factors and the details about the Company and its financial statements. Indicative Price for Book Building Purpose

The following Quantitative and major Qualitative factors should be considered in assessing the Fair Price of the shares of KYCR Coil Industries Limited and accordingly the indicative price may be quoted. QUALITATIVE FACTORS Professional Management

The management recruits, employs, trains and motivates a pool of employees who carry out the operations at every layer of the organization. The process of manufacturing of KYCR products are operated by skilled professionals who are of various backgrounds such as engineering, etc. It also has experienced marketing team and technicians. Their activities are driven with the direction from the board of directors who have long years of exposure in the industry. The

background and activities of the board of directors must also be taken into consideration as it counts a great deal for the efficiency and effectiveness of business operations. Capital Equipments KYCR owns and employs modern, specialized and critical equipments which are essential to execute projects effectively. KYCR has the Cold Rolling Plant that is one of the most advanced

plant in Bangladesh; imported from Germany. Besides, the Company uses brand new machineries and equipments for production of the products. Quality Control KYCR employed skilled staff for maintenance of quality and improvement of such over the period of time. Continuous improvement while eliminating waste has always been the target of the

functional individuals involved. The Company has ISO certification and maintains its standards as per local as well as international requirements. Brand Value The company has already established the brand “Murgi” in the marketplace that is well accepted by the consumers and presently being one of the strongest and renowned five major brands

known throughout the country. The brand “Murgi” has been the only choice of people in certain parts of the country even though other brands play their roles in a competitive manner in other territories across various regions in the country.

QUANTITATIVE FACTORS

KYCR Coil Industries Limited is a growing company and the relevant highlights have been provided below:

Financial Year Turnover (Tk.) Profit after Tax

(Tk.)

Fixed Assets

(Tk.)

NAV per

share

EPS

October -2010 (10

Months)

5,429,388,206 337,717,285 2,328,627,198 29.74 2.59

2009 4,348,942,559 251,527,033 953,004,172 32.32 3.86

2008 2,582,068,789 127,131,093 1,009,134,700 30.39 1.95

2007 2,117,127,407 106,646,477 667,122,786 27.81 1.64

2006 2,013,900,743 258,686,924 748,488,626 27.27 3.97

2005 3,354,160,882 180,636,178 842,461,940 25.80 2.77

The following methods have been applied to obtain the fair price. The Prices derived from each method have been averaged in order to minimize influence of any unusual factor, if any, in

obtaining the weighted average price as under:

Particulars Amount

(Tk.)

Method 1: Net Asset Value 29.74

Method 2: Historical Earnings based value per share 78.80

Method 3: Market Price based value per Share 123.02

Method 4: Valuation with reference to P/E of similar stocks 159.20

Method 5: Valuation with reference to P/BV of similar stocks 208.77

Average 119.90

Based on conservative estimate fair price of KYCR Coil Industries Limited stands at Tk. 119.90. However considering the attractiveness for the investors the management of KYCR in consultation with the issue manager expects its share price at Tk. 90/- each. However, indicative price will be fixed on the basis of price quoted by the EIIs.

VALUATION AND THE PROCEDURES USED

Valuation is an estimation of the market value of an entity. It differs from an appraisal which only takes tangible assets into account. However, it is important to consider the relevant factors relating to the firm in order to derive a value, which is relatively close to the actual worth of the company. The valuation for KYCR Coil Industries Limited has been carried out based on accumulated information; taken from internal and external sources that are reliable.

Few different methods have been used to determine the value of the shares of KYCR Coil Industries Limited under book building method, each of which provides different types of values as they cover different aspects of the company’s current position and future prospects. In order to avoid the effect of differences in results produced in the methods, we have taken average of the results with weight assigned for each method. The management always considered using approaches which are reasonable so as to arrive at a justified price of the shares of the company. However, the interpretation of the pricing methods by the investors is very subjective

in nature and may vary from one to another.

CALCULATIONS OF METHODOLOGIES

Method 1: Net Asset Value

Particulars 31-10-2010

Taka

Share Capital (As per B/S) 1,302,400,000

Revaluation Reserve 1430576602

Retained Earnings 1,139,748,194

General Reserve -

Net Assets 3,872,724,796

Less: Intangible Assets ( Preliminary Expenses) -

Net Tangible Assets 3,872,724,796

Total Ordinary Shares 130,240,000

Net tangible assets per share ( Tk. 10 per Share) 29.74

Method 2: Historical Earnings based value

Earnings based Value method is also based on historical performance sourced from previous audited financial statements and statistics from Dhaka Stock Exchange. The value is calculated by taking average of periodic EPS during last five years eight months based on current share capital. To arrive at earning based value average, EPS is multiplied by average P/E ratio of DSE during last twelve months.

Earning based valuation are appropriate for any matured company. KYCR has already proved

their market potentiality, strength of company’s asset as well as growth of market share. Set out below the calculation:

Year NPAT EPS

Oct-2010 (annualized) 405,260,742 3.11

2009 251,527,033 3.86

2008 127,131,093 1.95

2007 106,646,477 1.64

2006 258,686,924 3.97

Average EPS 2.91

Earning based value per share (EPS X Average DSE P/E for last one year*)

78.80

Note: Average Price to Earnings ratio (P/E) for all companies listed with DSE during the same

one year period from September, 09 to October, 10 was 25.73 as illustrated in the calculation below:

Month P/E Ratio Month P/E Ratio

November,09 25.00 May,10 27.73

December,09 25.65 June,10 24.08

January,10 29.35 July,10 24.55

February,10 30.58 August,10 25.81

March,10 27.59 September,10 26.29

April,10 29.88 October,10 28.46

Average 27.08

Source: DSE monthly Review

Valuation with reference to Similar Stocks Following assumptions were taken to find out the representative Price/earning (P/E) for valuation of KYCR shares:

1. Analyzed the distribution of P/E multiples of the companies listed with Dhaka stock exchange.

2. Steel & steel related manufacturing companies are taken as similar company.

3. To remove the impact of regular price variations, average price of last 12 months (November 2009 to October 2010) has been taken in determining P/E multiples. The price of the comparables at Dhaka Stock Exchange is used for this purpose

Method: 3 Market price based value per share

Sl. No. Company Name 12 Month Avg. Price

1 S Alam Cold Rolled Steels Ltd. 780.65

2 BSRM Steels Limited 1679.83

Total 2460.48

Average (Face Value Tk. 100) 1230.24

Average (Converted face value of Tk. 10) 123.02

Method: 4 Valuation with reference to P/E of similar stocks

Sl. No. Company Name 12 Month Avg. Price EPS P/E Ratio

1 S Alam Cold Rolled Steels Ltd. 780.65 14.57 53.58

2 BSRM Steels Limited 1679.83 34.43 48.79

Total 2460.48 102.37

Average 1230.24 51.19

Taking the weighted average P/E of S. Alam Cold Rolled Steels Limited and BSRM Steels Limited

for the period of 01 November, 2009 to 31 October, 2010 (workings above) value stands at:

Average DSE P/E X Annualized EPS of KYCR = 51.19 X 3.11 = Tk. 159.20

Method 5: Valuation with reference to P/BV of similar stocks (P/BV)

Sl. No. Company Name 12 Month Avg. Price

NAV Per Share P/BV Ratio

1 S Alam Cold Rolled Steels Ltd. 780.65 111.13 7.02

2 BSRM Steels Limited 1679.83 8.62 194.88

Total 2460.48 201.9

Average 1230.24 100.95

P/BV ratio of BSRM Steels Limited is abnormally high. To represent conservative valuation, BSRM Steels is excluded and only the weighted average P/BV ratio of S. Alam Cold Rolled Steels Limited is considered. Accordingly value stands at:

Average P/BV ratio of S Alam Cold Rolled Steels Ltd X NAV of KYCR = 7.02 X 29.74 = Tk.

208.77

Determining price under Book Building Method:

Book Building is a process through which an issuer attempts to determine the price to offer its security based on demand from institutional investors. Under the process, the price of an IPO

share will be determined through an automated bidding to be participated by different financial institutions and then the share will be opened for the IPO participant at the cut-off price determined during the book building process. The bidding will be handled through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by the Commission, especially developed for book building method. The entire procedure of price discovery under book building method is delineated below.

(a) The issuer/issue manager shall issue invitation to the eligible institutional investors, both in

writing and through publication in at least 5 (five) widely circulated national dailies, giving at least 10 (ten) working days time, to attend the road show/presentation/seminar indicating time and venue of such event. The invitation letter shall accompany an information document containing all relevant information covering the proposed issue of the issuer. The eligible institutional investors shall submit indicative price to the issuer/issue manager, signed jointly by the Chief Executive Officer (CEO) and the Financial Analyst, highlighting the factors taken into

consideration in support of the indicative price, within the next 3(three) working days of the said road show/presentation/seminar;

(b) The Information Document (ID) Shall be sent to the following institutions/ associations, unless otherwise directed by the Commission, at least 5(five) working days prior to the road show/ presentation/ seminar:

(i) Stock Exchanges

(ii) Bangladesh Association of Publicly Listed Companies (BAPLC) (iii) Bangladesh Merchant Bankers’ Association (BMMA) (iv) Bangladesh Association of Banks (BAB) (v) Bangladesh Leasing and Finance Companies Association (BLFCA) (vi) Bangladesh Insurance Association (BIA) (vii) Registered asset management Companies;

(c) Participation of the representatives of the stock exchanges and Bangladesh Merchant Bankers’ Association in the road show/ presentation/ seminar as observer.

(d) The issuer, in consultation with the issue manager, shall quote its own indicative price in the prospectus based on the indicative prices so obtained from the eligible institutional investors: Provided that the quote of the indicative price in the prospectus shall not exceed the arithmetic mean of the price offers so obtained from the eligible institutional investors;

(e) The prospectus shall simultaneously be submitted to the Commission and the stock exchanges along with the due diligence statements issued by all concerned;

(f) If any issue fails to get indicative prices from at least 15 (fifteen) eligible institutional investors covering at least 3 (three) categories, including at least 5 (five) registered merchant bankers, the whole process shall be cancelled, which may be repeated with prior permission of the Commission.

(g) Rationale for the indicative price must be included in the prospectus i.e. the issuer is required to disclose in detail about the qualitative and quantitative factors justifying the indicative price; (h) The indicative price shall be the basis for formal price building with an upward and downward band of 20% (Twenty Percent) of indicative price within which eligible institutional investors

shall bid for the allocated amount of security.

(i) Eligible institutional investors bidding shall commence after getting consent from the Commission for this purpose.

(j) Institutional bidding period shall be 2(two) successive working days, which may be changed with the approval of the Commission.

(k) The issuer and the issue manager shall submit the status of bidding and the cut off price, along with the draft prospectus, simultaneously to the Commission and the stock exchanges within 3(three) working days from the closing day of the bidding.

(l) If institutional quota is not cleared at 20% (Twenty Percent) below indicative price, the issue

will be considered cancelled unless the floor price is further lowered within the face value of security. Provided that, the issuer’s chance to lower the price shall not be more than once.

(m) Prospectus will be posted on the Websites of the Commission, stock exchanges, issue manager and issuer at least 2 (two) weeks prior to the start of the bidding to facilitate investors to know about the company and all aspect of offering.

(n) No institutional investor shall be allowed to quote for more than 10% (Ten Percent) of the total security offered for sale, subject to maximum of 5 (Five) bids.

(o) The bidding will be handled through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by the Commission, especially developed for book building method;

(p) The volume and value of bid at different prices will be displayed on the monitor of the said system without identifying the bidder.

(q) The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids that would clear the total number of securities being issued to them.

(r) Institutional bidders shall deposit their bid with 20% (Twenty Percent) of the amount of bid

in advance to the designated bank account and the rest amount to settle the dues against security to be issued to them shall be deposited within 5 (Five) working days prior to the date of opening subscription for general investors.

(s) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for full settlement of the security to be issued in their favor, 50% (Fifty Percent) of bid money deposited by them shall be forfeited by the Commission. The securities earmarked for the bidder who defaulted in making payment shall be added to the general investor quota.

(t) General investors, which include mutual funds and NRBs shall buy at the cut-off price;

(u) There shall be a time gap of not more than 15 (fifteen) working days or as may be determined by the Commission, between closure of bidding by eligible institutional investors and subscription opening for general investors;

(v) Subscription for general investors shall remain open for the period as specified by the Commission;

(w) General investors shall place their application through banker to the issue; and (x) All application money shall be kept in a separate escrow account opened with a designated bank with prior intimation to the Commission. Issuer will not be allowed to utilize such money

until all the process of issue is completed and Commission’s consent to this effect is obtained.

Section IX Allotment, Subscription and Market

MARKET FOR THE SECURITIES BEING OFFERED

The issuer shall apply to the following two Stock Exchanges within 7 (seven) working days from the date of consent

accorded by the SEC to issue the prospectus:

Declaration about listing of shares with the stock exchange(s) None of the stock exchanges(s), if for any reason, grants listing within 75 days from the closure of subscription, any allotment in terms of this Information Memorandum shall be void and the

company shall refund the subscription money within fifteen days from the date of refusal for listing by the stock exchanges, or from the date of expiry of the said 75 (seventy five) days, as the case may be. In case of non-refund of the subscription money within the aforesaid fifteen days, the company directors, in addition to the issuer company, shall be collectively as well as separately liable for refund of the subscription money, with interest at the rate of 2% (two percent) per month above

the bank rate, to the subscribers concerned. The issue manager, in addition to the issuer company, shall ensure due compliance of the above mentioned conditions and submit compliance report thereon to the Commission within seven days of expiry of the aforesaid fifteen days time allowed for refund of the subscription money. Trading and settlement

Trading and settlement regulation of the stock exchanges shall apply in respect of trading and settlement of the shares of the Company. DESCRIPTION OF SECURITIES OUTSTANDING OR BEING OFFERED Dividend, voting and pre-emption rights

The Share Capital of the Company is divided into Ordinary Shares, carrying equal rights to vote and receive dividend in terms of the relevant provisions of the Companies Act 1994 and the Articles of Association of the company. All shareholders shall have the usual voting right in person or by proxy in connection with, among others, election of Directors & Auditors and other usual agenda of General Meeting – Ordinary or Extra-ordinary. On a show of hand, every shareholder present in person and every duly authorized representative of a shareholder present

Dhaka Stock Exchange Limited

9/F, Motijheel C/A,

Dhaka-1000

Chittagong Stock Exchange Limited

CSE Buildng, 1080 Sk. Mujib Road

Agrabad, Chittagong-4100

and

at a General Meeting shall have one vote and on a poll every shareholder present or by proxy shall have one vote for every share held by him or her. In case of any additional issue of shares for raising further capital the existing shareholders shall

be entitled to Right Issue of shares in terms of the guidelines issued by the SEC from time to time.

Conversion and liquidation rights In terms of provisions of the Companies Act 1994, Articles of Association of the Company and other relevant rules in force, the shares of the Company are freely transferable. The Company shall not charge any fee for registering transfer of shares. No transfer shall be made to a firm,

an infant or person of unsound mind.

Dividend policy

(a) The profit of the Company, subject to any special right relating thereto created or authorized to be created by the Memorandum and subject to the provisions of the Articles of Association, shall be divisible among the members in proportion to the amount of capital paid-up on the shares held by them respectively.

(b) No large dividend shall be declared than is recommended by the Directors, but the Company in its General Meeting may declare a smaller dividend. The declaration of Directors as to the amount of Net profit of the Company shall be conclusive.

(c) No dividend shall be payable except out of the profits of the Company or any other undistributed profits. Dividend shall not carry interest as against the Company.

(d) The Directors may from time to time pay the members such interim dividend as in their judgment the financial position of the Company may justify.

(e) A transfer of shares shall not pass the right to any dividend declared thereon before the registration of transfer.

(f) No limitation in payment of dividend is stipulated in any debt instrument or otherwise.

Other rights of stockholders

In terms of the provisions of the Companies Act 1994, Articles of Association of the Company and other relevant rules in force, the shares of the Company are transferable. The Company shall not charge any fee, other than Government duties for registering transfer of shares. No transfer shall be made to a minor or person of unsound mind.

The Directors shall present the financial statements as required under the law & International Accounting Standard. Financial statements will be prepared in accordance with the International Accounting Standards consistently applied throughout the subsequent periods and present with the objective of providing maximum disclosure as par law and International Accounting Standard to the shareholders regarding the financial and operational position of the company. The shareholders shall have the right to receive all periodical statement and reports, audited as well as un-audited, published by the company from time to time.

The shareholder holding minimum of 10% shares of paid-up capital of the company shall have the right to requisition extra ordinary General Meeting of the company as provided for the section 84 of the Companies Act 1994.

DEBT SECURITIES

There is no debt securities issued or plan to issue by the company within 6 (six) months.

Section X RISK FACTORS & MANAGEMENT PERCEPTIONS ABOUT THE RISKS

Investors should be aware that there are risks associated with a particular investment in the company. These risks may result in loss of income or capital investment. Investors should carefully consider all the risks and uncertainties associated to the company along with all the information provided in this Information Memorandum before taking decision to invest in shares of KYCR Coil Industries Limited.

1. Interest Rate Fluctuation of the interest rates (Cost of borrowed funds) in a country affects the profitability as

well as liquidity position of a company. (It is relevant for the companies having loans/borrowings from banks/other financial institutions and significant for those with large loans/borrowings.) A favorable movement in the interest rates for the company results in positive effect on profitability of that company and an adverse volatility in such rates results in a negative consequence thereof.

Management Perception

Interest charges are incurred by the Company for different types of loans taken from Banks/Financial Institutions and these charges are negotiated by the Company with the respective loan providers at regular intervals. A very competitive rate is attained by the Company as it has very well-established goodwill in the marketplace in terms of loan repayments in time. The confidence level of the loan providers is raised by the management of the Company as it pursues growth and prosperity in terms of sales, assets, and other positive qualitative and quantitative factors on a gradual basis.

2. Foreign Exchange rate The project may face some degree of foreign exchange rate fluctuation risk as the Company imports raw materials against payment of foreign currency and exports the products for receipts of the same. Devaluation in the local currency may have significant impact on the profitability of the Company.

Management Perception Hedging mechanisms are employed by the company on a regular basis. If the price of the foreign currency appreciates against the local currency during import and/or depreciates during export, there will be a nationwide impact which would lead to market adjustment in the end product prices.

3. Industry Risk

a. Volatility in the Earnings Raw materials for the steel mill is fully imported and price in the international market is always volatile. Effect of volatility in price seriously affects the profitability of the company.

Management Perception KYCR imports most of the raw materials from abroad and exposed to such kind of risk. However, this risk would affect the industry as a whole and after a certain period of time, the costs are

adjusted in prices offered by all companies operating in the industry. Furthermore, the company has continuous monitoring, reporting and control to make the exposure below or within the standards set by the industry.

b. Market is highly competitive Some of the competitors of the Company are larger than the Company and have vast financial resources that may enable them to deliver products on more attractive terms or to invest large

amounts of capital into their business, including greater expenditure for better and more

efficient production capabilities. These competitors may limit the opportunity of the Company to expand its’ market share and may compete with it on pricing of products. The business, financial condition and prospects of the Company could be adversely affected if it is unable to compete with its competitors and sell its products at competitive prices.

Management Perception Few companies with famous brands are the key players in the industry. The Company markets the brand “Murgi ” all over the country that currently has captured a significant percentage of market share in the industry. Besides, it has established the brand name across various territories in the country that is believed to be a positive indicator for the Company in order to grasp more market shares in the near future.

4. Technology The technology used for manufacturing of steel determines not only the quality of steel produced but also the cost of production. The more sophisticated the manufacturing process, the lower will be the cost of production and therefore, higher the profitability.

Management perception Highly automated and competitive machineries are available with the company for the

manufacturing of steel. In Bangladesh, the Company has so far been one of the pioneers in setting up Cold Rolled Mill with State of the Art European Technology for further processing of the input materials. Moreover, the company has NOF plant that gives the Company a competitive edge as galvanization of steel is carried out rarely by companies in Bangladesh.

5. Potential and Existing Government Regulations The company operates under The Companies Act, Taxation Policy adopted by NBR, Regulations

of Securities and Exchange Commission (SEC) and rules adopted by other relevant regulatory organizations. Any abrupt changes in the policies formulated by those bodies may leave adverse impact on the business of the Company.

Management perception Any adverse policy, rule or regulation imposed on the overall sector may affect the Company’s operation and hence affect the profitability in turn. The management of the Company is aware of

the recent guidelines prescribed by all the relevant authorities and complies with such from time to time whilst enhancing the performance of the Company.

6. Raw materials supply Steady supply of raw materials is important to the steel industry since steel manufacturing is a continuous process. Companies which have control on over supply of their raw materials are more capable of being cost efficient than the others which do not possess such control. The control on over supply could be in the form of long-term supply contracts with suppliers.

Management perception Management has long years of experience in this arena and also they have maintained a very strong positive relationship with various suppliers (Large Supplier Base) where raw materials are sourced at competitive prices. Main raw material of KYCR is the Hot Rolled Sheet and Zinc which are imported from different sources. Over the last decade, the company has enjoyed continuous

flow of supply of raw materials in time and it has nevertheless forecasted better improvement in the near future. For ensuring regular supply, the Company has MOU with leading global suppliers like POSCO and HYUNDAI. 7. Power and Other Utilities Power is an important factor in the steel manufacturing industry. Interruption of power supply affects the flow of steel manufacturing. Companies with uninterrupted power supply can get

competitive edge over their competitors if such supply is in shortage in the overall industry.

Management perception The company has supply of power from PDB for 10 MW, 33 KV HT line for operation of the factory. Besides, the company has captive power plant having capacity of 2 MW (approx.) which is used for NOF plant to ensure uninterrupted continuous line production.

8. Working capital management Due to the long working capital cycle of the steel industry, efficient working capital management to be an important factor for steel manufacturers. The management of working capital is very much crucial for the profitability of the Company. Management perception

Company’s liquidity position is currently at satisfactory level and the management is constantly preparing the working capital budgets at regular intervals & also monitoring the actual movement in the working capital movement against the standards set. In case of any significant and unexpected variation, the Company takes necessary action after identifying the permanent and floating working capital separately. 9. Distribution network

Distribution channel in the supply chain is very crucial in terms of marketing of products among its customers. Any flaw or bottleneck in the chain will ultimately affect the company’s competitiveness in the marketplace and hence may also affect the profitability in turn. Management Perception The Company has more than 800 active/seasonal dealers in different belts across the country. The Company believes that this network and the cordial relationships that it enjoys with the

dealers/distributors/agents, enables it to market and distribute its steel widely and efficiently all over the country. Moreover from FY 2005 the Company has started to export CR Coil which currently comprises about 15% of its total sales quantity. 10. History of non-operation Since inception , the company did not experience any closure of operation except for the

requirement of maintenance. 11. Implementation of proposed New project The company proposed to invest its IPO proceeds for implementation of its new facilities to increase value added products. Any new project carries some inherent risks and may not be successful or may take long time to secure sustained profitability.

Management’s Perception KYCR started its commercial operation on 01 February 2002 and subsequently increased its production capacity by smooth implementation of NOF Plant. It is expected that the proposed expansion can be done smoothly based on experience of the sponsors in establishing project of this kind.

Section XI CORPORATE DIRECTORY

Registered Office

KYCR COIL INDUSTRIES LIMITED Factory: Juramtal, Baro Kumira, Sitakunda, Chittagong, Bangladesh.

Head Office: 255 Nasirabad I/A, Chittagong 4211, Bangladesh

Phone: 880 31 681241-4 | 682474-8 Fax: 880 31 682836 |

681398, Web: www.kdsgroup.net

Auditor

Hoda Vasi Chowdhury & Co. Delwar Bhaban (4th floor) 104, Agrabad C/A

Chittagong-4100

Manager to the Issue

Alliance Financial Services Limited Rahman Chamber (3rd floor) 12-13 Motijheel C/A, Dhaka- 1000 Tel: 9515468, 9515469

Fax: 88-02-9515467 web: www.allfin.org

Valuer

Shafiq Basak & Co. National House (1st floor) 109, Agrabad Comercial Area Chittagong-4100

Tel: 880-031-711561 Fax: 880-031-723680 E-mail: [email protected]

Credit Rating

Credit Rating Information and Services Limited (CRISL) Nakshi Homes (4th floor)

6/A Segunbagicha Dhaka-100 Tell: 880-2-7173700-1 Fax:880-2-9565783 E-mail:[email protected]

Company’s Compliance

Officer

Mr. Moddassar Ahmed Siddique FCA

CFO

http://www.allfin.org/

Section XII AUDITORS’ REPORT TO THE SHAREHOLDERS

OF


We have audited the accompanying balance sheet of the KYCR Coil Industries Limited as at 31 October 2010 and the related income statement to the period from 1 January to 31 October 2010, statement of cash flow and statement of changes in equity for the period then ended

together with the notes numbering 1 to 35 annexed thereto. The preparation of these financial statements is the responsibility of the Company’s management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion: In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Company’s affairs as of 31 October 2010 and of the results of it’s operations and it’s cash flow for the period then ended and comply with the Companies Act 1994, the Securities and Exchange 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 purposes of our audit and made due verification thereof;

(b) in our opinion, proper books of account 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 balance sheet and profit and loss account and it’s cash flow dealt with

by this report are in agreement with the books of account and returns.

(d) the expenditure incurred was for the purposes of the Company’s business.

Sd/- Chittagong, 3 January 2011 Chartered Accountants Hoda Vasi Chowdhury & Co


BALANCE SHEET

AS AT 31 OCTOBER 2010

31-Oct-10 31-Dec-09

ASSETS & PROPERTIES Notes Taka Taka

NON CURRENT ASSETS & PROPERTIES

2,615,018,054 1,007,786,722

Property, Plant & Equipment 3.1 2,328,627,198 953,004,172

Capital Work-in-Progress 3.3 - 7,715,050

Investment 4 286,390,856 47,067,500

Preliminary Expenses 5 - -

CURRENT ASSETS & PROPERTIES 5,056,888,229 4,446,151,159

Inventories 6 2,306,672,032 1,971,870,331

Receivables 7 1,756,020,785 1,744,751,099

Due from Sister Concern 8 517,189,181 337,138,888

Advances, Deposits and Prepayments

9 351,964,090 316,920,642

Cash and Bank Balances 10 125,042,141 75,470,199

TOTAL ASSETS & PROPERTIES Taka 7,671,906,283 5,453,937,881

SHAREHOLDERS' EQUITY & LIABILITIES

SHAREHOLDERS' EQUITY 3,872,724,796 2,104,430,909

Share Capital 11 1,302,400,000 651,200,000

General Reserve 12 - 202,085,763

Revaluation Reserve 13 1,430,576,602 -

Un-appropriated Profit 1,139,748,194 1,251,145,146

CURRENT LIABILITIES 3,799,181,487 3,349,506,972

Current Portion of Long Term Loan 14 - 126,220,207

Creditors and Accruals 15 114,514,696 13,087,676

Short Term Loan 16 3,395,411,672 2,918,975,130

Income Tax Provision 17 289,255,119 291,223,959

Taka 7,671,906,283 5,453,937,881

NET ASSETS VALUE PER SHARE (Basic)

28 29.74 323.16

NET ASSETS VALUE PER SHARE (Restated) 29.74 16.16

CONTINGENT LIABILITIES & COMMITMENTS

34

These financial statements should be read in conjunction with the annexed notes

and were approved by the Board of Directors on 02 January 2011

and were signed on its behalf by :

Sd/- Sd/- Sd/- COMPANY SECRETARY DIRECTOR

MANAGING DIRECTOR

Signed in terms of our separate report of even date annexed

Sd/-

Chittagong, 3 January 2011 CHARTERED ACCOUNTANTS


INCOME STATEMENT

FOR THE PERIOD FROM 1 JANUARY TO 31 OCTOBER 2010

31-Oct-10 31-Oct-09

Notes Taka Taka

Net Turnover 18 5,429,388,206 3,647,818,018

Cost of Goods Sold 19 (4,782,515,074

) (3,283,839,993)

Gross Profit 646,873,132 363,978,025

Operating Expenses

Administrative Expenses 20 (37,038,571) (23,165,331)

Selling and Distribution Expenses 21 (38,931,647) (6,500,898)

Trading Profit 570,902,914 334,311,796

Financial Expenses 22 (25,503,479) (939,037)

Gross Operating Profit 545,399,435 333,372,759

Amortization of Preliminary Expenses 5 - (527,439)

Profit after amortization of Preliminary Expenses

545,399,435 332,845,320

Other Income 25 5,395,907 2,778,077

Net Operating Profit before WPPF 550,795,342 335,623,397

Provision for WPPF (27,539,767) -

Net Operating Profit before Income Tax

523,255,575 335,623,397

Provision for Income Tax 17 (185,538,290) (125,858,774)

Profit after Income Tax 337,717,285 209,764,623

Earning Per Share (Restated) 29 2.59 1.61

Earning Per Share (Annualized) 3.11 1.93




Sd/- Sd/-

Sd/-

COMPANY SECRETARY DIRECTOR

MANAGING DIRECTOR

Signed in terms of our separate report of even date annexed

Sd/-

Chittagong, 03 January 2011 CHARTERED ACCOUNTANTS


CASH FLOW STATEMENT

FOR THE PERIOD ENDED 31 OCTOBER 2010

31-Oct-10 31-Oct-09

Notes Taka Taka

CASH FLOW FROM OPERATING ACTIVITIES

Cash received from customers & others 8,15,18,25 5,328,621,073 3,916,956,486

Cash paid to suppliers & employees 6,7,9,17,19,20,2

1 (5,338,199,439) (3,191,355,982)

Cash received / (payment) from short term bank loan 15 476,436,542 (119,628,096)

Financial Expenses 21 (25,503,479) (939,037)

Cash Inflow / (Outflow) from Operating Activities 441,354,697 605,033,371

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets 3.1 (33,954,242) (54,412,030)

Addition of Capital Work in Progress 3.3 7,715,050 (5,104,550)

Investment 4 (239,323,356) (98,659,191)

Cash Inflow / (Outflow) from Investing Activities (265,562,548) (158,175,771)

CASH FLOW FROM FINANCING ACTIVITIES

(Repayment) / Receipt of Term Loan 14 (126,220,207) (428,689,483)

Cash Inflow / (Outflow) from Financing Activities (126,220,207) (428,689,483)

Net Increase/ (Decrease) in Cash & Cash Equivalents Taka 49,571,942 18,168,117

Cash and Cash Equivalents at the beginning of the period 10 75,470,199 47,212,862

Cash and Cash Equivalents at the end of the period Taka 125,042,141 65,380,979

Operating Cash Inflow / (Outflow) Per Share (Basic) 30 3.39 92.91

Operating Cash Inflow / (Outflow) Per Share (Restated) 3.39 4.65


AUDITORS' REPORT TO THE SHAREHOLDERS

See Annexed Report

Sd/- Sd/- Sd/-

COMPANY SECRETARY DIRECTOR MANAGING DIRECTOR


STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD 31 OCTOBER 2010

Amount in Taka

Particulars Share Capital General Reserve

Revaluation Reserve

Unappropriated Profit

Total Equity

Balance at the beginning of the period 651,200,000 202,085,763 - 1,251,145,146 2,104,430,909

Net Profit (after tax) transferred from Profit & Loss Account

- - - 337,717,285 337,717,285

Revaluation Reserve from Revaluation Surplus - - 1,430,576,602 - 1,430,576,602

Bonus Share(Unappropriated Profit) 449,114,237 - - (449,114,237) -

Bonus Share(General Reserve) 202,085,763 (202,085,763) - - -

Balance at the end of the period 1,302,400,000 - 1,430,576,602 1,139,748,194 3,872,724,796

FOR THE PERIOD 31 OCTOBER 2009

Amount in Taka

Particulars Share Capital Tax Holiday

Reserve Unappropriated

Profit Total Equity

Balance at the beginning of the period 651,200,000 202,085,763 999,618,113 1,852,903,876

Net Profit (after tax) transferred from Profit & Loss Account

- - 209,764,624 209,764,624

Balance at the end of the period 651,200,000 202,085,763 1,209,382,737 2,062,668,500


AUDITORS' REPORT TO THE SHAREHOLDERS

See Annexed Report

Sd/- Sd/- Sd/-


KYCR COIL INDUSTRIES LTD

NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 OCTOBER 2010

1 THE COMPANY & IT'S OPERATIONS

The Company was incorporated in Bangladesh on 04th November 1995 as a Private Company registered under the Companies Act, 1994 bearing registration number CHC - 2071 of 1995. The Company’s Registered office is at 1, Hajji Amir Ali Chowdhury Road, Khatungonj - Chittagong with factory office at Jouramtall, Bara kumira, Sitakunda. The main objectives of the company is to own and establish mills, factories and workshop for manufacturing CR Coil, CI Sheet, Galvanizing Sheet, Plates etc. of all kinds and descriptions and to purchase or import raw materials to manufacture the same and its by-products and marketing the products and by-products locally and internationally. The Company started commercial production on 1st February 2002. Subsequently the Company was converted into Public Limited Company, along with the subdivision of face value of shares from Tk 100 to Tk 10 each and enhancement of Authorized Capital from Tk 1,000,000,000 to Tk 5,000,000,000 as per special resolution passed in the Board of Directors meeting held on 31 July 2010.

2 SUMMARY OF SIGNIFICANT ACCOUNTING AND VALUATION POLICIES

2.1 Basis of preparation and presentation of the financial statements

The financial statements have been prepared and the disclosures of information made in accordance with the requirements of the Companies Act 1994 and in compliance with the International Accounting Standards (IASs) adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), Bangladesh Accounting Standard (BAS) & Bangladesh Financial Reporting Standard (BFRS). The balance sheet and profit & loss account have been prepared according to BAS 1 “Presentation of Financial Statement” based on accrual basis of accounting following going concern assumption under Generally Accepted Accounting Principles (GAAP) in Bangladesh and cash flow statement according to BAS 7 “Cash Flow Statement”.

2.2 Accounting convention and assumption

The financial statements are prepared in accordance with the historical cost convention.

2.3 Principal accounting policies

The specific accounting policies have been selected and applied by the Company’s management for significant transactions and events that have a material effect within the Framework for the Preparation and Presentation of Financial Statements. Financial Statements have been prepared and presented in compliance with BAS 1 Preparation of Financial Statements. The previous years figures were prepared according to the same accounting principles. Compared to the previous period/year, there were no significant changes in the accounting and valuation policies affecting the financial position and performance of the company. However, changes made to the presentation are explained in the note for each respective item.

2.4 Application of Standards The following BASs are applied to the financial statements for the year under review:

BAS 1 Presentation of Financial Statements

BAS 2 Inventories

BAS 7 Cash Flow Statements

BAS 8 Accounting policies, changes in accounting estimates and errors

BAS 10 Events after the Balance Sheet date

BAS 12 Taxation

BAS 16 Property, Plant & Equipment

BAS 18 Revenue

BAS 24 Related Party Disclosures

BAS 33 Earnings Per Share

BAS 34 Interim Financial Reporting

BAS 37 Provisions, Contingent Liabilities and Contingent Assets

2.5 Property, Plant and Equipment

Property, Plant and Equipment are shown at historical cost less depreciation thereon. Depreciation is charged on diminishing balance method on all Property, Plant & Equipment except land. Depreciation on current period’s addition is charged for the full period irrespective of the date(s) of acquisition. Revalued amount was incorporated on 31st August 2010 and depreciation will be charged from that date. Depreciation on revalued amount for two months has been adjusted with revaluation surplus.

Rates of depreciation on various categories of Property, Plant and Equipment are as follows:

Particulars Rate of Depreciation

Factory Building 15%

Plant & Machinery 10%

Equipment & Appliance 10%

Furniture & Fixtures 10%

Motor Vehicles 10%

2.6 Inventories

Inventories are stated at the lower of cost or net estimated realizable value in compliance with the requirements of para 21 and 25 of BAS 2.

Category of Inventories Basis of valuation

Stores and Spares Weighted average (moving average) cost

Inventories-in-Trade:

Raw Materials Weighted average cost

Finished Products At lower of cost or net estimated realizable value

Stores and Spares Cost value

Materials-in-Transit At cost

2.7 Trade Receivables

Trade Receivables are recognized at cost which is the fair value of the consideration given.

2.8 Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash at banks, term deposit, government Treasury bill which are available for use by the company without any restrictions.

2.9 Foreign currency transaction

Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction date in accordance with BAS 21 the effect of changes in Foreign Exchange rates. Foreign currency transactions are translated at the exchange rate ruling on the date of transaction.

2.10 Creditors and Accrued Expenses

2.10.1 Trade and other payables

Liabilities are recorded at the amount payable for settlement in respect of goods and services received by the company.

2.10.2 Provision

The preparation of financial statements is in conformity with Bangladesh Accounting Standards BAS 37 provisions, contingent liabilities and contingent assets requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, assets and liabilities during and at the date of financial statements.

In accordance with the guidelines as prescribed by BAS 37 provisions were recognized in the following situation:

When the company has a present obligation as a result of past events;

When it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation; and

Reliable estimates can be made of the amount of the obligation.

We have shown the provisions in the balance sheet at an appropriate level with regard to an adequate provision for risks and uncertainties. An amount recorded as a provision represented the best estimate of the probable expenditure required to fulfill the current obligation on the balance sheet date. Other provisions are valued in accordance with BAS 37 Provisions, Contingent Liabilities and Contingent Assets and, if required, in accordance with BAS 19 Employee Benefits. Other Provisions comprise all recognizable risks from uncertain liabilities and anticipated losses from pending transactions.

2.11 Taxation

2.11.1 The Company was allowed tax holiday for a period of five years from 1st January 2002 to 31 December 2006.

2.11.2 Appropriate provision has been made for Income Tax on the Operating income of the Company during the period under report.

2.11.3 Deferred income tax

Deferred Tax has not been considered consistently.

2.12 Contingent liabilities and assets

Contingent liabilities are current or possible obligations, arising from past events and whose existence is due to the occurrence or non occurrence of one or more uncertain future events which are not within the control of the company. In accordance with BAS 37 Provisions, Contingent Liabilities and Contingent Assets they are disclosed in note - 34 to the financial statements.

2.13 Revenue Recognition

In compliance with the requirements of BAS 18 Revenue, revenue is recognized only when; Sale is completed and final.

2.14 Financial Expenses

According to BAS 23 borrowing cost that are directly attributable to the acquisition, construction or production of qualifying assets from part of the cost of that assets, other borrowing cost are recognized as an expenses. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Inventories that require a substantial period of time to bring to a salable condition can be regarded as qualifying assets for the purposes of this standard. Imported HR Coil of various thickness and sizes stored in bonded warehouse for long period of time for uninterrupted production and supply. Accordingly the financial expenses incurred for procurement of raw materials have been included in “Cost of Raw Materials” as directly attributable cost in conformity with the BAS 2 and BAS 23.

On the other hand, financial expenses of indirect nature have been charged under “Financial Expenses”.

2.15 Earning per share

The Company calculates Earning per Share (EPS) in accordance with BAS 33. Earning per Share has been shown on the face of Profit and Loss Account.

2.15.1 Basic earnings

The Company calculates earnings for the year attributable to the ordinary share holders. As there is no preference dividend, minority interest or extra ordinary items, the net profit after tax for the period has been considered as fully attributable to ordinary shareholders.

2.15.2 Basic earning per share

This has been calculated by dividing the basic earnings by the number of ordinary shares outstanding during the period under report. 2.15.3 Annualize earning per share The financial period of the company covers from 01 January to 31 October 2010. For better understanding compare with yearend proportionate of annual earnings per share has been disclosed.

2.16 Revaluation of Fixed Assets

The increased value of assets arised due to revaluation of assets has been credited to equity under heading of Revaluation Surplus / Reserve as per BSA - 16: Property Plant & Equipment.

2.17 Workers Profit Participation Fund

The Company makes provision @ 5% on Net Operating Profit with effect from 01 January 2010 in compliance with the Companies Profits (Workers Participation) Act, 1968 as amended in 1985.

2.18 Reporting Period

The financial period of the Company covers from 01 January to 31 October 2010.

3 PROPERTY, PLANT & EQUIPMENT

3.1 Operating Fixed Assets - at Cost Less Accumulated Depreciation - note 2.5

Particulars

Cost (Amount in Taka)

Depreciation Rate (%)

Depreciation (Amount in Taka)

Written Down

Value as on 31.10.2010

(Taka)

Opening Balance

as on 01.01.2010

Addition During the Year

Deletion During the Year

Closing Balance

as on 31.10.2010

Opening Balance

as on 01.01.2010

Charge During the Year

Deletion

During

the Year

Closing Balance

as on 31.10.2010

Land and Land Development: Free Hold Land 28,839,503 1,768,450 - 30,607,953 - - - - 30,607,953

Building: Factory Building 552,221,425 19,101,051 - 571,322,476 15% 350,235,736 27,635,843 - 377,871,579 193,450,897

Plant & Machinery:

Plant & Machinery 1,310,880,899 8,468,157 - 1,319,349,056 10% 623,408,271 57,995,064 - 681,403,335 637,945,721

1,310,880,899 8,468,157 - 1,319,349,056 623,408,271 57,995,064 - 681,403,335 637,945,721 Equipment & Appliance:

Office Equipment 1,104,504 11,800 - 1,116,304 10% 588,817 43,957 - 632,774 483,530 Computer 5,011,414 267,600 - 5,279,014 10% 2,051,004 269,001 - 2,320,005 2,959,009

Electric Installation & Air Conditioner

24,394,479 40,440 - 24,434,919 10% 11,000,834 1,119,507 - 12,120,341 12,314,578

Fire Extinguisher 264,160 - - 264,160 10% 144,748 9,951 - 154,699 109,461 Weight Scale 1,050,000 - - 1,050,000 10% 504,801 45,433 - 550,234 499,766

31,824,557 319,840 - 32,144,397 14,290,204 1,487,849 - 15,778,053 16,366,344 Furniture & Fixtures 3,274,851 833,810 - 4,108,661 10% 1,707,445 200,101 - 1,907,546 2,201,115 Motor Vehicles 26,463,457 3,462,934 - 29,926,391 10% 10,858,864 1,588,961 - 12,447,825 17,478,566

31.10.2010 Taka 1,953,504,692 33,954,242 - 1,987,458,934 1,000,500,520 88,907,818 - 1,089,408,338 898,050,596

31.12.2009 Taka 1,893,784,841 59,719,851 - 1,953,504,692 884,650,141 115,850,379 - 1,000,500,520 953,004,172

31-Oct-10 31-Oct-09 Basis

3.2 Depreciation Allocated to: Taka Taka

Factory Overhead - note 19.2 80,017,036 103,771,363 90% Administrative Expenses - note 20 4,445,391 5,765,076 5% Selling Expenses - note 21 4,445,391 5,765,076 5%

Taka 88,907,818 115,301,515 100%

31-Oct-10 31-Dec-09 3.3Capital Work-in-Progress Taka Taka

Factory Building - 7,615,050 Power Plant - 100,000

Taka - 7,715,050

3.4 Revaluation Reserve

Particulars

Cost (Amount in Taka)

Depreciation

Rate (%)

Depreciation (Amount in Taka) Written Down

Value as on

31.10.2010 (Taka)

Opening Balance

as on 01.01.2010

Revaluation

Surplus During

the Period

Deletion During

the Year

Closing Balance

as on 31.10.2010

Opening

Balance as on

01.01.2010

Charge During the Year

Deletion

During

the Year

Closing Balance

as on 31.10.201

0

Land and Land Development:

Free Hold Land - 742,339,047 - 742,339,047 - - - - 742,339,047

Building:

Factory Building - 505,862,234 - 505,862,234 15% - 12,646,556 - 12,646,556 493,215,678

Plant & Machinery:

Plant & Machinery - 184,814,393 - 184,814,393 10% - 3,080,240 - 3,080,240 181,734,153

- 184,814,393 - 184,814,393 - 3,080,240 - 3,080,240 181,734,153

Equipment & Appliance:

Office Equipment - - - - 10% - - - - -

Computer - - - - 10% - - - - -

Electric Installation & Air Conditioner

- 12,465,216 - 12,465,216 10% - 207,754 - 207,754 12,257,462

Fire Extinguisher - - - - 10% - - - - -

Weight Scale - 1,031,148 - 1,031,148 10% - 17,186 - 17,186 1,013,962

- 13,496,364 - 13,496,364 - 224,940 - 224,940 13,271,424

Furniture & Fixtures - - - - 10% - - - - -

Motor Vehicles - 16,576 - 16,576 10% - 276 - 276 16,300

31.10.2010 Taka - 1,446,528,614 - 1,446,528,614 - 15,952,012 - 15,952,012 1,430,576,602

3.5 Revaluation Surplus

Represent revaluation surplus arised in accordance with the report on revaluation of assets carried out by Shafiq Basak & Co,

Chartered Accountants.

31-Oct-10 31-Dec-09

Taka Taka

4 INVESTMENT

KDS Logistics Ltd. 200,000 Shares @ Tk 100 each (non quoted) 20,000,000 20,000,000

Al - Arafah Islami Bank Ltd. - note 4.1 259,110,856 27,067,500

PHP First Mutual Fund 728,000 Shares @ Tk 10 each (non quoted) 7,280,000 -

Taka 286,390,856 47,067,500

4.1 Face Value of 10,853,700 nos shares @ Tk 10 each of Al - Arafah Islami Bank Ltd. is Tk 108,537,7000 and Market Value as on that date Tk 696,807,540.

4.2 PHP First Mutual Fund was listed on 29 November 2010.

5 PRELIMINARY EXPENSES

Preliminary Expenses - 593,574

Amortized during the period - (593,574)

Taka - -

Amortization of Preliminary Expenses during the period ended on 31.10.2009 was Tk 527,439 is shown in Income Statement.

6 INVENTORIES

Stores & Spares - note 6.1 30,971,989 32,737,443

Raw Materials in Stock - note 6.2 1,418,745,369 1,225,708,906

Stock - in - transit - note 6.3 562,647,194 568,237,721

Finished Goods - note 6.4 294,307,480 145,186,261

Taka 2,306,672,032 1,971,870,331

6.1 Stores & Spares - note 6

Stores & Spares 30,971,989 32,737,443

It includes Mechanical, Electrical & Consumable Items

Tk 30,971,989 32,737,443

6.2 Raw Materials in Stock - note 6 Qty in MT

Direct Materials 19,662.85 1,407,495,793 1,220,894,870

Indirect Materials - 11,249,576 4,814,036

Indirect Materials are Consumable Items

19,662.85 Tk 1,418,745,369 1,225,708,906

6.3 Stock - in - transit - note 6

Direct Materials 517,099,333 529,663,728

Indirect Materials 45,547,861 38,573,993

Tk 562,647,194 568,237,721

6.4 Finished Goods - note 6

Finished Goods 4,050.15 294,307,480 145,186,261

294,307,480 145,186,261

7 RECEIVABLES

Trade Receivable 1,751,347,222 1,742,629,834

Interest Receivable 4,673,563 2,121,265

Taka 1,756,020,785 1,744,751,099

i) Receivables are unsecured but considered good.

ii) There have been no receivables outstanding for the period exceeding six months.

iii) There is no such debt due by or to directors or other officers of the Company.

iv) Details of Trade Receivables are shown in Annexure - A.

8 DUE FROM SISTER CONCERN

Due from KY Steel Mills Ltd. 368,362,261 173,788,110

Due from Steel Accessories Ltd. 148,826,920 163,350,778

Taka 517,189,181 337,138,888

These represents the balancing amount receivables from sister concern on account of:

i) CR Product Sales to KY Steel Mills Ltd.

ii) CR Product Sales & Temporary Loan paid to Steel Accessories Ltd.

31-Oct-10 31-Dec-09

Taka Taka

9 ADVANCES, DEPOSITS AND PREPAYMENTS

Advances - note 9.1 339,004,802 307,045,574

Deposits - note 9.2 8,212,094 7,407,011

Prepayments - note 9.3 4,747,194 2,468,057

Taka 351,964,090 316,920,642

9.1 Advances - note 9

Advance to employee 420,545 388,437

Advance Against Supplies 6,151,300 -

Advance Against Expenses - 10,000,000

Advance Income Tax 112,180,629 167,507,127

VAT Current A/C 159,105,460 127,287,642

Earnest Money 170,630 1,862,368

Advance for Share Purchase 57,564,226 -

Alliance Financial Services 1,000,000 -

Advance to others 2,412,012 -

Tk 339,004,802 307,045,574

i) All the advances and deposits amount is considered good and recoverable.

ii) There is no agreement amount due from directors or officers of the Company.

iii) Represents the VAT paid on imported raw materials at the import stage but yet to be adjusted.

iv) Advance is paid to SKYS securities & Union capital Ltd. for purchase of Al-Arafah Islami Bank shares.

9.2 Deposits - note 9

Bakhrabad Gas System Ltd. 1,667,825 1,294,028

Bangladesh Telecommunication Company Ltd. 10,000 10,000

Power Development Board Chittagong 6,000,000 6,000,000

Bangladesh Oxygen Corporation 22,983 22,983

Bangladesh Railway 60,000 60,000

Security Money-Grameen Phone 20,000 20,000

Security Money- Ansar & VDP 431,286 -

Tk 8,212,094 7,407,011

i) All are security deposits against contractual services to be provided by the respective institutions.

9.3 Prepayments - note 9

Pragati Insurance Company Ltd. (from 01.05.2010 to 30.04.2011) 3,663,525 2,442,373

BSTI CM Licence Fee (from 01.07.2009 to 30.06.2012) 1,083,669 -

Northern Insurance Ltd. - 25,684

Tk 4,747,194 2,468,057

10 CASH AND BANK BALANCES

Cash in Hand

Cash in hand at Head Office 384,009 480,142

Cash in hand at Factory 247,418 237,124

631,427 717,266

Cash at Bank - note 10.1 120,113,247 72,209,815

Foreign Currency Accounts - note 10.2 4,297,467 2,543,118

124,410,714 74,752,933

Taka 125,042,141 75,470,199

31-Oct-10 31-Dec-09

Taka Taka

10.1 Balances with Schedule Banks - note 10

Arab Bangladesh Bank Ltd., Anderkilla Branch 3,023,707 831,578

Bangladesh Krishi Bank Ltd., Tea Board Branch 4,500 -

Bank Asia Limited, Agrabad Branch 261 836

Bank Asia Limited, CDA Avenue Branch 454,733 1,906,878

Bank Alfalah Limited, Chittagong Branch 67,215 68,485

Dutch-Bangla Bank Ltd., Agrabad Branch 3,169,683 2,154,732

Dhaka Bank Ltd., Agrabad Branch 104,292 93,672

EXIM Bank Ltd., Khatungonj Branch 34,100 -

EXIM Bank Ltd., Agrabad Branch 56,042 3,841

EXIM Bank Ltd., Sitakunda Branch 2,956,172 99,000

Eastern Bank Ltd., Agrabad Branch 104,130 25,775

HSBC Ltd., Chittagong Branch 1,763,423 3,890,651

Habib Bank Limited, Laldighi Branch 22,924 32,003

ICB Islami Bank Ltd,. 500 -

IFIC Bank Limited, Agrabad Branch 216,663 1,436,139

Islami Bank Bangladesh Ltd., Khatungonj Branch 584,452 -

Janata Bank Limited, Baijid Branch 767,555 405,583

Janata Bank Limited, Asadgonj Branch 170,389 170,964

Janata Bank Limited, Kumira Branch 92,686 1,965,386

Jamuna Bank Ltd., Agrabad Branch 3,113 3,688

Jamuna Bank Ltd., Khatungonj Branch 294,438 12,165

Mercantile Bank Ltd., Khatungonj Branch 2,047,807 -

Mutual Trust Bank Ltd., Agrabad Branch 813,450 972,420

Mutual Trust Bank Ltd., CDA Avenue Branch 37,505 -

National Bank Ltd., Khatungonj Branch 4,196,018 -

NCC Bank Ltd., Agrabad Branch 1,913,915 25,166

NCC Bank Ltd., Jubilee Road Branch 3,725 -

One Bank Ltd, Khatungonj Branch 1,605,750 -

Premier Bank Ltd.,Khatungonj Branch 4339 -

Prime Bank Ltd., Agrabad Branch 64,415 64,990

Prime Bank Ltd., Laldighi Branch 7,777,436 1,691,865

Pubali Bank Ltd., Khatungonj Branch 551,073 4,784,503

South East Bank Ltd., Khatungonj Branch 484,095 68,985

Social Investment Bank Ltd., Agrabad Branch 2,502 12,547,786

Social Investment Bank Ltd., Khatungonj Branch 3,705 -

Sonali Bank Ltd., Agrabad Branch 2,689,345 152,026

State Bank of India, Agrabad Branch 482,746 72,787

Standard Bank, Khatungonj Branch 196,400 -

Standard Chartered Bank, Agrabad Branch 1,253,482 515,310

Shahjalal Islami Bank Ltd., Khatungonj Branch

320,191 74,909

The City Bank Ltd., Khatungonj Branch 793,493 1,003,326

The Trust Bank Ltd., Agrabad Branch 187,143 40,246

United Commercial Bank Ltd., Agrabad Branch 2,271,227 1,325,204

Uttara Bank Ltd., Khatungonj Branch 86,818 4,655

Fixed Deposit Receipts 78,435,689 35,764,261

Tk 120,113,247 72,209,815

10.2 Foreign Currency Accounts - note 10

HSBC Ltd., Chittagong Branch 1,181,686 2,543,118

Standard Charterd Bank., Chittagong Branch 3,115,781 -

Tk 4,297,467 2,543,118

31-Oct-10 31-Dec-09

Taka Taka

11 SHARE CAPITAL

11.1

Authorized

Number

500,000,000 Ordinary Shares of Tk 10 each

5,000,000,000 1,000,000,00

0

Taka 5,000,000,000 1,000,000,00

0

11.2

Issued, subscribed and paid-up

130,240,000 Ordinary Shares of Tk 10 each

1,302,400,000 651,200,000

Taka 1,302,400,000 651,200,000

11.3 Position of Shares holding

Name of the Shareholders

31-Oct-10 31-Dec-09

% Taka % Taka

Al - Haj Khalilur Rahman 9.21 120,000,000 9.21 60,000,000

Mr. Salim Rahman 13.82 180,000,000 13.82 90,000,000

Mrs. Tahsina Rahman 7.68 100,000,000 7.68 50,000,000

Mr. S.M. Shamim Iqbal - - 6.14 40,000,000

Mrs. Hasina Iqbal - - 6.14 40,000,000

KDS Hi - Tech Garments (BD) Ltd. 21.50 280,000,000 21.49 140,000,000

KDS Garment Industries Ltd.

17.08 222,400,000 17.07 111,200,000

KIY Steel Industries Ltd. 2.30 30,000,000 2.30 15,000,000

KY Steel Mills Ltd. 28.41 370,000,000 16.15 105,000,000

Total 100.00 1,302,400,000 100.00 651,200,000

11.4 Classification of Shareholders by holding

Holdings No. of Holders No. of Shares Total Holdings

100,000 to 10,000,000 shares 2 13,000,000 9.98% 10,000,001 to 20,000,000 shares 2 30,000,000 23.04% 20,000,001 to 30,000,000 shares 2 50,240,000 38.57% 30,000,001 to 40,000,000 shares 1 37,000,000 28.41%

Total 7 130,240,000 100.00

Note: The authorized share capital of the company is Tk. 5,000,000,000 (Five hundred Crore) divided in to 500,000,000 (Fifty Crore) ordinary shares of Tk. 10/- each, which was converted into TK. 10/- per share from Tk. 100/- per share by passing special resolution in the Extra Ordinary General Meeting (EGM) held on 31 .07.2010.

31-Oct-10 31-Dec-09

Taka Taka

12 GENERAL RESERVE

Opening Balance 202,085,763 -

Addition during the Period - 202,085,763

Transferred to Share Capital (202,085,763) -

Taka - 202,085,763

13 REVALUATION RESERVE

Opening Balance as on 01.09.2010 1,446,528,614 -

Charged during the year (15,952,012) -

Taka 1,430,576,602 -

i) Revaluation of Company's assets were carried out by Shafiq Basak & Co, Chartered Accountants following Market value Method of Valuation as on 31 August 2010 & submitted their report on 20 September 2010. Revaluation surplus has been credited to Revaluation Reserve account.

14 LONG TERM LOAN

Due within one year - 126,220,207

Taka - 126,220,207

a) Eastern Bank Ltd., Agrabad Branch


Tk - 61,720,258

b) South East Bank Ltd., Khatungonj Branch


Tk - 10,467,249

c) National Credit and Commerce Bank Ltd., Agrabad Branch


Tk - 32,596,173

d) Dutch Bangla Bank Ltd., Agrabad Branch


Tk - 21,436,527

15 CREDITORS AND ACCRUALS

For Other finance - note 15.1 2,848,658 2,249,205

For Supplies expenses - note 15.2 69,704,757 4,588,106

For Revenue expenses - note 15.3 41,961,281 6,250,365

Taka 114,514,696 13,087,676

South East Bank Ltd., Khatungonj Branch, LTR - 135,094,121

Janata Bank Ltd., Asadgonj Branch, LTR 126,496,938 212,453,862

Shahjalal Islami Bank Ltd., Khatungonj Branch, LTR 20,599,258 27,263,308

Social Islami Bank Ltd., Agrabad Branch, LTR 1,650,599 25,589,948

NCC Bank Ltd., Agrabad Branch, LTR 71,055,617 -

Jamuna Bank Ltd., Khatungonj Branch LTR 74,468,318 -

State Bank of India, Agrabad Branch, LTR 1,649,503 58,800,235

Mercantile Bank Ltd., Khatungonj Branch, ABP 249,094,505 195,868,352

Pubali Bank Ltd., Khatungonj Branch, LTR 774,916,065 13,273,580

Mutual Trust Bank Ltd., CDA Avenue Branch, LTR 26,024,232 -

Janata Bank Ltd., Asadgonj Branch, ABP 241,851,574 358,013,457

South East Bank Ltd., Khatungonj Branch, ABP 5,240,220 356,816,508

Pubali Bank Ltd., Khatungonj Branch, ABP 126,767,485 116,406,797

Taka 3,395,411,672 2,918,975,130

Major Terms and conditions of the said loans are presented in - note 26

31-Oct-10 31-Dec-09

Taka Taka

17 INCOME TAX PROVISION - note 2.12

Opening balance 291,223,959 140,266,542

Provision made during the period 185,538,290 150,957,417

476,762,249 291,223,959

AIT Adjusted (167,507,130) -

Paid during the period (20,000,000) -

Taka 289,255,119 291,223,959

i) The IT assessment for the all years to 2008 (IT Assessment year 2009-2010) have been completed and agreed with the Tax Authorities while the return for 2009 has been filed and pending for assessment. Company paid Tk 167,507,130 as advance, which will be adjusted with above provision on finalization of the assessment upto the year 2009.

ii) Consistently deferred tax has not been considered.

31-Oct-10 31-Oct-09

Taka Taka

18 NET TURNOVER Qty in MT

Local Sales 50,951.10 4,862,895,492 3,692,216,734

Scrap Sales 2,477.20 91,111,439 66,855,964

Export Sales - note 18.1 8,349.52 605,315,303 229,427,639

61,777.82 5,559,322,234 3,988,500,337

Less: VAT 129,934,028 340,682,319

Taka 5,429,388,206 3,647,818,018

18.1 Export Sales - note 18

Export in Foreign Currency 8,349.52 USD 8,805,307 2,546,835

Export in Local Currency Taka 605,315,303 229,427,639

19 COST OF GOODS SOLD

Opening Stock of Raw Materials

Direct Materials 18,078.07 1,220,894,870 1,304,148,273

Indirect Materials

- 4,814,036 2,479,577

18,078.07 1,225,708,906 1,306,627,850

Raw Materials Purchased

Direct Materials - note 19.1.1 66,044.34 4,708,802,244 2,856,068,919

Indirect Materials - note 19.1.2 - 133,785,989 140,630,676

66,044.34 4,842,588,233 2,996,699,595

Materials available for consumption

84,122.41 6,068,297,139 4,303,327,445

Closing Stock of Raw Materials - note 6.2

Direct Materials (19,662.85) (1,407,495,793) (1,255,568,915)

Indirect Materials - (11,249,576) (12,881,995)

(19,662.85) (1,418,745,369) (1,268,450,910)

Raw Materials Consumption 64,459.56 4,649,551,770 3,034,876,535

Production Overhead - note 19.2 - 282,084,523 263,031,834

Cost of Production (Process Loss 1,027.53 MT)

63,432.03 4,931,636,293 3,297,908,369

Opening Stock of Finished Goods

2,395.94 145,186,261 10,235,213

65,827.97 5,076,822,554 3,308,143,582

Closing Stock of Finished Goods - note 6.4

(4,050.15) (294,307,480) (24,303,589)

61,777.82 Taka 4,782,515,074 3,283,839,993

31-Oct-10 31-Oct-09

Taka Taka

19.1 Raw Materials Purchase

19.1.1 Direct Materials note - 19 Qty in MT

HRC 62,214.77 3,998,385,325 2,489,209,721

ZN 3,699.93 656,004,516 327,834,915

Compound ZN 118.62 37,265,367 16,996,658

Tin Ingot 11.01 17,147,036 22,027,625

66,044.33 Tk 4,708,802,244 2,856,068,919

19.1.2 Indirect Materials note - 19

Rolling Oil 9,834,728 7,579,435

HCL 13,889,181 8,190,516

Consumable Stock 110,062,080 124,860,725

Tk 133,785,989 140,630,676

Taka 4,842,588,233 2,996,699,595

19.2 FACTORY OVERHEAD - note 19

Salaries and Wages 54,011,049 47,155,990

Bonus 709,456 568,313

Shifting Expenses 3,238,732 2,725,943

Mechanical Shutdown Expenses 787,094 698,085

Electricity Charges 49,009,049 45,964,827

Gas Bill 16,950,827 11,960,041

Laboratory Expenses 132,995 106,210

Electrical Spares

3,489,503 2,429,429

Depreciation - note 3.2 80,017,036 103,771,363

Fire Insurance 6,105,973 3,677,364

Gas Line Repairing 1,124,150 1,425,803

Crane Repairing

533,003 743,356

Crane Hire Charges 1,166,524 1,099,596

Loading Expenses 26,600 302,085

Un-loading Expenses 4,818,336 3,116,130

Canteen expenses 1,960,037 1,293,376

Store Material Consumption 58,004,159 35,993,923

Taka 282,084,523 263,031,834

31-Oct-10 31-Oct-09

Taka Taka

20 ADMINISTRATIVE EXPENSES

Salary & Allowances 3,706,910 2,362,896

Directors Remuneration - note 24 320,000 320,000


Festival Bonus 366,623 363,113

Telephone & Mobile charges 1,753,385 1,239,053

Traveling Expenses 3,846,802 2,925,993

Conveyance 482,071 405,279

Staff Fooding 254,878 219,702

Office Tea 323,875 133,261

Expenses

Entertainment Expenses 1,164,453 1,075,895

Postage & Stamp charges 100,713 124,117

Repairing Expenses 79,010 97,907

Courier Service Charges 13,870 69,000

Newspaper and Periodicals 4,709 10,716

Uniform & Liveries 14,740 700

Legal Expenses 3,561,600 184,510

Vehicles Fuel & Lubricants 2,772,504 897,868

Office Stationeries 368,354 407,917

Medical Expenses 868,664 37,324

Land Revenue Expenses 44,828 177,828

Subscription 2,797,785 77,125

Vehicle maintenance 679,745 614,259

Miscellaneous expenses 1,624,972 308,334

Registration & Renewal Expenses 1,747,239 190,255

Rent, Rates & Taxes 50,000 50,000

Electricity Charges 5,445,450 5,107,203

Audit fee - note 23 200,000 -

Taka 37,038,571 23,165,331

Salary & Allowances include payment to employees only.

21 SELLING AND DISTRIBUTION EXPENSES

Salary & Allowances 2,042,517 596,022


Sales Promotion Expenses 32,243,739 139,800

Sample Expenses 200,000 -

Taka 38,931,647 6,500,898

31-Oct-10 31-Oct-09

Taka Taka

22 FINANCIAL EXPENSES

Bank Interest 24,595,492 -

Bank Charge 907,987 939,037

Taka 25,503,47

9 939,037

i) The above amount was not directly attributable. Directly attributable cost incurred for cost of raw materials was charged to cost of goods sold as per IAS 23.

23 AUDITOR'S REMUNERATION - note 20

Audit Fee (Statutory) 200,000 -

Taka 200,000 -

Audit fee represents auditor's remuneration only which is fixed up by the Board of Directors.

24 DIRECTOR'S REMUNERATION - note 20

Director's Remuneration paid to Mrs. Tahsina Rahman @ Tk 32,000 320,000 320,000

Taka 320,000 320,000

25 OTHER INCOME

ID Card Re-issue Compensation 1,800 1,030

Delivery Charge for Scrap Sales 2,487,485 2,307,747

Interest on FDR 2,906,622 469,300

Taka 5,395,907 2,778,077

26 BANK FACILITIES

The following facilities are available with the company's Bankers : BDT in Crore

Sl No

Bank Name LC

Limit LTR Limit

Term Loan Limit

CC Hypo Limit

OD/CC Pledge Limit

BG Limit

Rate of Interest

Sanction Validity

1 Janata Bank - Asadgonj

100.00 50.00 56.17 13.30 43.00 15.00 12.00% 15.10.2010 *

2 Mercantile Bank - Ktg

160.00 60.00 - 5.00 - 15.00 11.50% 30.09.2010 *

3 Southeast Bank - Ktg

68.25 33.25 - - - 25.00 12.00% 28.02.2011

4 Pubali Bank - Ktg SDB SDB - - - SDB 11.00% Specific

5 Shahjalal Bank - Ktg

50.00 35.00 - - - 10.00 11.50% 31.12.2010

6 Jamuna Bank - Ktg

50.00 25.00 - 2.50 - - 11.50% 31.07.2010 *

7 AB Bank - Anderkilla

45.00 40.00 8.00 - - - 13.00% 30.09.2010 *

8 State Bank of India - Ktg

15.00 15.00 - - - - 12.00% 30.06.2010 *

9 Social Islami Bank - Agr.

100.00 25.00 - 25.00 - 10.00 11.00% 22.08.2010 *

10 Standard Chartered - Agr.

120.00 60.00 - 2.00 - - 11.00% 12.04.2011

11 Mutual Trust Bank - Agr.

40.00 20.00 - 5.00 - 5.00 11.00% 28.02.2011

12 NCCBL - Agr. 100.00 50.00 - 5.00 - 25.00 11.00% 30.09.2011

13 Dhaka Bank - Agr. 100.00 50.00 50.00 35.00 - 30.00 11.00% 31.07.2011

14 Dutch Bangla

Bank - Agr 88.00 50.00 - 20.00 - - 11.00% 30.09.2011

Total Exposure 1,036.25 513.25 114.17 112.80 43.00 135.00 - -

* Renewal of expired loans are under process.

27 RELATED PARTY TRANSACTIONS

The Company carried out a number of transactions with related parties in the normal course of business

on arms length basis

Sl. No

Name of the Parties

Relationship Types of Transaction

Closing Balance

as at 31.10.2010

Taka

Closing Balance

as at 31.12.2009

Taka

1 KY Steel Mills Ltd. Sister Concern Sales of CR Coil

368,362,261 173,788,110

2 Steel Accessories Ltd. Sister Concern

Sales of CR Product & Temporary Loan

148,826,920 163,350,778

Total 517,189,181 337,138,888

31.10.2010 2009

Taka Taka

28 NET ASSET VALUE PER SHARE

Net Assets Value per Share (Basic) Value of Share 2010 Tk 10, 2009 Tk 100 29.74 323.16

Net Assets Value per Share (Restated) Value of Share 2010 Tk 10, 2009 Tk 10 29.74 16.16

Net Assets Value during the period Tk 3,872,724,796 (31.12.2009: Tk 2,104,430,909)

Number of Ordinary Shares at the close of business 130,240,000 nos (31.12.2009: 6,512,000 nos)

29 THE COMPOSITION OF EARNING PER SHARE (EPS) IS GIVEN BELOW :

Earning per share (Basic) Value of Share 2010 Tk 10, 2009 Tk 100 2.59 32.21

Earning per share (Restated) Value of Share 2010 Tk 10, 2009 Tk 10 2.59 1.61

(a) Earning attributed during the period to the ordinary shareholders Tk 337,717,285 (31.10.2009: Tk 209,764,623)

(b) Number of ordinary shares at the close of business 130,240,000 nos (31.10.2009: 6,512,000 nos)

30 VALUE PER SHARE ON THE BASIS OF CASH FLOW FROM OPERATING ACTIVITIES :

Operating cash Inflow/(Outflow) per share (Basic) Value of Share 2010 Tk 10, 2009 Tk 100 3.39 92.91

Operating cash Inflow/(Outflow) per share (Restated) Value of Share 2010 Tk 10, 2009 Tk 10 3.39 4.65

The composition of Opening Cash Inflow/(Outflow) Value per share is given below:

(a) Operating Cash Inflow/(Outflow) during the period Tk 441,354,697 (31.10.2009: Tk 605,033,371)

(b) Number of ordinary shares at the close of business 130,240,000 nos (31.10.2009: 6,512,000 nos)

31 POST BALANCE SHEET EVENTS

No material events had occurred from the Balance Sheet date to the date of issue of this Balance Sheet, which could materially affect the values stated in the Balance Sheet.

32 EMPLOYEES



Number of employees whose salary below Tk 3,000 per month - -

Number of employees whose salary above Tk 3,000 per month 380 434

Total 380 434

33 CAPACITY UTILIZATION

CR Plant

Installed Capacity (MT) Annual 120,000 120,000

Installed Capacity (MT) for the period 100,000 100,000

Actual Equivalent production (MT) 60,095 29,389

Capacity Utilized 60.10% 29.39%

NOF Plant

Installed Capacity (MT) Annual 70,000 70,000

Installed Capacity (MT) for the period 58,333 58,333

Actual Equivalent production (MT) 45,410 27,449

Capacity Utilized 77.85% 47.06%

34 CONTINGENT LIABILITIES AND COMMITMENTS

34.1 Appeal prefer to VAT Appellate Tribunal against Price Declaration of CR Coil amounting to Tk 1,227,623; GP Coil /Sheet Tk 352,249 and CI Sheet Tk 7,678,068 total Tk 9,257,940 which is awaiting final hearing. In case of adverse decision by the Tribunal Company's liability will stand at Tk 9,257,940.

34.2 Dispute with the VAT authority prefer for writ petition against VAT:

15 Nos writ such as no : 7419/05 dated 20.10.2005, 8697/05 dated 05.12.05, 8696/05 dated 05.12.05, 8889/05 dated 13.12.05, 5964/06 dated 20.07.06, 7598/06 dated 10.08.06, 10847/07 dated 17.12.07, 1580/08 dated 26.02.08, 1520/08 dated 25.03.08, 4560/08 dated 19.06.08, 6398/09 dated 17.09.09, 7100/09 dated 29.10.09, 7297/09 dated 04.11.09, 4841/10 dated 16.06.10, 4843/10 dated 16.06.10 aggregating amounting to Tk 940,741,960.

Causes of cases were custom duty for bond; Audit demand & price declerance for VAT. The Management of the Company informed that as the matter is sub-judice, provision for writ petition against VAT would not be required as per Legal Advisor's opinion of the Company.

35 GENERAL

35.1 Figures appearing in these accounts have been rounded off to the nearest taka.

35.2 Previous year's/period's phrases & amounts have been re-arranged, wherever considered necessary,

to conform to the presentation for the year under review.




SD/- SD/- SD/-


7.1 Trade Receivable as on 31st October 2010 Annexure-A

Particulars Taka

1 Zobaida Steel(Afzal Trading)--Acc.Rec 574,067.04

2 R.M.Steel--Acc.Rec. 473,312.10

3 M.R.Traders-Acc.Rec. 146,697.41

4 Eastern Refinery Limited--Acc.Rec. 115,877,666.83

5 Abul Khair Steel Mills Ltd.--Acc.Rec. 913,016.42

6 Fuad & Brothers--Acc.Rec. 340,431.34

7 M.Rahman & Brothers--Acc.Rec. 2,408,919.57

8 Samuda Containers--Acc.Rec. 63,936.68

9 I.I.Tubes Mills Ltd.--Acc.Rec. 8,155.69

10 Osaka Cycle Industries Ltd.-Acc.Rec. 830,664.09

11 Beg Steel Mills Ltd.--Acc.Rec.(C0794) 1,477,878.94

12 Jalalabad Steels Ltd.--Acc.Rec. 7,739.27

13 Nazrul & Brothers--Acc.Rec. 13,713.75

14 Bismillah Enterprise,CTG-Acc.Rec.(C0173) 114,770.92

15 Mcdonald Steel--Acc.Rec. 671,836.29

16 Madina Traders--Acc.Rec. 12,683.58

17 Vangaurd Steel Ind. Ltd--Acc.Rec. 62,435.45

18 Peerless Makers (pvt.) Ltd.--Acc.Rec. 384,474.45

19 Yunsco Steel and Engr. Ltd.--Acc.Rec. 542,823.88

20 Shafiq And Sons,Asadgonj-Acc.Rec 29,726.71

21 Ajmeer Khawja Enterprise-Acc.Rec 384,273.34

22 Rubel Steel Mills Ltd (Partex Group)-Acc.R 27,078.60

23 National Fan-Acc.Rec 3,252.23

24 Sristy Steel Enterprise-Acc Rec 1,346,131.43

25 Haji Motiur Rahman & Sons-Acc Rec 64,046.08

26 Janani Enterprise-Acc.Receivable 14,410.25

27 K.S. TRADING-Acc.Rec. 9,279,455.89

28 S.S.Traders--Acc.Rec. 587,041.58

29 Bhuiyan Enterprise,Ctg-Acc Rec 4,031,991.22

30 Saleh Engineering Works,Ctg (C0996) 5,875.86

31 Mohesen Awolia Traderse,Ctg(C0997) 435,599.45

32 Babul Chandra Dey, Ctg(C1024) 104,134.11

33 GMS PURNAMAX(M) SDN,BHD (X0001) 3,283.47

34 Venus Int Pte Ltd,Singapore(X0004) 22,286,653.08

35 Do International Trading Co.,Ltd,Thailand( 2,201.37

36 Atco Export, UK (X0008) 6,604.69

37 Portland Steel Int., South Africa(X0009) 684,460.69

38 Deepak Commercial Brokerage, Dubai(X0011) 4,414.02

39 Steel(Singapore) Trading Pte Ltd(X0013) 20,985,522.62

40 Wira Overseas Enterprise,Singapore(X0016) 48,265.65

41 Gloria Trading, Congo (X0017) 32,571.94

42 Salim Traders -B.Baria-(CB0007) 8,683,344.09

43 Rupali Traders-B.Baria(CC0007) 10,323,972.83

44 Alpana Traders -B.Baria(CC0008) 4,063,090.50

45 Padma Traders -B.Baria(CD0057) 2,502,689.03

46 Arif Traders -B.Baria(CD0076) 5,734,924.20

47 Abul Kashem,Casba-B.Baria(CD0333) 28,356,609.20

48 Sumon Ent-Bangura-B.Baria(CD0418) 528,023.60

49 Hobigonj Trading-B.Baria(CD0448) 20,911,653.25

50 New Madina Tinghor-B.Baria(CD0580) 45,382.68

51 Ananda Enterprise-B.Baria(CD0638) 9,456,153.61

52 Fahin & Maisa Enterprise-B.Baria(CD0691) 9,335,891.42

53 Ma Moni Traders-B.Baria(CD0692) 1,167,919.41

54 Haji Shahid Meah Traders-B.Baria(CD0695) 4,296,747.27

55 Minar Traders-Barguna(CD0428) 25,879,442.97

56 Al-Madina Store2-Barishal(CD0297) 29,263,500.05

57 Abu Bakar-Barishal(CD0482) 7,121.87

58 Hazi Traders-Barishal(CD0668) 1,228,386.44

59 Aktaruzzaman-Barishal(CD0665) 1,052,089.18

60 Bikrampur Ent-Bhola-(CB0015) 1,348,356.88

61 Five Star-Bhola(CD0325) 3,920,523.17

62 Samad Sarder-Bogra(CD0022) 7,783,167.53

63 Enam Corporation-Chandpur(CD0099) 11,782,257.12

64 Kazi Traders-Chandpur(CD0257) 15,829,309.72

65 Sagir & Brothers -Chittagong-(CB0001) 32,652,894.01

66 Liton Enterprise-Chittagong(CD0154) 517,957.56

67 Nureja Enterprise -Chittagong(CD0313) 23,927,290.75

68 Omar Farq. & Brothers-Ctg(CD0331) 1,056,591.58

69 A S Traders-Chittagong(CD0390) 30,122,250.81

70 Salim And Sons-Chittagong(CD0652) 3,221,428.77

71 Hj. Nazeer Ahamed Traders-Chuadanga(CD0672 9,284,895.79

72 Abdul Matin,Ramchanpur-Comilla(CC0026) 141,002.70

73 Musa & Sons -Comilla(CC0033) 8,404,421.16

74 Ali Akbar Traders -Comilla (CD0056) 1,298,544.17

75 Babul Traders-Comilla(CD0079) 12,828.33

76 Haji Moinul Islam -Comilla(CD0142) 972,699.39

77 ShakherGaon Store-Comilla(CD0180) 1,187,062.63

78 Khalu Meah Bapary-Comilla(CD0197) 20,354,350.58

79 Saiful enterprise -Comilla(CD0396) 1,467,803.77

80 Rafique Ting ghar-Comilla(CD0397) 7,209,195.93

81 Monindra Ch. Debnath-Comilla(CD0413) 20,760,206.00

82 Hafiz & Brothers-Comilla(CD0419) 4,019,307.04

83 Rony Tin ghar-Comilla(CD0452) 825,367.91

84 Hossain Enterprise-Comilla(CD0481) 1,345,757.27

85 Maruf Steel-Comilla(CD0499) 9,837,135.01

86 Abdul Karim -Comilla(CD0517) 2,260,468.73

87 Prodip Kumar Bhoumik,-L-Comilla(CD0538) 2,441,109.22

88 Nargis Hardware Store-Comilla(CD0563) 3,250,593.83

89 Nazrul Traders,Comilla (CD 0679) 623,341.32

90 H K Ali Bricks, Comilla (CE0005) 145,460.27

91 Karim Traders -CoxsBazar(CD0217) 2,910,499.11

92 Shah Alam Trading,Chokoria,Coxs Bazar(CD04 6,754,111.26

93 Kamru Traders -CoxsBazar(CD0521) 1,255,523.49

94 Chittagong Steel -Dhaka(CB0016) 1,442,344.38

95 Ayub & Sons -Dhaka (CD0270) 636,279.80

96 J. B. Enterprise-Dhaka(CD0286) 3,674,497.29

97 Dhaka Trading Corporation -Dhaka(CD0380) 2,787,568.79

98 Rakhi Steel Cor.-Dhaka(CD0415) 26,922,365.30

99 Jalalabad Steel Ltd -Dhaka(CD0458) 9,976,012.68

100 Samata Traders-Dhaka(CD0496) 180,390.72

101 Zaman & Sons-Dhaka(CD0653) 2,761,593.19

102 Fazlay Rabbi Ali-Faridpur(CD0654) 9,098,222.20

103 Abul Kashem -Feni(CD0105) 4,728,017.88

104 Adbur Quddus-Feni(CD0177) 1,728,589.59

105 Abdul Bashar-Feni (CD0200) 8,824,168.70

106 Abdul Momen Traders-s.Nay-Feni(CD0433) 2,856,790.51

107 Gopal Chandra Sarkar-Feni (CD0661) 947,746.16

108 Fathema Hardware Store-Feni (CD0647) 10,077,886.10

109 Raju Traders S.Gon-Gaibanda(CD0532) 7,791,858.07

110 Abul Kashem Traders-Gaibanda(CD0694) 1,076,682.67

111 Abed Ali Traders-Gazipur(CD0491) 3,835,352.19

112 Shahjalal Traders -Gazipur(CD0360) 664,459.85

113 Mojibor Traders-Gazipur(CD0225) 4,061,529.71

114 Shahin Enterprise-Gazipur(CD0631) 35,747,847.58

115 Sheuli Enterprise-Gazipur(CD0648) 9,488,330.10

116 Sikder Traders -Gopalgonj(CD0450) 17,052,402.46

117 Amin Traders,Gopalgonj(CD0697) 2,044,686.44

118 F Zaman & Sons,Gopalgonj(CD0704) 639,879.16

119 Ramash Ch.Gosh-Hobigonj(CD0462) 9,304,405.35

120 Al Mamun Enterprise-Hobigonj(CD0650) 15,839,633.87

121 Dalai Mia & Sons-Hobigonj(CD0677) 2,029,321.91

122 Sabib Enterprise-Hobigonj (CD0684) 1,534,928.63

123 Marwa Enterprise-Jalkhati(CC0018) 31,523,543.52

124 Tanim Enterpise -Jalkhati(CC0022) 4,805,664.80

125 Alam & Brothers-Jalkhati(CD0038) 6,076,475.96

126 Nayamat Ent-Jalkhati(CD0130) 7,953,582.07

127 Salam And Brothers-JhalKhati(CD0657) 9,251,682.40

128 Dhanshiri Enterprise-JhalKhati(CD0689) 35,559,678.98

129 Sharif & Borthers-Jessore(CD0522) 1,093,752.09

130 Ayian Steel Corporation-Jhenaidhah(CD0656) 198,464.37

131 Monir Ahamed -Khulna(CD0109) 32,902,259.92

132 Kazal Ghush -Kishoregonj-(CA0006) 32,016,725.70

133 Mujibur Rahman-2-Kishoregonj(CD0221) 33,787,823.80

134 Haji Motiur & Sons-Kishoregonj(CD0322) 6,928,038.50

135 Jaman & Hasan Ent. -Kishoregonj(CD0386) 17,196,030.39

136 Saidur Rahaman-Kishoregonj(CD0490) 735,845.03

137 Asha Enterprise-Kishoregonj(CD0504) 4,101,868.17

138 Bashar Traders-Kishoregonj(CD0622) 22,359,908.39

139 Haji Shahab Uddin & Sons-Kishoregonj(CD064 3,219,135.30

140 Seven Brothers-Kishoregonj (CD0682) 393,989.05

141 Sadek Traders-Kurigram(CD0574) 2,214,708.18

142 Janata Biponi -Kustia(CD0382) 1,353,308.24

143 Muntakim Traders -Kustia(CD0570) 1,805,393.02

144 Ali Hossain & Traders-Kustia(CD0636) 8,733,532.71

145 Mamun Enterprise-Kustia(CD0667) 1,316,674.18

146 Jilani Traders -Laxmipur(CD0174) 3,251,509.68

147 Laxmipur Ent.-Laxmipur(CD0226) 22,315,784.20

148 Mukbul & Brothers-Laxmipur(CD0243) 4,003,579.37

149 Mazumder & Co-Laxmipur(CD0404) 5,983,820.61

150 Basanti Traders-Alexgandar-Laxmipur(CD0573 5,307,263.20

151 Three Bany Traders-Laxmipur(CD0610) 4,616,615.76

152 Fatema Traders-Magura(CB0018) 1,091,405.47

153 Salam Traders- Manikgonj(CD0588) 1,684,614.63

154 M. A. Sattar-Molavibazar(CD0066) 15,615,619.80

155 Rahman Traders -Molavibazar(CD0510) 1,558,279.65

156 Shashanka Dutta -Molavibazar(CD0540) 10,093,855.22

157 Rakin Enterprise-Munshigonj(CD0666) 12,675,951.14

158 Shaha Trading -Narail(CC0041) 6,023,213.11

159 Showrav Traders-Narayangonj(CD0234) 4,348,680.53

160 Kakoli Enterpirse -Narayangonj(CD0262) 2,758,493.39

161 Haji Trader-Narayangonj(CD0283) 1,429,086.31

162 Sonia Trading-Narsindi(CD0346) 12,689,419.92

163 Shahid Trader-Narsindi(CD0409) 9,915,654.86

164 Muzibur Traders-Netrokona(CD0639) 5,558,718.86

165 N.K.Bhowmick-Noakhali-(CB0009)/T.K. Trader 27,424,083.47

166 B. K. Nath -Noakhali (CC0015) 4,041,978.65

167 Pubali Trading -Noakhali(CC0029) 17,602,952.16

168 R.M. Enterprise-Noakhali(CC0030) 28,057,871.90

169 Taz Enterprise-Noakhali(CD0042) 28,160,116.79

170 Abdur Rashid -Noakhali(CD0043) 17,298,756.26

171 Noor Traders-Noakhali(CD0080) 19,010,838.75

172 MaFatema Steel&Sons-Noakhali(CD0081) 3,395,066.52

173 Babul Traders-2 -Noakhali(CD0082) 3,732,501.43

174 Shebar Hat Khadda Vander-Noakhali(CD0132) 4,117,604.16

175 Fatema Trading -Noakhali(CD0135) 4,341,741.83

176 Shaha Steel-Noakhali(CD0254) 33,002,050.58

177 Allahar Dan-Noakhali(CD0315) 7,734,557.15

178 Haji. Younus & Sons-Noakhali(CD0324) 795,311.33

179 Femous Iron House-Noakhali(CD0387) 11,672,598.70

180 Popular Traders-Noakhali(CD0391) 5,458,999.93

181 Mohammed Ullah -Noakhali(CD0398) 7,750,332.21

182 Patwari Traders-Noakhali(CD0406) 1,245,955.08

183 Badal Traders-Chowm-Noakhali(CD0578) 875,188.94

184 Sokina Traders-Noakhali(CD0629) 189,043.27

185 Sufian Traders-Shbrhat-Noakhali(CD0642) 878,500.10

186 Manik Timber-Noakhali-(CD0673) 8,232,900.76

187 Monir & Sons-Chowmahoni,Noakhali(CD0702) 1,211,111.10

188 Shahanara Trading-Pabna(CD0246) 2,747,746.54

189 Shaha Trading Corp-Pabna (CD0412) 15,038,543.71

190 Mollah & Sons-2-Pabna(CD0608) 31,530,438.03

191 Jasmin Traders-Patuakhali(CD0431) 17,429,551.38

192 Islamia Traders-Patuakhali(CD0516) 2,749,783.19

193 Kajol Store-Patuakhali(CD0572) 12,145,119.14

194 Mitali Enterprise -Pirozpur(CD0074) 1,975,113.75

195 Makka Traders-Rajshahi(CD0031) 1,264,886.95

196 Rahman Traders,Baneshar,Rajshahi(CD0272) 5,760,928.62

197 Kismat Trading Corp-Rajshahi(CD0632) 11,312,190.02

198 Rahman Traders-2-Razbari(CD0199) 5,641,506.71

199 Talukder Traders -Sariadpur-(CB0012) 16,798,078.19

200 Laxmi Narayan Shaha-Sariadpur(CD0582) 6,060,478.02

201 Rahaman Traders -Shathkhira(CC0032) 21,464,362.56

202 Mofazzal Enterprize,Sherpur(CD0681) 32,328,550.06

203 A. Ali Trader -Sunamgonj(CD0508) 3,062,780.24

204 Abu Bakar & Sons-Sylhet(CD0048) 22,564,116.37

205 Jogajog Traders-Kalighat,Sylhet(CD0577) 1,768,633.20

206 Bashir Uddin & Sons, Chatak,Sylhet(CD0685) 5,355,548.42

207 Sikander & Sons-Sylhet (CD0674) 508,201.50

208 Akata Traders-Tangail(CD0446) 1,865,607.38

209 Kamrul & Brothers-Tangail(CD0633) 107,032.94

210 Jannat Steel Corporation-Tangail(CD0651) 34,218,796.41

211 Rahman Traders-Thakurgaon(CD0353) 17,662,650.31

212 Mahmud Machinary-Thakurgaon(CD0473) 19,770,434.43

213 H.R Brothers Pirgonj-Thakurgao(CD0609) 9,582,240.10

214 M.A.Hoque Traders-Thakurgaon(CD0670) 17,183,829.07

215 Jahirul Traders, Thakurgaon(CD0701) 91,849.01

216 Farhad Traders-Thakurgaon(CD0712) 1,020,982.25

217 Three Brothers-Thakurgaon(CD0717) 1,280,738.22

218 Nabi Trading--Mymensingh(CD0343) 985,803.95

219 Madina Traders-Mymensing(CD0693) 8,857,072.75

220 Janata Bank,Agrabad Branch(CE0024) 52,517.36

221 Ali Hossain,Office Assitt,KY Steel(CE0027) 15,385.66

222 Nawjesh Ali,SDS Director,Rajshahi(CE0031) 107,302.70

223 Zen Enterprise-Chittagong-2(CD0680) 1,699,209.06

224 K I Enterprise-Chittagong(CD0696) 1,069,676.73

225 Safrat Enterprise-Kornel-Chitt-2(CD0688) 783,161.88

Grand Total 1,751,347,222.00

KYCR COIL INDUSTRIES LIMITED Auditors' Report under section 135(1) and paragraph 24(1) of Part -II of Third Schedule of the Companies Act 1994

For the periods from 01 January 2005 to 31 October 2010

We have examined the financial statements of KYCR Coil Industries Limited for the years ended 31st December 2005, 2006, 2007, 2008 and 2009 and for the period from 01 January 2010 to 31 October 2010 in pursuance of Section 135(1) under Paragraph 24(1) of Part -II of Third Schedule of the Companies Act 1994 our report is as under:

A. Statement of Assets and Liabilities:

31.10.2010 Taka

31.12.2009 Taka

31.12.2008 Taka

31.12.2007 Taka

31.12.2006 Taka

31.12.2005 Taka

NON CURRENT ASSETS & PROPERTIES

2,615,018,054 1,007,786,722 1,029,728,27

4 667,716,360 749,082,200 843,055,514

Property, Plant & Equipment 2,328,627,198 953,004,172 1,009,134,700 667,122,786 748,488,626 842,461,940 Capital Work-in-Progress - 7,715,050 - - - - Investment 286,390,856 47,067,500 20,000,000 - - - Preliminary Expenses - - 593,574 593,574 593,574 593,574

CURRENT ASSETS & PROPERTIES 5,056,888,22

9 4,446,151,159

3,598,680,888

3,477,003,76

6

3,560,095,417

2,802,209,72

5

Inventories 2,306,672,032 1,971,870,331 1,922,794,096 1,704,105,163 2,033,054,181 1,466,126,402 Receivables 1,756,020,785 1,744,751,099 960,189,314 953,249,731 717,716,530 830,622,016 Due from Sister Concern 517,189,181 337,138,888 432,357,605 548,079,715 361,490,039 74,200,468 Advances, Deposits and Prepayments 351,964,090 316,920,642 236,127,011 251,119,305 439,923,574 392,928,577 Cash and Bank Balances 125,042,141 75,470,199 47,212,862 20,449,852 7,911,093 38,332,262

TOTAL ASSETS & PROPERTIES 7,671,906,28

3 5,453,937,881

4,628,409,162

4,144,720,126 4,309,177,617 3,645,265,23

9

SHAREHOLDERS' EQUITY & LIABILITIES

SHAREHOLDERS' EQUITY 3,872,724,79

6 2,104,430,909

1,852,903,876

1,725,772,78

3 1,618,126,306

1,359,439,383

Share Capital 1,302,400,000 651,200,000 651,200,000 651,200,000 651,200,000 651,200,000 Tax Holiday Reserve - - 202,085,763 202,085,763 202,085,763 98,610,994 General Reserve - 202,085,763 - - - - Revaluation Reserve 1,430,576,602 - - - - - Un appropriated Profit 1,139,748,194 1,251,145,146 999,618,113 872,487,020 764,840,543 609,628,389

NON CURRENT LIABILITIES - - 126,220,207 85,389,163 157,424,562 320,968,567

Long Term Loan - - 126,220,207 85,389,163 157,424,562 320,968,567

CURRENT LIABILITIES 3,799,181,487 3,349,506,97

2

2,649,285,079

2,333,558,18

0

2,533,626,749

1,964,857,28

9

Current Portion of Long Term Loan - 126,220,207 310,687,187 - - - Creditors and Accruals 114,514,696 13,087,676 5,520,345 7,779,513 11,671,859 11,904,266 Short Term Loan 3,395,411,672 2,918,975,130 2,192,811,005 2,261,790,781 2,521,954,890 1,952,953,023 Income Tax Provision 289,255,119 291,223,959 140,266,542 63,987,886 - -

7,671,906,28

3 5,453,937,881

4,628,409,162

4,144,720,126 4,309,177,617 3,645,265,23

9

NET ASSETS VALUE PER SHARE(Basic)

29.74 323.16 284.54 265.01 248.48 208.76

NET ASSETS VALUE PER SHARE(Restated)

29.74 32.32 28.45 26.50 24.85 20.88

B. Statement of Operating Results:

31.10.2010 Taka

31.12.2009 Taka

31.12.2008 Taka

31.12.2007 Taka

31.12.2006 Taka

31.12.2005 Taka

Net Turnover 5,429,388,206 4,348,942,559 2,582,068,789 2,117,127,407 2,013,900,743 3,354,160,882

Cost of Goods Sold (4,782,515,074

) (3,917,942,273) (2,354,515,889) (1,930,323,567) (1,737,096,122) (3,153,720,280)

Gross Profit 646,873,132 431,000,286 227,552,900 186,803,840 276,804,621 200,440,602 Operating Expenses Administrative Expenses (37,038,571) (24,772,605) (17,559,689) (14,060,144) (15,842,659) (17,970,714) Selling and Distribution Expenses (38,931,647) (7,270,961) (7,484,713) (1,046,199) (1,253,653) (1,318,949)

Trading Profit 570,902,914 398,956,720 202,508,498 171,697,497 259,708,309 181,150,939 Financial Expenses (25,503,479) (1,271,224) (1,353,850) (1,063,134) (1,021,385) (514,761)

Gross Operating Profit 545,399,435 397,685,496 201,154,648 170,634,363 258,686,924 180,636,178 Amortization of Preliminary Expenses - (593,574) - - - -

Profit after amortization of Preliminary Expenses

545,399,435 397,091,922 201,154,648 170,634,363 258,686,924 180,636,178

Other Income 5,395,907 5,392,528 2,255,101 - - -

Net Operating Profit before WPPF 550,795,342 402,484,450 203,409,749 170,634,363 258,686,924 180,636,178 WPPF (27,539,767) - - - - -

Net Operating Profit before Income Tax 523,255,575 402,484,450 203,409,749 170,634,363 258,686,924 180,636,178

Provision for Income Tax (185,538,290) (150,957,417) (76,278,656) (63,987,886) - -

Profit after Income Tax 337,717,285 251,527,033 127,131,093 106,646,477 258,686,924 180,636,178

Earning Per Share (Basic) 2.59 38.63 19.52 16.38 39.72 27.74

Earning Per Share (Restated) 2.59 3.86 1.95 1.64 3.97 2.77

C. Statement of Cash Flow:

31.10.2010 Taka

31.12.2009 Taka

31.12.2008 Taka

31.12.2007 Taka

31.12.2006 Taka

31.12.2005 Taka

CASH FLOW FROM OPERATING ACTIVITIES

Cash received from customers & others 5,328,621,073 4,457,121,135 2,697,786,832 1,926,645,384 1,726,378,766 3,291,595,985

Cash paid to suppliers & employees (5,338,199,439) (4,748,567,111

)

(2,465,835,332)

(1,579,379,004) (2,161,236,411) (4,022,617,899

)

Cash received / (payment) from short term bank loan

476,436,542 726,164,125 358,422,597 (260,164,109) 569,001,867 811,678,334

Financial Expenses (25,503,479) (1,271,224) (1,353,850) (1,063,134) (1,021,385) (514,761)

Cash Inflow / (Outflow) from Operating Activities

441,354,697 433,446,925 589,020,247 86,039,137 133,122,837 80,141,659

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (33,954,242) (59,719,851) (466,373,095) (1,464,980) - (7,623,465)

Addition of Capital Work in Progress 7,715,050 (7,715,050) - - - -

Investment (239,323,356) (27,067,500) (20,000,000) - - -

Cash Inflow / (Outflow) from Investing Activities

(265,562,548) (94,502,401) (486,373,095) (1,464,980) - (7,623,465)

CASH FLOW FROM FINANCING ACTIVITIES

(Repayment) / Receipt of Term Loan (126,220,207) (310,687,187) (75,884,142) (72,035,399) (163,544,005) (38,018,167)

Cash Inflow / (Outflow) from Financing Activities

(126,220,207) (310,687,187) (75,884,142) (72,035,399) (163,544,005) (38,018,167)

Net Increase/ (Decrease) in Cash & Cash Equivalents

49,571,942 28,257,337 26,763,010 12,538,758 (30,421,168) 34,500,027

Cash and Cash Equivalents at the beginning of the year 75,470,199 47,212,862 20,449,852 7,911,094 38,332,262 3,832,235

Cash and Cash Equivalents at the end of the year 125,042,141 75,470,199 47,212,862 20,449,852 7,911,094 38,332,262

Operating Cash Inflow / (Outflow) Per Share(Basic) 3.39 66.56 90.45 13.21 20.44 12.31

Operating Cash Inflow / (Outflow) Per Share(Restated)

3.39 6.66 9.05 1.32 2.04 1.23

D. Dividend Declared:

Particulars

31.10.2010

31.12.2009

31.12.2008

31.12.2007

31.12.2006

31.12.2005

Cash Dividend (%) - - - - - -

Stock Dividend (Bonus Share

%) 100% - - - - -

E. KYCR Coil Industries Limited is a public limited company which was incorporated 04 November

1995.

F. The Company did not prepare any account for any period subsequent to 31 October 2010.

I. Figure related to previous years have been rearranged where considered necessary.

Sd/-

Chittagong, 3 January 2011 Chartered Accountants Hoda Vasi Chowdhury & Co

Ratio Analysis

Particulars 31 Dec, 2005

31 Dec, 2006

31 Dec, 2007

31 Dec, 2008

31 Dec, 2009

31Oct, 2010

Liquidity Ratios:

Current Ratio 1.43 1.41 1.49 1.36 1.33 1.33

Quick Ratio 0.48 0.43 0.65 0.55 0.66 0.71

Debt Equity Ratio 1.67 1.66 1.36 1.42 1.45 0.88

Operating Ratios:

Accounts Receivable Turnover Ratio 3.71 2.03 1.64 1.84 2.69 2.69

Inventory Turnover Ratio 2.18 1.00 1.04 1.31 2.04 2.27

Asset Turnover Ratio 0.92 0.47 0.51 0.56 0.80 0.71

Profitability Ratios:

Gross margin Ratio (%) 5.98 13.74 8.82 8.81 9.91 11.91

Operating Income Ratio (%) 5.40 12.90 8.11 7.84 9.17 10.52

Net Income Ratio (%) 5.39 12.85 5.04 4.92 5.78 6.22

Return on Asset Ratio (%) 4.96 6.00 2.57 2.75 4.61 4.40

Return on Equity Ratio (%) 13.29 15.99 6.18 6.86 11.95 8.72

Basic Earning Per Share ( Restated) 2.77 3.97 1.64 1.95 3.86 2.59 Net Asset Value per Share ( Restated) 20.88 24.85 26.50 28.45 32.32 29.74

“if you have any query about this document, you may consult issuer

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