Kmw~ xNYL

2 4 5 12 16 20 28 29 31 32 33 34 35 37 67 kKrYJuTouL TJJjLr fgq mJKwtT xJiJre xnJr KmK xnJkKfr nJwe kKrYJuTouLr kKfPmhj TPktJPra vJxj mqmJ TokJP~ xJKatKlPTa KjrLJ TKoKar kKfPmhj KjrLTPhr kKfPmhj KKfk uJn-uJTxJj KyxJm ATqAKa kKrmftPjr Kmmre jVh Igt kmJPyr Kmmre KyxJPmr KaTJxoNy kK lro

Contents
2 4 6 8 9 10 12 16 28 29 31 32 33 34 35 37 68

BOARD OF DIRECTORS

NOTICE OF ANNUAL GENERAL MEETING RETAIL & NON RETAIL MARKETING EVENTS & MANUFACTURING

COMPANY INFORMATION

CHAIRMAN'S STATEMENT DIRECTORS' REPORT

HUMAN RESOURCES & CSR ACTIVITIES

20

COMPLIANCE CERTIFICATE AUDITORS' REPORT

CORPORATE GOVERNANCE

AUDIT COMMITTEE REPORT STATEMENT OF FINANCIAL POSITION

STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CASH FLOWS FORM OF PROXY STATEMENT OF CHANGES IN EQUITY

NOTES TO THE FINANCIAL STATEMENTS

Board of Directors
Fernando Garcia Restrepo Chairman Present position Group Managing Director, Bata Emerging Markets (WEST)

Previous positions President Director, Bata Indonesia Managing Director, Bata Kenya Managing Director, Bata India Vice President, Wholesale & Marketing, Bata Ltd, Toronto, Canada Managing Director, Bata Bangladesh

Kumar Nitesh

Present position Vice Chairman & Managing Director (Appointed on 1 January 2013)

Previous positions Managing Director, Bata Thailand Ltd. Vice-President (Retail), Bata India Limited

Muhammad Qayyum

Present position Vice Chairman & Managing Director (Retired on 31 December 2012)

Previous positions Retail Manager, Futura Footwear Limited, South Africa Retail Manager, Bata Pakistan Limited Merchandising Manager, Bata Pakistan Limited Area Manager, Bata Pakistan Limited Merchandise Planning & Budget Control Manager, Bata Pakistan Limited

Shaibal Sinha Director

Present position Chief Financial Officer, Bata Emerging Markets, Singapore Previous position Chief Financial Officer, Bata India

Rashidul Hasan Independent Director

Present positions Chairman, Uttara Finance & Investments Ltd. Independent Director, Reckitt Benckiser Bangladesh Ltd. Independent Director, Monno Group of Industries Trustee, Kumudini Welfare Trust of Bangladesh Ltd.

Previous positions Founder Chairman of IDLC the first joint venture leasing company of Bangladesh CEO & Managing Director of IPDC the first joint venture investment company of Bangladesh Director General, Department of Industries of the Republic of Bangladesh

K M Rezaul Hasanat Independent Director

Present position Chairman and CEO, Viyellatex Group

TJJjLr fgq
TJJjL xPaJrL oJ yJKxo r\J KjrLT xJAj lryJh F TJ YJatJct FTJCqJx mJKz j-15, rJc j-12 mT-Fl, KjPTfj uvJj-1 dJTJ-1212 IJAj CkPhJ Fx IJyPoh F FPxJKxP~a&x u& nqJKu oJKuT u& FPxJKxP~a&x mqJT AJjt mqJT Ku cJY& mJuJ mqJT Ku FAY Fx Km Kx Ku AxuJoL mqJT (mJuJPhv) Ku lqJrL 1. aL, VJ\LkMr 2. iJorJA, dJTJ rK\Jct IKlx mJaJ xM TJJjL (mJuJPhv) KuKoPac aL Kv FuJTJ aL, VJ\LkMr v~Jr Ku~JP\J IKlx 6, Km. Km. FKnKjC (3~ fuJ) dJTJ

Company Secretary Md. Hashim Reza

Company Information

Auditors Hussain Farhad & Co. Chartered Accountants House # 15, Road # 12 Block-F, Niketon Gulshan-1 Dhaka-1212 Legal Advisers S Ahmed & Associates Law Valley Malik Law Associates

Bankers Eastern Bank Ltd. Dutch Bangla Bank Ltd. HSBC Ltd. Islami Bank (Bangladesh) Ltd. Factories 1. Tongi, Gazipur 2. Dhamrai, Dhaka

Registered Office Bata Shoe Company (Bangladesh) Limited Tongi Industrial Area Tongi, Gazipur Share Liaison Office 6, B. B. Avenue (2nd floor) Dhaka

mJKwtT xJiJre xnJr KmK

FA KmKr oJiqPo \JjJPjJ pJP p, mJaJ xM TJJjL (mJuJPhv) KuKoPac-Fr 41fo mJKwtT xJiJre xnJ KjoKuKUf TJptJmuL xJhPjr \jq @VJoL 19 \Mj 2013 mMimJr xTJu 10:30 KoKjPa iJorJA TJrUJjJ, dJTJ~ IjMKf yPm: 1. 2. 3. 4. 5. 31 KcPxr 2012 fJKrPU xoJ mZPrr \jq kKrYJuTmOPr kKfPmhj Vye, KmPmYjJ S IjMPoJhj 31 KcPxr 2012 fJKrPU xoJ mZPrr \jq KjrLKf KyxJm Fm KjrLTPhr kKfPmhj Vye, KmPmYjJ S IjMPoJhj kKrYJuTmOPr xMkJKrvTf unqJv WJweJ kKrYJuTmOPr KjmtJYj 2013 xJPur \jq KjrLT KjP~JV Fm fJPhr kJKrvsKoT KjitJre kKrYJuTouLr @PhvPo oJ yJKxo r\J aL, 25 FKku 2013 hsmq: 1. 2. 3. 4. 8 o 2013 yP rTct ca p xm v~JrPyJJrPhr jJo C fJKrU kpt TJJjLr v~Jr rK\Jr KTmJ KckK\arL rK\JPr jKgn yPm fJrJA unqJPvr \jq mi mPu Veq yPmj FT\j xhxq FA xJiJre xnJ~ CkKf gJTPf Fm nJa khJj TrPf kJPrj KTmJ fJr kP CkKf yPf Fm nJa KhPf FT\j kK KjP~JV TrPf kJPrj kK lro pgJpgnJPm kNre TPr xnJr KjitJKrf xoP~r 48 WJ kNPmt TJJjLr rK\Jct IKlPx ImvqA \oJ KhPf yPm kK lro xPpJ\j TrJ yPuJ
TJJjL xPaJrL

Notice of Annual General Meeting

1.

Notice is hereby given that the 41ST ANNUAL GENERAL MEETING of Bata Shoe Company (Bangladesh) Limited will be held at Dhamrai Factory, Dhaka, on 19 June 2013, Wednesday at 10:30 a.m. to transact the following business: 2. 3. 4. 5. To receive, consider and adopt the audited financial statements of the Company and the Auditors Report thereon for the year ended 31 December 2012. To declare Dividend as recommended by the Directors. To elect Directors. To appoint Auditors for the year 2013 and to fix their remuneration. By order of the Board Tongi, 25 April 2013 NOTES: 1. Md. Hashim Reza Company Secretary To receive, consider and adopt the Directors Report for the year ended 31 December 2012.

2. 3. 4.

8 May 2013 is the RECORD DATE. Shareholders whose names appearing in the share register of the Company or in the depository register on that date will be eligible to receive dividend as approved at the Annual General Meeting. A member eligible to attend and vote at the General Meeting is entitled to appoint a proxy to attend the meeting and vote on his/her behalf. A Proxy Form is enclosed. Form of Proxy, duly completed, must be deposited at the Companys Registered Office at least 48 (fortyeight) hours before the appointed time for the Meeting.

Retail
The Retail channel sold 9.3 million pairs of shoes and with a turnover of Tk. 4.6 billion represents a 9% growth against last year. To achieve this outstanding growth in spite of global recession, the company took several initiatives like product innovation, aggressive marketing programmes, market expansion, human resource development, operational efficiency, team work etc. During the year, the company opened 23 new stores and renovated 16 potential stores. The new stores generated additional turnover of Tk. 105 million. More than 500 new lines were introduced before the biggest festival of Eid-ul-Fitre, which created a sensation among our valued customers.

Non Retail

Non Retail business played a vital role in the companys total turnover in 2012. This business channel includes 5 different divisions namely Dealers Support Program (DSP), Wholesalers, Rural Sales, Department Stores and Industrial & Institutions. The company focused on the big volume dealers to expand our market share. In addition, emphasis was given to open new dealers. More than 70 new dealers were opened last year which contributed around Tk. 104.5 million turnover. Currently, the company has more than 1,000 DSPs and wholesalers running under a sound meaningful business policy focused on development of good relationship. For retaining market leadership, the company focuses on appropriate shoe design and product development to meet the needs of the market. In communications with partners, the company organized a national Road Show of new products and received excellent positive feedback from customers to develop the right products and services.

Marketing events

In 2012, we embarked on several marketing events to highlight our brand image and to increase customer awareness. Bata Bangladesh introduced many exclusive new lines of shoes the majority of which were during festival periods. These new arrivals were introduced in different Bata brands.

Bata Bangladesh organized the Annual Sales Conference for all store and depot managers where the business plan with appropriate business targets were highlighted and top achievers were rewarded. The program ended with a colourful Fashion show and cultural event.

To highlight our B.first brand we launched the Back to School promotion in our all stores throughout the country. For all things ingenious and all things bright, B.First represents children at their most curious years.

We also campaigned during the Bengali New Year. In this campaign we highlighted our summer collection all over the country.

Manufacturing
The company operates two modern manufacturing facilities, one in Tongi and the other in Dhamrai. Last year, the two manufacturing facilities produced a total of more than 28 million pairs of shoes.

Human Resources
In 2012, Bata Bangladesh emphasised on various training programmes in view of employee development, better performance, productivity, quality & smooth business operations. The company organized 10 in-house training programmes for 1034 employees. 11 participants were sent overseas for training. Bata Bangladesh organized a day long picnic at Savar Golf Club where the employees enjoyed a different day with games, laughter, fun, songs and ended with a raffle draw. This event offers an unique opportunity to refresh the enthusiasm and to strengthen interpersonal communication.

CSR Activities
Bata Bangladesh is committed to being a good corporate citizen. CSR activities involve supporting individuals and communities in need. Partnership with voluntary and charitable organizations is a prominent feature of Batas CSR. Among others, Bata Bangladesh works with Care, CRP and Sied.

Under the Bata childrens program Bata Bangladesh is actively involved in blood donations, shoe donations to school going children, National Immunization Day, Independence Day, art and essay writing competition and so on.

10

11

xnJkKfr nJwe 2012

Chairman's Statement 2012

Fernando Garcia Restrepo

Chairman

Kk~ v~JrPyJJrmO, TJJKjr kKrYJuTouLr k gPT @Ko Vf 31 KcPxr 2012 fJKrPU vw yS~J mZPrr mJKwtT @KgtT kKfPmhj S KjrLTPhr kKfPmhjxy kKrYJuTouLr kKfPmhj @kjJPhr xJoPj CkJkj TrPf kPr @jKf mJi TrKZ KmVf 2012 xJPu @kjJPhr hv TJj kTJr kJTKfT hMPptJV KTmJ rJ\QjKfT IKrfJ ZJzJ oJaJoMKa vJKkNetnJPmA TPaPZ KT @\tJKfT IgtQjKfT oJ Fm mJuJPhPvr IgtjLKfPf Fr Kmk knJPmr TJrPe @kjJPhr TJJKj jfj jfj YqJPuPr xMULj y~ fJ PS @kjJPhr TJJKj CPuUPpJVq kmOK I\tPjr kKfvKf rJ TPr YPuPZ FA kKfvKfr iJrJmJKyTfJ~ @oJPhr fJPhr kP~J\j Fm @PrJ Cjffr xmJ khJPjr uPq KmKnj mJKeK\qT rfkNet FuJTJ~ jfj jfj UMYrJ Fm kJATJrL Km~PTs UJuJ ImqJyf rP~PZ 2012 xJPu @orJ fJPhr KmKnj oRxMo Fm CxPmr KhPT uq rPU @oJPhr kPeqr xrmrJy Fm kYJr kYJreJ YJKuP~KZ pJ @oJPhr xJoKVT KmP~ nJu nKoTJ rPUPZ 2012 xJPu @orJ KmVf mZPrr fujJ~ vfTrJ 11 nJV Km~ kmOK I\tj TPrKZ FTAxP, CkJhPjr kKfKa P mq~ xPTJYj Fm KmKnj P TfJ xJiPjr \jq @oJPhr @KrT kPYJ ImqJyf KZu @kjJPhr TJJKj F mZPr TrkNmt oMjJlJ TPrPZ 971 KoKu~j aJTJ pJ Vf mZPrrr fujJ~ vfTrJ 22 nJV mKv TJJKjr Kja oMjJlJ yP~PZ 672 KoKu~j aJTJ pJ Vf 2011 xJPur fujJ~ 91 KoKu~j aJTJ mKv 2012 xJPur UMYrJ Km~ KZu 2011 xJPur fujJ~ vfTrJ 9 nJV mKv UMYrJ Km~ fgJ KrPaAu YqJPjPur Km~ KZu TJJKjr oJa KmP~r 62 nJV UMYrJ KmP~r Skr
12

Dear Shareholders,

On behalf of the Board of Directors of the company, it is my great pleasure to present to you the Directors Report along with the Financial Statements and Auditors Report thereon for the year ended 31 December 2012.

While the country was relatively peaceful in 2012, without any major political disturbances and natural adversity, your company faced new challenges as a result of the global economic slowdown and its harmful impact on the economy of Bangladesh. Your company nevertheless remains committed to achieving a reasonable rate of growth. This commitment includes launching expansion programmes to increase the number of retail and wholesale outlets in important business locations to better serve the needs of our customers. During 2012, our promotional campaigns have been focused on boosting the market demand for seasonal and festival products, thus contributing positively to our turnover. In 2012, we achieved 11% growth in turnover while continuing our relentless efforts to reduce costs by taking various austerity measures in each and every area of our operations. Your company achieved a profit before tax of Tk.971 million representing a growth of 22% over the previous year. The net profit of the company was Tk. 672 million, an increase of Tk. 91million over the year 2011.

During 2012, the retail turnover was 9% greater than in 2011. The retail channel contributed 62% of the total companys turnover. Our increased focus on retail has been implemented through the opening of three City

@oJPhr ImqJyf rfJPrJPkr iJrJmJKyTfJ~ F mZr @rS 3Ka KxKa Jr Fm 20Ka lqJKoKu Jr UJuJ yP~PZ F mZPr @orJ mv TP~TKa JPrr xJr Fm Cj~jS TPrKZ CxPmr xo~ Fm mqJT a u' kJVJo CkuPq mz irPjr kYJr kYJreJ YJuJPjJ yP~PZ mJaJ, jgt Jr, SP~jPmsjJr, KmlJt, xqJJT, oKr T~Jr S mJmuVJoJrx& msJPr keqPuJPT Kk Fm APuTasKjT KoKc~JPf mv nJPuJnJPm kYJr TrJ y~ 2012 xJPu kJATJrL Km~ 2011 xJPur YP~ 15 nJV mKv KZu pJ TJJKjr oJa KmP~ 37 nJV ImhJj rPUPZ kJATJrL KmP~r Skr @oJPhr ImqJyf rfJPrJPkr iJrJmJKyTfJr xP xKf rPU 2012 xJPu @orJ @PrJ 53Ka KcFxKk Fm 18Ka yJuPxuJr YJuM TPrKZ KcuJrPhr KmKnj rTPor kPeJhjJ Fm kMrJrxy kJATJrL KmP~r \jq KmPvw kYJr kYJreJrS @P~J\j TrJ y~ @kjJPhr TJJKj KmKnj kT VyPer oJiqPo xJrJ mZr jfj jfj keq CkJhj ImqJyf rPUPZ FZJzJ JjL~ Fm @\tJKfT xrmrJyTJrLr oJiqPo KmKnj FTKxn keq xVy TrJ yP~PZ 2012 xJPu @kjJPhr TJJKj aL Fm iJorJA lqJKrr CkJhj mqmJr Cj~j Fm @iMKjTLTre ImqJyf rPUPZ pJr lPu Cn~ TJrUJjJr hfJ Fm CkJhjvLufJ uqeL~nJPm mOK kP~PZ @oJPhr TotLPhr kvJVf hfJ mOKr \jq 11 TotL @t\JKfT asKj kJVJo Fm xKojJPr IvVye TPrPZj, 15 TotL JjL~ asKj Fm 1034 TotLPT Kj\ fJmiJPj asKj kJVJPo IvVyPer mqmJ TrJ yP~PZ, pJ TotLPhr YJozJ S \MfJ CkJhj Fm Kmkej KmwP~ JPjr kKrKi @rS Kmf TPrPZ mJaJ mJuJPhv FTKa TPkJtPra mKc KyPxPm xoJP\r kKf hJ~m TPktJPra xJoJK\T hJK~fvLufJ (KxFx@r) TJpto yP mqK Fm TKoCKjKaPT fJr kP~J\Pj xyJ~fJ TrJ KmKnj jJoijq JPxmL Fm hJfmq xJr xP kJatjJrKvk mJaJr KxFx@r Fr Ijqfo Kjhvtj mJaJ mJuJPhv T~Jr, Kx@rKk, Kxc asJ xy KmKnj xJr xP TJ\ TPr gJPT mJaJ KYuPcsjx kJVsJo" mJaJ yc IKlx TfttOT xJrJ KmPvr ImPyKuf KvPhr xyJ~fJ TrJr CPPvq YJuM TrJ FTKa TJpto FA TJptPor Iv KyPxPm kgKv

stores and twenty Family stores. We also upgraded and renovated several key stores during the year. Major promotional campaigns were held during the major festival periods and Back-to-School. Bata, North Star, Weinbrenner, B-First, Sandak, Marie Claire and Bubblegummers branded products were highlighted through print and electronic media.

Wholesale turnover was 15% greater than in 2011. The wholesale channel contributed 37% of the total companys turnover. Our increased focus on wholesale was implemented through the opening of 53 DSP outlets and 18 wholesalers. Special sales promotion campaigns were also launched, offering additional incentives and rewards for the dealers, in addition to other sales promotion activities. Your company continues in introducing new and innovative articles throughout the year and several new projects were launched in all categories. In addition, we sourced many exclusive products both from local and overseas suppliers. In the year 2012 your company continued to modernise and upgrade the production facilities in both the Tongi and Dhamrai factories. This has greatly improved the productivity and efficiency of the factories.

With a view to improving the professional skills of our employees 11 executives participated in overseas training programmes and seminars, 15 executives participated in local and 1034 executives participated inhouse training to maintain their competitive edge by widening their knowledge of leather, footwear manufacturing, marketing and merchandising.

Bata Bangladesh is committed to being a good corporate citizen. Corporate Social Responsibility (CSR) activities involve supporting individuals and communities in need. Partnership with voluntary and charitable organizations is a prominent feature of Batas CSR. Bata Bangladesh works with Care, CRP, Sied, Trust and various others. Bata Childrens Programme, a programme launched by the Bata head office to focus on helping disadvantaged children worldwide, supports underprivileged and street children through different NGOs like Utsho, Maer Achol, Sied, Trust Shishu Polli, UNICEF, Care etc.
13

Fm KkKZP~ kzJ ImPyKuf KvPhr KmKnj FjK\S poj Cx, oJP~r @Yu, xLc asJ, Kv kuL, ACKjPxl, T~Jr AfqJKhr oJiqPo xyJ~fJ TrJ y~ 2012 xJPur 31 KcPxr kpt @kjJPhr TJJKjr xmtPoJa TotL hJKzP~PZ 1,439 \j kvJhJKrf, Kao KKra Fm vJKkNet Kv xTt m\J~ rJUJr \jq @kjJPhr TJJKj F mZr IjqJjq IjMJjxy FTKa mJKwtT mjPnJ\j S xJKfT IjMJPjr @P~J\j TPr hPvr vLwt \MfJ CkJhjTJrL Fm mJ\Jr\JfTJrL KyPxPm @kjJPhr TJJKj 2012 xJPu \JfL~ TJwJVJPr 1,621 KoKu~j aJTJ khJj TPrPZ 2012 xJPur 30 KcPxr @kjJPhr TJJKjr kKfKa v~Jr dJTJ T FTPYP 535.70 aJTJ~ Fm 27 KcPxr YVJo T FTPYP 518.10 aJTJ~ ~-Km~ y~ @kjJPhr kKrYJuTouL v~Jr kKf 17.00 aJTJ KyPxPm oJa 232.56 KoKu~j aJTJ ImftLTJuLj unqJv IjMPoJhj TPrPZj pJ 24 KcPxr 2012 fJKrPU khJj TrJ y~ kKrYJuTouL FUj 672 KoKu~j aJTJ oMjJlJr Skr 2012 xJPur YzJ unqJv v~Jr kKf 10.50 aJTJ KyPxPm oJa 143.64 KoKu~j aJTJ xMkJKrv TrPZj lPu 31 KcPxr 2012 fJKrPU vw yS~J mZPr oJa unqJPvr kKroJe hJzJPm v~Jr kKf 27.50 aJTJ KyPxPm oJa 376.20 KoKu~j aJTJ TJJKjr xW-KmKi IjMxJPr mqmJkjJ kKrYJuT ToJr jLPfv ZJzJ Ijq kKrYJuTmO FA mJKwtT xnJ~ Imxr Vye TrPuj Fm kMjKjmtJYPjr pJVq KmiJ~ kJgtL yPuj kKrPvPw, @Ko kKrYJuTouLr k gPT TJJKjr kKf ImqJyf xJyJpq S xyPpJKVfJ khJPjr \jq @oJPhr xJKjf v~JrPyJJrmO, fJ xJiJre, xrmrJyTJrL, TotTftJTotYJrLmO Fm Vek\JfL mJuJPhv xrTJPrr KjTa TffJ kTJv S ijqmJh Jkj TrKZ

As at 31December 2012, a total of 1439 people were employed by your company. To uphold team spirit, integrity and harmonious industrial relations, your company organised, among other programmes, an annual picnic and cultural show during the year. Your company contributed Tk. 1,621 million to the countrys National Exchequer for the year 2012 as the leading manufacturer and marketer in the countrys footwear industry. Your companys shares were traded at Tk. 535.70 on the Dhaka Stock Exchanges on 30 December 2012 and Tk. 518.10 on the Chittagong Stock Exchange on 27 December 2012.

Your Board of Directors approved an interim dividend of Tk. 17.00 per share amounting to Tk 232.56 million, which was paid on 24 December 2012. The Board is now recommending a final dividend of Tk. 10.50 per share amounting to Tk. 143.64 million with respect to 2012 after making a net profit of Tk. 672 million. This will make a total dividend payment of Tk. 27.50 per share amounting to Tk.376.20 million for the year ended 31 December 2012. In accordance with the Articles of Association of the company, all the directors, except the Managing Director, Kumar Nitesh, retire at the Annual General Meeting and, being eligible offer themselves for reelection.

Finally, on behalf of the Board of Directors, I would like to express our gratitude to you, our valued shareholders, as well as to our valued customers, suppliers, employees and to the Government of the Peoples Republic of Bangladesh for the keen support and cooperation extended to the company. Fernando Garcia Restrepo Chairman 25 April 2013

lJjtJPJ VJKxt~J rxPasPkJ Y~JroqJj 25 FKku 2013

14

15

Directors' Report 2012

Industry Outlook

Your Directors have pleasure in submitting their Report and Audited Financial Statements of the Company for the year ended 31 December 2012 along with the preceding five years as follows: The footwear sector in the country witnessed a moderate growth during the year. The growth is expected to remain the same level next year. The Company attained growth of 11% during the current year. It is expected that, the growth trend will continue under the prevailing market conditions. Cost of Sales & Profit Margin The overall costs of raw materials have increased internationally. However, the cost of sales has decreased satisfactorily in 2012 as compared to net turnover due to strict control over the consumption of raw materials and other cost of productions. Consequently the gross profit has increased over that of 2011. Key Operating & Financial Information Your Directors have pleasure in submitting the key operating and financial data of the Company for the year ended 31 December 2012 along with the preceding five years below:
Financial results 2012 Taka 000 2011 Taka 000 2010 Taka 000 2009 Taka 000 2008 Taka 000 2007 Taka 000

Net profit before tax Provision for tax Net profit after tax Un-appropriated profit brought forward Undistributed dividend reserve Loss on BB Export winding up Profit available for appropriation

299,473

971,389 671,916 (2,791)

213,003

793,620 580,617 -

199,000

742,971 543,971 873,195 -

180,286 -

629,692 449,406 724,748

170,219 1,000 -

619,635 449,416 575,292

148,052 -

493,927 345,875 571,417

1,313,782 1,982,907

1,075,165 1,655,782

From which the Directors recommended the following appropriations: Final dividend paid (previous year) Total dividend Interim dividend paid (current year) Un-appropriated profit carried forward 232,560 143,640

1,417,166

1,174,154

1,025,708

917,292

Dividend

1,606,707

376,200

1,313,782

342,000

198,360

143,640

1,075,166

342,000

198,360

143,640

300,960

157,320

143,640

873,194

300,960

157,320

143,640

724,748

342,000

198,360

143,640

575,292

For the year ended 31 December 2012 the Board of Directors recommended an interim dividend of Tk. 17.00 per share amounting to Tk 232,560,000 and now recommends a final dividend of Tk. 10.50 per share amounting to Tk.143,640,000 thus making a total dividend of Tk. 376,200,000 per share amounting to Tk. 27.50. The Directors retiring as per Article 104 of the Companys Articles of Association are Mr. Fernando Garcia Restrepo, Mr. Shaibal Sinha, Mr. Rashidul Hasan and Mr. K M Rezaul Hasanat and being eligible offer themselves for re-election.
16

Directors Proposed for Re-Election

Audit Committee Meeting

The Audit Committee is a sub-committee of the Board. All members of the Audit Committee were appointed by the Board of Directors from amongst the members. They met once during the year 2012. Except for Mr. Fernando Garcia Restrepo and Mr. K M Rezaul Hasanat all the members were present in the meeting of the committee. The Company Secretary was the Secretary of the Committee. The Audit Committee is comprised of: Mr. Mr. Mr. Mr. Mr. Mr. Fernando Garcia Restrepo Muhammad Qayyum Kumar Nitesh Shaibal Sinha Rashidul Hasan K M Rezaul Hasanat Chairman Member (resigned on 31 December 2012) Member (appointed on 1 January 2013) Member Member as Independent Director Member as Independent Director

Reports on Activities of the Audit Committee

N N N N N

The Audit Committee has performed regularly the following activities: Oversee the financial reporting. Monitoring the choice of accounting policies, principles, internal control and risk management process. Oversee performance of statutory auditors. Reviewing the annual financial statements before submission to the Board for approval. Reviewing the statement of significant related party transactions.

The System of Internal Control

The Board of Directors assures the Shareholders that the Company has a robust risk management process to ensure that the system of internal control is sound in design and has been effectively implemented and monitored. Although it is possible that all risks to the business are not known at present, the Company takes reasonable steps to identify material risks that may hamper business results and systematically reviews these risks in light of the changing internal and external environment in order to assess that the controls in place are adequate to address these risks. Directors Declaration as to Financial Statements a) c) As part of preparation and presentation of the financial statements, the Directors also report that: b) d) Proper books of accounts of the Company have been maintained as required by law.

The Financial Statements prepared by the Management of the Company present a true and fair view of Companys state of affairs, the result of its operations, cash flows and changes in equity. Appropriate accounting policies have been consistently applied in preparation of the Financial Statements and the accounting estimates are based on reasonable and prudent judgment.

The Financial Statements were prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) as applicable in Bangladesh and there has not been any departure there from.
17

e)

The CEO and Finance Director have certified to the Board that: i) they have reviewed the financial statements and believe: b) ii) a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

Other Regulatory Disclosures:

N

there are, to the best of their knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or in violation of the companys codes of conduct.

these statements together present a true and fair view of the companys affairs and are in compliance with existing accounting standards and applicable laws.

BB Export Limited., the wholly owned subsidiary of the Company, has been wound up voluntarily by the members on 6 November 2012. The assets of the subsidiary company have been taken over by the parent Company at written down value as mutually agreed by the management of both the Companies. The activity of the tannery unit has been discontinued as per resolution of the Board meeting No 208, dated 30 September 2012.

Auditors

Hussain Farhad & Co., Chartered Accountants, have offered their willingness to be re-appointed as statutory auditors of the company. The Board recommends their appointment for the year 2013 and to continue till the next Annual General Meeting. On behalf of the Board of Directors, Kumar Nitesh Managing Director 25 April 2013

18

Pattern of Shareholdings

The names of the Shareholders along with the positions of their shares are listed below: Names of the shareholders i) Parent/subsidiary/associate/related parties: N Bafin Nederland (B.V.) Number of share held 9,576,000 64

Annexure - 1 % holding 70.00

ii) iii) v)

Directors/CEO/CS/CFO/Audit Head and their spouses and minor children N Mr. Rashidul Hasan Executives (Head of Functions) Others Shareholders, who hold less than 10% International Finance Corporation N Non-resident shareholders N Local shareholders
N

iv)

Shareholders, who hold 10% or more

Nil

Board Meetings

Total

13,680,000

2,840 908,928 3,192,168

Nil

Nil

100.00

0.02 6.64 23.34

Nil

The Board met 4 (four) times during the year 2012. The Company Secretary and Finance Director were also present in the Board meetings. The attendance by each Director is stated below: Present Directors Name Mr. Muhammad Qayyum Mr. Rashidul Hasan Mr. Shaibal Sinha Mr. Kumar Nitesh Mr. K M Rezaul Hasanat Mr. Fernando Garcia Restrepo No. of Attendance 4 meetings 4 meetings 0 meeting 4 meetings 1 meeting 1 meeting (resigned on 31 December 2012)

(appointed on 01 January 2013)

19

Annexure 2

Status of Compliance with the Conditions Imposed by BSECs Notification on Corporate Governance (Report under Condition No. 7.00) Condition No.
1.1 Board Size: The number of the Board members of the company shall not be less than 5 (five) and more than 20 (twenty).

Titles

Complied Complied

Status

1.2 (i)

Independent Directors: At least one fifth (1/5) of the total number of Directors in the companys Board shall be Independent Directors. Independent Director does not hold any share or holds less than 1% shares of the total paid-up capital. Independent Director or his family members are not connected with the company's any sponsor or Director or Shareholder who holds 1% or more shares. Does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companies.

The Board of Bata is comprised of 5 (five) Directors.

Remarks

1.2 (ii) (a) 1.2 (ii) (b) 1.2 (ii) (c) 1.2 (ii) (d) 1.2 (ii) (e) 1.2 (ii) (f) 1.2 (ii) (g) 1.2 (ii) (h)

Complied Complied Complied Complied Complied Complied Complied Complied

There are two Independent Directors in the Bata Board, namely Mr. Rashidul Hasan, and Mr. K M Rezaul Hasanat.

Independent Director is not a member, Director or officer of any Stock Exchange. Independent Director is not a shareholder, Director or officer of any member of Stock Exchange or an intermediary of the capital market. Independent Director is not a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of any statutory audit firm. Independent Director shall not be an Independent Director in more than 3 (three) listed companies.

1.2 (ii) (i) 1.2 (iii) 1.2 (iv)

Independent Director has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a bank or a Non-Bank Financial Institution (NBFI). Independent Director has not been convicted for a criminal offence involving moral turpitude.

Complied Complied Complied

The Independent Director(s) shall be appointed by the Board of Directors and approved by the shareholders in the AGM.

The Post of Independent Director(s) cant remain vacant for more than 90 (ninety) days.

20

Condition No.
1.2 (v)

1.2 (vi) 1.3 (i)

The Board shall lay down a code of conduct of all Board members and annual compliance of the code to be recorded.

Titles

Complied

Status

Remarks

The tenure of office of an Independent Director shall be for a period of 3 (three) years, which may be extended for 1 (one) term only. Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial, regulatory and corporate laws and can make meaningful contribution to business.

Complied

1.3 (ii)

1.3 (iii) 1.4

Independent Director should be a Business Leader/Corporate Leader/Bureaucrat/University Teacher with Economics or Business Studies or Law background/Professionals like Chartered Accountants, Cost & Management Accountants, Chartered Secretaries. The Independent Director must have at least 12 (twelve) years of corporate management/professional experiences. In special cases the above qualifications may be relaxed subject to prior approval of the Commission.

Complied

Not Applicable Complied

1.5 (i) 1.5 (ii) 1.5 (iii) 1.5 (iv) 1.5 (v)

1.5

Chairman and CEO shall be filled by different individuals. Chairman shall be elected from among the Directors. The Board of Directors shall clearly define respective roles and responsibilities of the Chairman and the CEO. The Directors Report to Shareholders on: Industry outlook and possible future developments in the industry. Segment-wise or product-wise performance. Risks and concerns. A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin. Discussion on continuity of any Extra-Ordinary gain or loss. Basis for related party transactions - a statement of all related party transactions should be disclosed in the annual report.

Complied Complied Complied Complied Not Applicable Complied Not Applicable

Stated in the financial statement at note no. 35. Stated in the financial statement at note no. 34.

1.5 (vi) 1.5 (vii)

Utilization of proceeds from public issues, rights issues and/or through any others instruments.

Stated in the financial statement at note no. 36.

21

Condition No.
1.5 (viii)

1.5 (ix)

An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc. If significant variance occurs between Quarterly Financial performance and Annual Financial Statements the management shall explain about the variance on their Annual Report. Remuneration to Directors including Independent Directors.

Titles

Not Applicable

Status

Remarks

Not Applicable

No significant variance.

1.5 (x) 1.5 (xi)

Complied Complied

1.5 (xii) 1.5 (xiii)

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

Stated in the financial statement at note no. 23.

Proper books of account of the issuer company have been maintained. Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment.

Complied Complied

1.5 (xiv)

1.5 (xv) 1.5 (xvi)

International Accounting Standards (IAS)/Bangladesh Accounting Standards (BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the issuer company's ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed.

Complied

Complied Complied

1.5 (xvii) 1.5 (xviii) 1.5 (xix) 1.5 (xx)

Significant deviations from the last years operating results of the issuer company shall be highlighted and the reasons thereof should be explained. Key operating and financial data of at least preceding 5 (five) years shall be summarized. No declaration of Dividend. The number of Board meetings held during the year and attendance by each Director shall be disclosed.

Not Applicable Complied Not Applicable Complied

Stated in Annexure 1 to the Directors report.

22

Condition No.
1.5 (xxi)

1.5 (xxi) (a) 1.5 (xxi) (b) 1.5 (xxi) (c) 1.5 (xxii)

The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by:Parent/Subsidiary/Associated Companies and other related parties (name wise details); Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details); Executives; Shareholders holding ten percent (10%) or more votes interest in the company (name wise details). In case of the appointment/re-appointment of a Director the company shall disclose the following information to the shareholders:N a brief resume of the Director; N nature of his/her expertise in specific functional areas; N names of companies in which the person also holds the Directorship and the membership of committees of the Board

Titles

Status

Remarks

Complied Complied Complied Complied Complied

Stated in Annexure 1 to the Directors report. Do Do Do Disclosed in the annual report.

1.5 (xxi) (d)

2.1

2.2 3 (i) 3 (ii)

The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit (internal Control and Compliance) and a Company Secretary (CS). The Board of Directors should clearly define respective roles, responsibilities and duties of CFO, the Head of Internal Audit and the CS. Attendance of CFO and the Company Secretary in the Board meeting. The company shall have an Audit Committee as a sub-committee of the Board of Directors. The Audit Committee shall assist the Board of Directors in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business. The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee shall be clearly set forth in writing.

Complied

Complied Complied Complied

Stated in Annexure 1 to the Directors report. Stated in the Directors report.

3 (iii) 3.1 (i) 3.1 (ii)

Complied Complied Complied The Audit Committee is composed of 5 (five) members.

The Audit Committee shall be composed of at least 3 (three) members.

The Board of Directors shall appoint members of the Audit Committee who shall be Directors of the company and shall include at least 1 (one) Independent Director.

23

Condition No.
3.1 (iii)

3.1 (iv) 3.1 (v) 3.1 (vi) 3.2 (i) 3.2 (ii) 3.3 (i) 3.3 (ii)

All members of the Audit Committee should be financially literate and at least 1 (one) member shall have accounting or related financial management experience: The term Financially literate means the ability to read and understand the financial statements i.e. Balance Sheet, Income Statement and Cash Flow Statement and a person will be considered to have accounting or related financial management expertise if s/he possesses professional qualification or Accounting/finance graduate with at least 12 (twelve) years of corporate management/professional experiences. Casual vacancy in Audit Committee (AC) shall be filled by the Board.

Titles

Complied

Status

Remarks

Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Mr. Rashidul Hasan has been appointed as chairman in March 2013.

The company secretary shall act as the secretary of the Committee. The quorum of the Audit Committee (AC) meeting shall not constitute without at least 1 (one) Independent Director.

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

Chairman of the audit committee shall remain present in the Annual General Meeting. The Role of Audit Committee: Oversee the financial reporting process. Monitor choice of accounting policies and principles. Monitor Internal Control Risk management process.

3.3 (iv) 3.3 (v)

3.3 (iii)

Oversee hiring and performance of external auditors.

3.3 (vi) 3.3 (vii)

Review along with the management, the annual financial statements before submission to the Board for approval. Review along with the management, the quarterly and half yearly financial statements before submission to the Board for approval. Review the adequacy of internal audit function. Review statement of significant related party transactions submitted by the management.

3.3 (viii) 3.3 (ix)

Review Management Letters/ Letter of Internal Control weakness issued by statutory auditors.

24

Condition No.
3.3 (x)

3.4.1 (i) 3.4.1 (ii) (a) 3.4.1 (ii) (b) 3.4.1 (ii) (c) 3.4.1 (ii) (d) 3.4.2

3.4

When money is raised through Initial Public Offering IPO)/Repeat Public Offering (RPO)/Rights Issue the company shall disclose to the Audit Committee about the uses/applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized for the purposes other than those stated in the offer document/ prospectus. Reporting of Audit Committee:The Audit Committee shall report on its activities to the Board of Directors. Report on conflicts of interests to the Board of Directors.

Titles

Not Applicable

Status

Remarks

Complied Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable There was no reportable case of conflict of interest in 2012.

Will report any suspected or presumed fraud or irregularity or material defect in the internal control system to the Board. Will report any suspected infringement of laws, including securities related laws, rules and regulations to the Board. Will report any other matter which shall be disclosed to the Board of Directors immediately.

There was no such case in 2012. Do Do Do

3.5

Reporting to the Authorities: If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and results of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee shall report such finding to the Commission, upon reporting of such matters to the Board of Directors for three times or completion of a period of 6 (six) months from the date of first reporting to the Board of Directors, whichever is earlier. Reporting to the Shareholders and General Investors: report on activities carried out by the Audit Committee, including any report made to the Board of Directors under condition 3.4.1 (ii) above during the year, shall be signed by the Chairman of the Audit Committee and disclosed in the annual report of the issuer company. Non-engagement of external/statutory auditors in appraisal or valuation services or fairness opinions.

Complied

Stated in Directors Report.

4 (i)

Complied

25

Condition No.
4 (ii)

4 (iii) 4 (iv) 4 (v) 4 (vi) 4 (vii) 4 (viii)

Non-engagement of external/statutory auditors in information systems design and financial implementation. Non-engagement of external/statutory auditors in Book-keeping or other services related to the accounting records or financial statements. Non-engagement of external/statutory auditors in Broker-dealer services. Non-engagement of external/statutory auditors in Actuarial services. Non-engagement of external/statutory auditors in Internal audit services.

Titles

Complied Complied Complied Complied Complied Complied Complied

Status

Remarks

Non-engagement of external/statutory auditors in any other service that the Audit Committee determines.

5 (i)

No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company.

5 (ii) 5 (iii) 5 (iv) 5 (v) 6 (i) (a)

Provisions relating to the composition of the Board of Directors of the holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company. At least 1 (one) Independent Director on the Board of Directors of the holding company shall be a Director on the Board of Directors of the subsidiary company. The minutes of the Board meeting of the subsidiary company shall be placed for review at the following Board meeting of the holding company.

Complied

Subsidiary company has been wound up on 6th November 2012. Do Do Do The subsidiary company did not go into operation since inception.

Complied Complied Complied Not Applicable Complied

The minutes of the respective Board meeting of the holding company shall state that they have reviewed the affairs of the subsidiary company also.

The Audit Committee of the holding company shall also review the financial statements, in particular the investments made by the subsidiary company. The CEO and CFO will certify to the Board that they have reviewed the financial statements and believe that these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading.

26

Condition No.
6 (i) (b)

6 (ii)

The CEO and CFO will certify to the Board that they have reviewed the financial statements and believe that these statements together present a true and fair view of the companys affairs and are in compliance with existing accounting standards and applicable laws.

Titles

Complied

Status

Remarks

7 (i)

There are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violation of the companys code of conduct. The company shall obtain a certificate from a Professional Chartered Secretary/Accountants (Chartered Accountants/Cost & Management Accountants/Chartered Secretary) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis. The Directors of the company shall state, in accordance with the Annexure attached, in the Directors' report whether the company has complied with these conditions.

Complied

Complied

7 (ii)

Complied

27

CERTIFICATE OF COMPLIANCE TO THE SHAREHOLDERS OF Bata Shoe Company (Bangladesh) Limited

(As required under the BSEC Guidelines)

We have examined compliance to the BSEC guidelines on Corporate Governance by Bata Shoe Company (Bangladesh) Limited for the year ended 31st December 2012, These guidelines relate to the Notification no. SEC/CMRRCD/2006-158/134/Admin/44 dated 7th August 2012 of Bangladesh Securities and Exchange Commission (BSEC) on Corporate Governance.

Such compliance to the codes of Corporate Governance is the responsibility of the Company. Our examination was limited to the procedures and implementation thereof as dopted by the Mangement in and not an expression of opinion or audit on the financial statements of the Company.

ensuring compliance to the conditions of Corporate Governance. This is a dcrutiny and verification only In our opinion and to the best of our information and according to the explanations provided to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the Mangement has conducted the affairs of the Company. above mentioned guidelines issued by BSEC. We also state that such compliance is neiter an assurance as to the future viability of the Company nor a certification on the efficiency or effectiveness with which the

Dhaka, 25 April 2013

HUSSAIN FARHAD & CO.

Chartered Accountants.

28

Audit Committee Report

The Board of Directors of Bata Shoe Company (Bangladesh) Limited has constituted an Audit Committee to support the Board in fulfilling its oversight responsibilities.

The Audit Committee meeting was held once for the year 2012. The Finance Director, Company Secretary and the Head of Internal Audit were invitees to the Audit Committee meeting. Purpose of the Audit Committee The role of Audit Committee is to monitor the integrity of the financial statements of the company and review and, when appropriate, make recommendations to the Board of Directors on business risks, internal controls and compliance. The Committee satisfies itself by means of suitable steps and appropriate information, that proper and satisfactory internal control system are in place to identify and contain business risks and the companys business is conducted in a proper and financially appropriate manner. In 2012, the Audit Committee reviewed its terms of reference in line with requirements of Bangladesh Securities and Exchange Commissions (BSEC) notification on corporate governance. The Committee carried out its duties in accordance with the terms of reference of the Audit Committee. Some of the major responsibilities of the Audit Committee are as follows: N Review the annual, half-yearly and quarterly financial statements and other financial results, and upon its satisfaction of the review, recommend the same to the Board. N Review the adequacy and effectiveness of financial reporting process, internal control system, risk management, auditing matters, and the companys processes for monitoring compliance with laws and regulations and the Codes of Conduct. N Recommend appointment, termination and determination of audit fees for statutory auditors. Consider the scope of work, and oversee and evaluate the work performed by statutory auditors. Review permitted nonaudit services performed by statutory auditors. N Exercise its oversight of the work of Internal Audit department of the company. Review the effectiveness of Internal Audit function including performance, structure, adequacy of resources, and compliance with professional standards. Examine audit findings and material weaknesses and monitor implementation of audit action plans. Major Activities of the Audit Committee N Reviewed and recommended to the Board the quarterly and annual financial statements for the year ended 31 December, 2012. N Considered and made recommendation to the Board on the appointment and remuneration of external auditors, Hussain Farhad & Co., Chartered Accountants for the year 2013. N Reviewed the management letter from external auditors for the year 2012 together with managements responses to the findings. N Approved the Internal Audit Plan for 2013, monitored progress and effected revisions when necessary. N Discussed Internal Audit reports and findings in detail with auditors and members of management and monitored the status of implementation of audit action plans and provided guidance to ensure timely completion of action plans. N Reviewed the activities of the compliance function, incidence reporting and actions, and the status of enforcement of the companys Codes of Conduct. N Reviewed the Internal Audit Charter. N Reviewed and received report on the matters as per requirement from the Securities and Exchange Commission (SEC). Major Responsibilities of the Audit Committee

The above matters are significant recommendations for continuous improvement and therefore duly noted.

29

30

Report on the Financial Statements

Independent Auditors' Report to the Shareholders of Bata Shoe Company (Bangladesh) Limited

We have audited the accompanying financial statements of Bata Shoe Company (Bangladesh) Limited ("the Company") which comprise the statement of financial position as at 31 December 2012, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Managements Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Bangladesh Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Bata Shoe Company (Bangladesh) Limited as at 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards. Other Matter The financial statements of Bata Shoe Company (Bangladesh) Limited for the year ended 31 December 2011, were audited by another auditor who expressed an unmodified opinion on those statements on 16 April 2012. Report on Other Legal and Regulatory Requirements In accordance with the Companies Act 1994 and the Securities and Exchange Rules 1987, we also report the following: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appeared from our examination of those books; d) the expenditure incurred was for the purposes of the Companys business. c) the statement of financial position and statement of comprehensive income dealt with by the report are in agreement with the books of account; and

Dhaka, 25 April 2013

Hussain Farhad & Co.

Chartered Accountants

31

Bata Shoe Company (Bangladesh) Limited Statement of Financial Position as at 31 December 2012
Assets Property, plant and equipment Capital work in progress Investment in subsidiary Prepayments of rent Total non-current assets Inventories Accounts receivable Advances, deposits and prepayments Cash and cash equivalents Notes 4 5 6 10 8 9 10 11 880,326,133 2,059,472 132,100,000 2012 Taka

1,014,485,605

Total current assets Total assets

2,965,537,715 3,980,023,320 136,800,000 1,717,200,579

1,888,784,523 276,562,580 566,731,442 233,459,170

2,692,797,498 3,546,726,569 136,800,000 1,424,274,906 1,561,074,906

1,756,397,259 190,610,122 443,022,574 302,767,543

853,929,071

731,871,393 38,251,715 19,970,000 63,835,963

2011 Taka

Equity Share capital Reserves and surplus Liabilities Deferred liability Deferred tax liability

Total equity attributable to equity holders of the company

12 13

1,854,000,579 123,817,664 12,300,000 353,751,438 420,194,568 241,388,294 385,280,477 530,956,889 58,333,411 136,117,664

Total non-current liabilities

14 7 15 16 17 18 19 34.2

Total current liabilities Total liabilities

Creditors for goods Creditors for expenses Creditors for other finance Accrued expenses Provision for tax Unclaimed dividend

Total equity and liabilities

1,989,905,077 2,126,022,741 3,980,023,320

The notes on pages 37 to 63 are an integral part of these financial statements.

3,546,726,569

1,833,447,663 1,985,651,663

409,263,569 300,735,251 230,638,433 346,740,381 483,230,866 62,839,163

152,204,000

150,704,000 1,500,000

Kumar Nitesh Managing Director

Rashidul Hasan
Director

Md. Hashim Reza Company Secretary

As per our report of same date. Hussain Farhad & Co. Chartered Accountants

Dhaka, 25 April 2013

32

Bata Shoe Company (Bangladesh) Limited Statement of Comprehensive Income for the year ended 31 December 2012
Notes 20 Revenue 7,384,505,735 2012 Taka 6,647,846,013 2011 Taka

Cost of sales Gross profit Exchange gain/(loss) Other income

21 22 24 25

(4,718,506,064)

2,665,999,671 26,776,981 21,335,940

(4,286,593,663) 21,210,803 6,071,420

Administration, selling and distribution expenses Profit from operating activities Finance income Finance expenses

23

(1,683,027,051) 1,005,619,518 (4,440,402) 16,895,538

(4,130,083)

2,361,252,350

(1,529,417,293) (21,210,569) 835,389,529 850,528,678

(2,517,182)

Net finance income/(expenses) Profit before income tax Income tax expense: Current tax Deferred tax

Profit before contribution to workers' profit participation fund Contribution to workers' profit participation fund 29 19 7

1,022,515,056

(15,139,149)

(51,125,753) 971,389,303

(41,769,476) 793,620,053

288,673,000 299,473,000 49.12 10,800,000 671,916,303

204,503,000 213,003,000 42.44 8,500,000 580,617,053

Profit for the year

Basic earnings per share (par value Tk 10)

The notes on pages 37 to 63 are an integral part of these financial statements.

32

Kumar Nitesh Managing Director

Rashidul Hasan
Director

Md. Hashim Reza Company Secretary

As per our report of same date. Hussain Farhad & Co. Chartered Accountants

Dhaka, 25 April 2013

33

34
Share capital 136,800,000 998,620 998,620 48,863,000 Taka 60,631,183 998,620 48,863,000 Reserve on revaluation of land Taka Nondistributable special reserve General reserve Retained earnings Total equity 1,322,457,853 Taka Taka Taka 1,075,165,050 580,617,053 Taka 580,617,053 (143,640,000) (198,360,000) (143,640,000) (198,360,000) 1,313,782,103 (2,790,630) 48,863,000 671,916,303 1,561,074,906 (2,790,630) 671,916,303 (143,640,000) (232,560,000) 136,800,000 60,631,183 136,800,000 60,631,183 1,606,707,776 1,854,000,579 (143,640,000) (232,560,000)

Particulars

Bata Shoe Company (Bangladesh) Limited Statement of Changes in Equity for the year ended 31 December 2012

Balance as at 1 January 2011

Total comprehensive income for 2011 Profit for the year

Transactions with the shareholders Final dividend for the year 2010 Interim dividend for the year 2011

Balance as at 31 December 2011

Loss on Investment in Subsidiary Total comprehensive income for 2012 Profit for the year

Transactions with the shareholders Final dividend for the year 2011 Interim dividend for the year 2012

Balance as at 31 December 2012

Bata Shoe Company (Bangladesh) Limited Statement of Cash Flows for the year ended 31 December 2012
Cash flows from operating activities Cash receipts from customers Cash payments to and on behalf of employees Cash payments for deferred liabilty Cash generated from operating activities Interest received from STD account Interest paid Income tax paid Net cash from operating activities 2012 Taka

2011 Taka

Cash payments to suppliers and contractors for goods and services

(1,122,268,755) (20,886,394) 723,359,941 (8,570,485) 7,511,347

7,285,702,413

6,636,928,275

(5,419,187,323)

(4,768,014,274) (14,414,896) 931,237,719 4,801,594

(923,261,386)

(244,240,492) 478,060,311

(233,574,896) 678,736,666

(23,727,751)

Cash flows from investing activities Interest received from FDR Acquisition of subsidiary Proceeds from sales of property, plant and equipment Payment for capital work in progress Acquisition of property, plant and equipment Net cash used in investing activities Dividend paid Cash flows from financing activities

13,811,858 (207,323,694) (2,059,472) 28,908,376 -

1,186,843 (73,949,546) 5,100,484 (24,500)

(166,662,932) (380,705,752)

(143,661,720)

(211,348,439)

Net cash used in financing activities

Net cash increase/(decrease) in cash and cash equivalents Cash and cash equivalents as at 1 January Cash and cash equivalents as at 31 December (Note 11)

(380,705,752)

(337,137,797)

(69,308,373) 233,459,170 302,767,543

(337,137,797)

130,250,430 172,517,113

302,767,543

35

36

1.

Bata Shoe Company (Bangladesh) Limited Notes to the Financial Statements as at and for the year ended 31 December 2012
Bata Shoe Company (Bangladesh) Limited (hereinafter referred to as "Bata"/"the Company") is a public Company limited by shares. It was incorporated in Bangladesh in 1972 under the Companies Act 1913. The address of the registered office of the Company is Tongi, Gazipur, Bangladesh. The Company is one of the operating companies of worldwide Bata Shoe Organization (BSO). The shares in the Company are listed in both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and mostly held by Bafin (Nederland) B.V. The financial year of the Company covers one year from 1 January to 31 December. In November 2009, the Company established a wholly owned subsidiary named "BB Export Ltd." (hereinafter referred to as "BB Export"/"the subsidiary Company"). BB Export Ltd. has been wound up voluntarily on 6 November, 2012. Reporting entity

2.

The Company is mainly engaged in manufacturing and marketing of leather, rubber, plastic, canvas footwear, hosiery and accessories items as well as finished leather. Manufacturing plants of the Company are situated at Tongi and Dhamrai. Basis of preparation Statement of compliance

2.1

These financial statements have been prepared in accordance with Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. These financial statements were authorised for issue by the Board of Directors at its 211th meeting held on 25 April 2013. Basis of measurement

2.2 2.3

These financial statements have been prepared on historical cost basis except for land at Tongi in the statement of financial position which was revalued in 1979. These financial statements are presented in Bangladesh Taka (Taka/Tk) which is both functional and presentational currency of the Company. The amounts in these financial statements have been rounded off to the nearest Taka except for the amounts presented in revenue in note 20, statement of production in note 21.2, related party transactions in note 36.1 & 36.2 and operating lease payments disclosure in note 37 which have been rounded off to the nearest thousand Taka and credit facilities available as at 31 December in note 11.2 have been rounded off to the nearest million Taka. The preparation of these financial statements in conformity with BFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: Note 7 Note 4 Deferred tax assets / (liabilities) Deferred liability Inventories Provision for tax 37 Property, plant & equipment Use of estimates and judgements Functional and presentational currency

2.4

Note 8

Note 14 Note 19

3.

3.1

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently, except as explained in note 3.3.3 which addresses review of useful lives of property, plant and equipment by management during the year 2012. Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Nonmonetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign currency

Significant accounting policies

3.2 3.2.1

Foreign currency differences arising on translation are recognised in profit or loss. Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date the Company becomes a party to the contractual provisions of the instrument. The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Non-derivative financial assets

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Copmany classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available for- sale financial assets. Financial assets at fair value through profit or loss

3.2.1.1

3.2.1.2

A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognised in profit or loss. If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise accounts receivables and cash and cash equivalents. Loans and receivables Held-to-maturity financial assets

3.2.1.3

38

3.2.1.3.1 Accounts receivables

Accounts receivables represent the amounts due from institutional customers, export customers etc. Accounts receivables are stated net of bad debts provision.

3.2.1.3.2 Cash and cash equivalents

Provision for doubtful debts is made based on the Company policy. Bad debts are written off on consideration of the status of individual debtors. Cash and cash equivalents comprise cash on hand, cash in transit and cash at bank including fixed deposits having maturity of three months or less which are available for use by the Company without any restriction. Bank overdrafts that are repayable on demand and form an integral part of the Companys cash management are included as a component of cash and cash equivalents. Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Available for sale financial assets comprise security deposits. Non-derivative financial liabilities Available-for-sale financial assets

3.2.1.4

3.2.2

The Company recognises all financial liabilities on the trade date which is the date the Company becomes a party to the contractual provisions of the instrument. The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. Financial liabilities comprise trade and other creditors only. Trade and other creditors

3.2.2.1

3.3

The company recognises a financial liability initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. Property, plant and equipment Recognition and measurement

3.3.1

Items of property, plant and equipment excluding land are measured at cost less accumulated depreciation and accumulated impairment losses. Land is measured at revalued amount. - the cost of materials and direct labour;

Cost includes expenditures that are directly attributable to the acquisition of assets. The cost of self-constructed assets includes the following: - any other cost directly attributable to bringing the asset to a working condition for the intended use; - capitalised borrowing costs. - when the Company has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. 3.3.2 Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance is expensed as incurred. 39

3.3.3

Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Land is not depreciated. Addition during the year of property, plant and equipment are depreciated for full year irrespective of date of acquisition, while no depreciation is charged in the year of disposal. 2012 Year 2011 Year 40 The estimated useful lives for the current and comparative years of property, plant and equipment are as follows: Building 40

Depreciation

Plant and machinery Motor vehicles

3.3.4 3.4

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. The useful lives and depreciation method of certain type of property, plant and equipment were revised in 2011. Property, plant and equipment that is being under construction/acquisition is accounted for as capital work in progress until construction/acquisition is completed and measured at cost. Inventories except raw material in transit are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. Impairment Non-derivative financial assets Inventories Capital work in progress

Furniture, fixtures and equipment

4-13.33

13.33 5

4-13.33

13.33 5

3.5

3.5.1

3.5.1.1

A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss events had an impact on the estimated future cash flows of that asset that can be estimated reliably. The Company considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and collective level. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principle repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Financial assets measured at amortised cost

3.5.1.2

3.5.2

Non-financial assets The carrying amounts of the Company's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.

40

3.6

3.7

Share capital Paid up capital represents total amount contributed by the shareholders and bonus shares issued by the Company to the ordinary shareholders. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote at shareholders' meetings. In the event of a winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any residual proceeds of liquidation. Employee benefits The Company maintains both defined contribution plan and defined benefit plan for its eligible permanent employees. The eligibility is determined according to the terms and conditions set forth in the respective deeds.

3.7.1 Defined contribution plan A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees.

3.7.2 Defined benefit plan A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Companys net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. The Company maintains an unfunded gratuity scheme, provision in respect of which is made annually for the employees other than managerial staff. Gratuity payable at the end of each year has been determined on the basis of existing rules and regulations of the Company. Actuarial valuation of the gratuity fund is carried out by a professional actuary.

The Company maintains three contributory provident funds for its permanent employees categorised as managers, officers and supervisors and workers. The Company also maintains a managerial staff pension fund which was a defined benefit as contribution plan. These are administered by the Boards of Trustees.

3.8 3.9

Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profitsharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. Provisions A provision is recognised if, as a result of past event, the Company has a present legal or constructive obligation that can reliably be estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. Revenue Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns and allowances, Value Added Tax and trade discounts.

3.10

Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expenses, over the term of the lease. At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met: - the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and - the arrangement contains a right to use the asset(s).

Revenue is recognised when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

41

3.11

Finance income and expenses Finance income comprises interest income on funds invested, interest on shop managers account held with the Company and foreign exchange gain on translation of foreign currency that are recognised in profit or loss. Interest income is recognised on accrual basis.

3.12

Finance expense comprises interest expense on overdraft, finance lease and interest on shop managers account held with the Company and foreign exchange loss on translation of foreign currency. All finance expenses are recognised in the statement of comprehensive income. Tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

3.12.1 Current tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Bata qualifies as a Publicly Traded Company"; hence the applicable tax rate is 27.50 %. It enjoys 10% rebate on income tax payable for declaring dividend at more than 20% of paid up capital. 3.12.2 Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they are reversed, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

3.13

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

3.14

Earnings per share The Company presents basic and diluted (when dilution is applicable) earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company with the weighted average number of ordinary shares outstanding during the period, adjusted for the effect of change in number of shares for bonus issue, share split and reverse split. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares. However, dilution of EPS is not applicable for these financial statements as there was no dilutive potential ordinary shares during the relevant periods. Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Companys other components. All operating segments operating results are reviewed regularly by the Companys management to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. Segment results that are reported to the management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Duty drawback Duty drawback claimed on export sales is adjusted against cost of imported raw materials.

3.15 3.16 3.17 3.18

Sales proceeds from wastage, scrap etc. Sales of empty drum of chemicals, split leather and other wastage of materials have been adjusted with cost of raw materials consumed. Income from non-operating activities is recognised as other income.

Workers' profit participation fund (WPPF) The Company provides 5% of its profit before charging such expense as WPPF in accordance with "The Bangladesh Labour Act 2006. Events after the reporting period Events after the reporting period that provide additional information about the Company's position at the date of statement of financial position or those that indicate the going concern assumption is not appropriate are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material.

42

4.

4(a) Year 2012

Property, plant and equipment

Cost/Valuation Additions during the year Taka Disposals/ transfers during the year Taka Depreciation As at 31 December 2012 86,057,856 Taka As at 1 January 2012 Taka Charged for the year Taka Adjustment for disposals/ transfers Taka Written down value as at 31 December 2012 86,057,856 Taka

Particulars

As at 1 January 2012 86,057,856 Taka

As at 31 December 2012 Taka -

Building 2

Land 1

Plant and machinery 728,467,578 Motor vehicles Furniture, fixtures and equipment

311,515,463

64,684,221

20,564,552

76,685,218

5,559,199

(89,571,529)

376,199,684

(1,115,000)

715,581,267

165,633,274

25,008,751

471,736,404

18,698,786

31,168,993

7,737,270

2,064,441

(82,395,747)

173,370,544

(1,115,000)

420,509,650

202,829,140

19,648,227

295,071,617

5,360,524

4(b) Year 2011

Particulars

1,600,173,909

453,568,460

262,754,779

115,826,141

(159,047,822)

(68,361,293)

1,703,880,866

501,033,308

868,302,516

212,234,052

100,552,603

59,581,899

(145,300,386)

(61,789,639)

823,554,733

210,026,312

880,326,133

291,006,996

Cost/Valuation Additions during the year Taka -

As at 1 January 2011 86,057,856 Taka

Disposals/ transfers during the year Taka -

Depreciation As at 31 December 2011 86,057,856 Taka As at 1 January 2011 Taka Charged for the year Taka -

Adjustment for disposals/ transfers Taka -

As at 31 December 2011 Taka -

Written down value as at 31 December 2011 86,057,856 Taka

Building 2

Land 1

Motor vehicles

Plant and machinery 632,678,103

304,122,635

Furniture, fixtures and equipment

21,562,997

116,807,988

7,392,828

116,555

(21,018,513)

(1,115,000)

728,467,578

311,515,463

20,564,552

459,960,675

159,606,219

13,644,660

32,081,567

6,027,055

5,712,422

(20,305,838)

(658,296)

471,736,404

165,633,274

18,698,786

256,731,174

145,882,189 1,865,766

1,441,856,253

397,434,662

188,266,106

63,948,735

(29,948,450)

(7,814,937)

1,600,173,909

453,568,460

795,520,949

162,309,395

98,930,619

55,109,575

(26,149,052)

(5,184,918)

868,302,516

212,234,052

731,871,393

241,334,408

1 Land of Tongi factory was revalued by Tk. 60,631,183 in 1979.

2 Building includes properties at 24 Bangabandhu Avenue, Dhaka which were purchased in 1985 from the Government of Bangladesh at a cost of Tk 5,344,417. Sale deed is yet to be executed.

4.1

Depreciation charged to:

Cost of goods sold (Note 21.1)

Administration, selling and distribution expenses (Note 23)

4.2

Particulars

Disposal of property, plant and equipment

Original cost Taka Accumulated depreciation 82,395,747 1,115,000 Taka 40,381,568 7,294,367 89,571,529 1,115,000

100,552,603
Book value 7,175,782 Taka 3,049,065

31,040,297

2012 Taka

69,512,306
Sales value 25,252,330 Taka 364,495

98,930,619
Mode of disposal Auction Auction

34,030,288

2011 Taka

64,900,331

Purchaser Various parties Mr. B. R. Begh Various parties

Machinery Computer Motor vehicles Furniture, fixtures and equipment

43,430,633 9,438,868

Shop furniture and equipment

159,047,822

15,491,792

145,300,386

14,113,704

2,144,501

13,747,436

1,378,088

28,908,375

3,053,018

238,532

Negotiation Auction Auction

Various parties

Various parties

43

4.3

Capital assets

CIF value of capital assets No capital assets were imported under CIF basis. However, import of capital assets by the Group under C&F basis was as follows: USD GBP EUR 417,446 417,446 Foreign currency 2012 2011 1,111,993 18,574 90,065 1,220,632 Local currency 2012 2011 (Taka) (Taka) 34,710,944 85,372,671 2,080,019 8,989,954 34,710,944 96,442,644

Plant and machinery

5.

Balance as at 1 January

Less: Transfer to property plant & equipment during the year 5.1 Balance as at 31 December (Note 5.1) Building Plant and machinery Equipment Capital work in progress represent as follows

Add: Addition during the year

Capital work in progress

38,251,715 40,311,187

2012 Taka

38,251,715 2,059,472 -

2,059,472

152,568,275

143,661,720

8,906,555

2011 Taka

114,316,560 38,251,715 201,314 9,335 38,041,066 38,251,715

6.

7.

BB Export Limited, the wholly owned subsidiary of the Company, have been wound up voluntarily by the members on 6 November 2012. The assets of the subsidiary company has been taken over by the parent Company at written down value as mutually agreed by the management of both the Companies. Deferred tax assets is arrived at as follows: Balance as at 1 January Addition/(reduction) during the year Balance as at 31 December Carrying amount on the date of statement of financial position Taka Deferred tax liabilities 2012 Taka 2011 Taka

Investment in subsidiary

2,059,472

2,053,987 5,485

(12,300,000)

(10,800,000)

(1,500,000)

Tax base Taka

Taxable/ (deductible) temporary difference Taka

(1,500,000)

(8,500,000)

7,000,000

(a)

As at 31 December 2012 Property, plant and equipment (excluding land and certain motor vehicles) Net deductible temporary difference Deferred tax liability

Provision for staff gratuity (Note 14) Provision for bad and doubtful debts (Note 9.1)

(123,817,664) (22,618,287)

791,930,824

596,187,798 -

(123,817,664) (22,618,287) (12,300,000) 49,307,075

195,743,026

44

Carrying amount on the date of statement of financial position (b) As at 31 December 2011 Property, plant and equipment (excluding land and certain motor vehicles) Provision for staff gratuity (net of payment) Provision for bad and doubtful debts Net deductible temporary difference Deferred tax liability Taka

Tax base Taka

Taxable/ (deductible) temporary difference Taka

(150,704,000) (19,819,104)

645,707,373

469,215,014 -

(150,704,000) (19,819,104) (1,500,000) 2011 Taka 5,969,255

176,492,359

8.

Inventories Raw materials Work in process Finished goods Accounts receivable

2012 Taka 433,360,454 61,989,523 1,393,434,546 1,888,784,523

9.

458,166,010 60,596,257 1,237,634,992 1,756,397,259

Trade (unsecured) - considered good

Export customers - Non BSO companies Export customers - BSO companies Receivables from dealers Receivables from institutional sale

6,216,924 13,931,813 190,793,961 47,867,930 258,810,628 19,108,225 705,675 184,518 196,347

Others (unsecured) - considered good Insurance claims VAT claims Joint venture commission receivable Duty drawback claim receivable Agents and employees

160,007,307

7,342,346 16,358,590 117,443,145 18,863,226 32,526,411 52,407 113,326 442,448

20,194,765 20,175,474

Total accounts receivable

Provision for doubtful debts (Note: 9.1)

(22,618,287) 276,562,580

299,180,867

(19,819,104) 190,610,122

210,429,226

17,287,327

33,134,592

9.1

Balance as at 1 January Provision made during the year Bad debts written off during the year Provision reversed during the year Balance as at 31 December

Provision for doubtful debts

22,618,287

19,819,104 2,799,183 -

35,923,248 336,169 (15,615,160) (825,153) 19,819,104

45

Accounts receivable are aged as below:

Export customers - BSO companies Receivables from dealers Receivables from institutional sale Insurance claims VAT claims Claim receivable on import Joint venture commission receivable Duty draw back claim receivable Agents and employees 9.2

Export customers - Non BSO companies

Below six months Taka 13,931,813 188,432,184 47,786,894 19,108,225 705,675 184,518 196,347 6,216,924

2012

Over six months Taka 2,361,777 81,036 20,175,474 -

Below six months Taka 16,358,590 114,911,368 18,863,226 32,526,411 52,407 113,326 442,448 7,342,346

2011

Over six months Taka -

As at 31 December 2012, accounts receivable does not include any receivable from: (a) The directors and other officers of the Company;

Debts due by directors, officers and other related parties

276,562,580

22,618,287

190,610,122

19,819,104

2,531,777 17,287,327

(b) Firms or private limited companies respectively in which any director of the Company is a partner, director or member, other than those disclosed in note 34.1; and (c) Companies under the same management. 10. Advances, deposits and prepayments Agents and employees Suppliers against materials and services 2012 Taka 2011 Taka

Advances (considered good) to:

Prepayments to landlords (current portion - Note 10.1) 10.1 Prepayments of rent

Security and other deposits

Advance income tax

566,731,442

335,292,718

134,409,803

13,906,918

7,638,007

6,268,911

83,122,003

241,121,785

126,822,403

21,535,565

17,582,745

3,952,820

443,022,574 117,378,784

53,542,821

Prepayments to landlords Non-current portion

Less: Current portion (Note 10) Loans and advances to directors, officers and other related parties Directors of the company;

215,222,003

10.2

132,100,000

83,122,003

63,835,963

53,542,821

Other than those mentioned in note above, there were no loans or advances to: (a) (c) (b)

Firms or private limited companies respectively in which any director of the company is a partner, director or member; and Subsidiaries or companies under the same management.

46

11.

Cash and cash equivalents Cash balances: On hand In transit: From stores From depots From institutions

2012 Taka 1,330,139 45,177,358 1,374,000 11,032,568 (67,641,911) 20,158,297 4,000,000 218,028,719 174,545,105 233,459,170

2011 Taka 567,781 45,034,924 5,173,288 8,799,532 (6,074,357) 24,276,758 27,904,500 197,085,117

Balances with banks in: Current accounts In Taka In USD Fixed deposits Short term deposits

11.1

Book overdrafts The current accounts include book overdrafts (i.e. cheque outstanding in excess of deposits) from Eastern Bank Limited and HSBC as follows: 2012 2011 Taka Taka Eastern Bank Limited HSBC 88,410,523 85,057,920 3,352,603 40,865,601 40,865,601 -

302,767,543

243,192,018

11.2

Credit facilities available as at 31 December The company enjoys both funded and non funded short term working capital facilities with two banks. The non funded facilities include Letters of Credit (LC), Letters of Guarantee, Packing Credit, LDBP, FDBP and foreign exchange forward contracts (FX Forward). The funded facilities include overdraft facility, short term loan and import loan. The aggregate amount of available short term working capital facilities is Tk 994 million (2011: Tk 969 million) of which non funded limit is Tk 694 million (2011: Tk 669 million) and funded limit is Tk 300 million (2011: Tk 300 million). Details of the total facilities are stated below: (a) (b) HSBC Bank i) L/C facility - Tk 300 million (2011: Tk 500 million). ii) Overdraft / short term loan facility - Tk 100 million (2011: Tk 100 million).

EBL Bank i) L/C facility - Tk 394 million (2011: Tk 400 million). ii) Overdraft facility / short term loan facility - Tk 200 million (2011: Tk 200 million).

Total credit facilities available Credit facilities availed

2012 (Tk in million) 1,000 223

2011 (Tk in million) 1,200 969

47

12.

Share capital Authorised:

2012 Taka 200,000,000 28,507,230

2011 Taka 200,000,000 28,507,230

20,000,000 ordinary shares of Tk 10 each Issued, subscribed and paid up: 2,850,723 ordinary shares of Tk 10 each issued for cash 10,829,277 ordinary shares (including 7,202,400 bonus shares) of Tk 10 each issued for consideration other than cash

The shares are listed both in the Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited and quoted at Tk 535.70 (2011: Tk 598.50) and Tk 518.10 (2011: Tk 605.00) per share at 31 December 2012 respectively. Percentage of shareholdings : % 2012 Taka % 2011 Taka

136,800,000

108,292,770

136,800,000

108,292,770

International Finance Corporation Other non-resident shareholders Local shareholders

Bafin (Nederland) B.V.

70.00 0.02

Classification of shareholders by range: Shareholder's range Less than 501 shares 501 to 5,000 shares 5,001 to 10,000 shares

100.00

23.34

6.64

95,760,000

136,800,000

31,922,320

9,089,280

28,400

70.00

100.00

23.83

0.02

6.15

95,760,000

136,800,000

32,599,800

8,410,800

29,400

Number of shareholders 5,163 387 34 25 9 5 2 2012

5,305 420 45 26 9 7 1 4 4

2011

630,001 251,000 600,676

2012

Number of shares

650,889 326,656 623,001

2011

10,001 to 20,000 shares

30,001 to 40,000 shares 40,001 to 50,000 shares

20,001 to 30,000 shares

374,645

215,302

384,564

175,000 91,000

215,446

246,800 284,444 47,600

50,001 to 100,000 shares Over 1,000,000 shares

100,001 to 1,000,000 shares

5,635

5,822

1,405,700

360,676

13,680,000

9,576,000

1,324,600

13,680,000

9,576,000

48

13.

Reserves and surplus Reserve on revaluation of land Non-distributable special reserve (Note 13.1) General reserve Unappropriated profit (Note 13.2)

13.1

13.2

This represents 90% of the cumulative post-tax profit in respect of certain categories of income up to 1992 as defined and directed by Bangladesh Bank. Since 1993, the requirement for continuing to create such special reserve is applicable only to the profit on sale of immovable assets such as land, buildings, etc. Balance as at 1 January Profit for the year Loss of BB Export Interim dividend Final dividend Balance as at 1 January Add: Provision made / (reversed) during the year Less: Paid during the year Balance as at 31 December Deferred liability Unappropriated profit 1,313,782,103 671,916,303 (2,790,630) (232,560,000) (143,640,000) 150,704,000 (5,999,942) 144,704,058 20,886,394 123,817,664 1,075,165,050 580,617,053 (198,360,000) (143,640,000) 147,847,820 17,271,076 150,704,000 165,118,896 14,414,896

Non-distributable special reserve

1,717,200,579

60,631,183 998,620 48,863,000 1,606,707,776

2012 Taka

1,424,274,906

60,631,183 998,620 48,863,000 1,313,782,103

2011 Taka

14.

1,606,707,776

1,313,782,103

15.

Payable to local suppliers Payable to BSO companies Payable to local suppliers Payable to BSO companies Workers' profit participation fund Personal accounts of employees and agents Security and other deposits Payable to subsidiary company Provident fund Tax deducted at source Pension fund VAT deducted at source Salary and wages payable Others Creditors for other finance Creditors for expenses

Creditors for goods

Deferred liability represents provision for staff gratuity up to 31 December 2012.

16.

353,751,438

340,871,856 12,879,582

409,263,569

404,165,187 5,098,382

97,864,002 322,330,566 420,194,568 51,125,753 68,792,575 23,105,500 6,540,438 53,845,380 1,642,750 6,551,877 15,389,842 14,394,179

72,815,182 227,920,069 300,735,251 41,769,476 58,234,811 22,558,000 1,110,410 7,923,902 35,426,199 1,613,419 32,377,079 14,573,848 15,051,289

17.

241,388,294

230,638,433

49

18.

Accrued expenses Bonus Utility Legal & audit fee Royalty Joint venture commission Other accrued liabilities

19.

Provision for tax Current year Earlier years (net of advance tax) Reconciliation of effective tax Profit for the year 2012

385,280,477

81,610,676 7,333,000 2,011,250 15,692,857 13,279,976 265,352,718

2012 Taka

346,740,381

79,929,670 6,991,000 1,848,850 19,434,122 9,679,648 228,857,091

2011 Taka

19.1

530,956,889 % Taka %

288,673,000 242,283,889

483,230,866 2011 Taka

204,508,000 278,727,866

Total income tax expense

Profit excluding income tax

299,473,000

671,916,303

Factors affecting the tax charge for current period: Non-deductible expenses Income subject to reduced tax rate Round off adjustment

971,389,303 27.50%

213,003,000

580,617,053

793,620,053

Income tax using the Companys domestic tax rate 27.50% 6.29%

Tax exempt income Tax incentives

Under/(Over) Provided in prior year

20.

Revenue Unit Local

30.83%

-0.16% 0.61%

-3.24%

-0.17%

0.00%

267,132,058

(31,500,251) 299,473,000 (1,552,129) 5,961,572

(1,632,233)

61,063,982

26.84%

-0.10%

-2.51% 0.14%

-0.18%

-5.30%

7.29%

(19,902,050) 213,003,000 1,080,225 (815,836)

(42,035,843) (1,407,096)

218,245,515

57,838,086

Shoes

Export

Hosiery & accessories

Pair

Quantity in '000 30,241

2012

7,100,105 206,025 78,376

Amount '000 Taka

Quantity in '000 28,142

2011

6,345,623 218,964 83,259

Amount '000 Taka

7,384,506

6,647,846

50

21.

Cost of sales Stock of finished goods as at 1 January Add: Cost of goods manufactured (Note 21.1) Finished goods purchased Cost of finished goods available for sale Less: Stock of finished goods as at 31 December The opening and closing stocks of goods produced are shown below:

4,718,506,064

1,237,634,992 4,247,028,045 627,277,573 6,111,940,610 1,393,434,546

2012 Taka

4,286,593,663

1,151,001,712 3,493,591,114 879,635,829 5,524,228,655 1,237,634,992

2011 Taka

Closing Shoes stock 4,534

Figures in '000 pairs

Opening stock 4,509

21.1

Cost of goods manufactured

Cost of materials consumed (Note 21.1.1) Direct wages Prime cost

3,355,624,874 3,881,444,713 146,723,635 55,935,882 91,608,741 4,047,163 1,021,939 19,099,221 9,471,572 2,094,741 607,484 1,746,733 3,579,190 31,040,297 4,248,421,311 60,596,257 61,989,523 366,976,598 525,819,839

2012 Taka

2,669,598,255 3,115,738,674 143,823,792 49,923,152 65,265,016 2,845,394 455,811 17,462,228 7,310,678 1,550,937 983,815 1,269,091 3,363,059 34,030,288 3,444,021,935 110,165,436 60,596,257 3,493,591,114 51 49,569,179 328,283,261 446,140,419

2011 Taka

Manufacturing overhead:

Remuneration to employees Gas, water and electricity Repairs and maintenance (Note 21.1.2) Insurance Uniform to workers Health and other welfare expenses Travelling Postage Freight and transport Stationery Entertainment Depreciation (Note 4.1) Cost of production

Difference in work in process:

Work in process as at 1 January Work in process as at 31 December Cost of goods manufactured

4,247,028,045

(1,393,266)

52
Opening stock 159,572,451 2,263,700,647 3,327,889,415 447,103,145 (13,714,614) 419,367,686 269,406,427 Value (Taka) 1,077,903,382 149,961,259 Value (Taka) Value (Taka) Value (Taka) Purchase Closing stock Consumption 1,087,514,574 2,281,824,914 287,530,694 447,103,145 411,258,255 2,705,443,145 2,669,598,255 3,355,624,874 (13,714,614) Production capacity in pairs Figures in '000 24,376 32,969 8,593 2012 23,422 2011 31,728 8,306 21,117 28,084 6,967 2012 Actual production in pairs Figures in '000 19,952 25,744 5,792 2011

21.1.1 Cost of materials consumed

Description

Sales proceed from wastage, scrap, etc.

Local purchase

Imported

2011

2012

Duty drawback of Tk. 1,031,190 claimed on export sales have been adjusted against cost of raw materials.

Cost of materials consumed is 32% imported and 68% locally purchased (2011: 39% imported and 61% locally purchased).

21.1.2 Repairs and maintenance

Repairs and maintenance amounting to Tk 91,608,741 includes Tk 51,278,775 (including C&F value of US$ 619,517 and EUR 2,347 of imported items) representing cost of spare parts, moulds and accessories consumed.

21.2

Statement of production capacity and actual production

Dhamrai

Tongi

22.

Other income Gain /(Loss) on disposal of property, plant and equipment Discount for early payment

Notes

23.

Remuneration to employees Health and other welfare expenses Travelling expenses Bank charges Repairs and maintenance Stationery Postage, telegram and telephone Entertainment expenses Subscription and donation Advertisement Rent, rates and taxes General charges Directors' fees Auditors' fees Legal and other professional fees Insurance Land revenue Freight and transport Packing expenses Commission Royalty on Hush Puppies brand Royalty on Dr. Scholl brand Global Footwear Services fees Electricity Trade mark licence fees IT fees Depreciation General charges

Administration, selling and distribution expenses

26,776,981

15,160,939 11,616,042

2012 Taka

21,210,803

1,301,086 19,909,717

2011 Taka

23.1 23.2

23.3 23.4 23.4 23.4 23.4 4.1

23.1

1,683,027,051

391,870,027 10,622,174 54,107,094 1,667,458 62,521,818 20,516,456 9,130,976 16,309,984 1,722,583 36,343,828 248,014,167 23,816,917 53,000 517,500 4,943,242 3,269,861 377,125 58,593,866 69,279,077 256,189,444 11,033,951 4,658,906 112,645,846 51,517,764 156,442,887 7,348,794 69,512,306

1,529,417,293

382,966,850 9,907,002 41,017,327 8,146,029 63,672,453 18,526,192 8,803,358 12,260,958 800,144 27,824,449 173,557,146 15,953,947 68,000 470,250 3,564,865 1,620,490 431,678 46,061,762 72,308,329 269,124,377 12,167,317 5,962,843 102,642,666 39,779,957 139,733,398 7,145,175 64,900,331

General charges represent security services, samples, bad debts, etc. Bad debts represent the following: Provision for doubtful debt made Provision for doubtful debts reversed 2,799,183 336,169 (825,153)

23.2

Legal and other professional fees include fees of Tk 845,750 (2011: Tk 1,196,350) of the statutory audit firm in connection with global reporting, tax certification and services regarding assessments/appeals and advisory services. 53

Legal and other professional fees

2,799,183

(488,984)

23.3

Commission Retail Wholesale Export

145,202,014 110,441,910 545,520 256,189,444

2012 Taka

23.4 24.

Royalty on Hush Puppies and Dr. Scholl brands, Global Footwear Services fees and trade mark licence fees of Tk.11,033,951 Tk.4,658,906 Tk.112,645,846 and Tk.156,442,887 respectively represent equivalent foreign currency of USD 138,482 USD 58,472 SGD 1,680,000 and USD 1,963,438 provided during the year. Interest on: Fixed deposit Short term deposit Personal account Finance expenses Finance income 13,811,858 7,511,347 12,735 1,186,843 4,801,594 82,983

269,124,377

156,041,707 111,918,575 1,164,095

2011 Taka

25.

21,335,940

6,071,420

Interest on: Overdraft Personal account Emoluments to directors

26.

4,440,402 2012

312,920 4,127,482

21,210,569 2011

17,907,047 3,303,522

Remuneration Bonus Retirement benefit schemes Housing Emoluments to managers

27.

22,029,492 2012

11,600,000 6,889,492 900,000 2,640,000

16,671,000 2011

10,245,000 3,476,000 790,000 2,160,000

Remuneration Retirement benefit schemes Housing Contribution to employees' provident fund and pension fund

28.

95,822,922

76,308,154 11,757,667 7,757,101

94,277,232

73,157,923 12,944,166 8,175,143

During the year the company contributed the following amounts to the employees' provident fund and pension fund: Provident fund : Managers Officers & supervisors Workers Pension fund 5,291,325 8,413,033 9,857,199 23,561,557 6,466,342 2012 4,880,409 7,587,956 10,817,036 23,285,401 5,756,244 2011

29.

Profit before tax Tk. 971,389,303 (2011: Tk. 793,620,053) includes profit amounting to Tk 300,421,822 (2011 : Tk 368,084,552) of leather shoe factory at Dhamrai and Tk. 670,967,481 (2011: Tk. 425,535,501) at Tongi.

Profit before tax

30,027,899

29,041,645

54

30.

Remittance of foreign currency

Name of party Bafin (Nederland) B.V. SSL International PLC Pte. Ltd., Singapore Wolverine World

Nature of transaction Dividend

Currency USD

in foreign currency 2,915,733

Amount

currency 237,006,000 Taka

Amount in local

Global Footwear Services

Royalty on Dr. Scholl Brand Footwear services fees

SGD USD

GBP

1,413,390

56,874

93,642,018 9,522,248

3,337,864

Euro Footwear Holdings S.a.r.l

Royalty on Hush Puppies Brand IT Fees

31.

The figures represent net of tax. Earnings in foreign currency

EUR

116,125 60,000

6,402,000

2012 Export of finished leather and shoes 32. Earnings per share 78,376,405 Taka

83,258,452

Taka

2011

32.1

Basic earnings per share (EPS)

2012 Taka 671,916,303 13,680,000 49.12

The computation of EPS is given below: Basic earnings per share (EPS) 32.2 Diluted earning per share

Taka 580,617,053 13,680,000 42.44

2011

Earnings attributable to the ordinary shareholders (net profit after tax)

Weighted average number of ordinary shares outstanding during the year

No diluted earnings per share is required to be calculated for the year as there was no scope for dilution during 33. these years. The number of employees for the whole year or part thereof who received a total remuneration of Tk 36,000 and above was 1,439 (2011: 1,433). 55 Number of employees

34.

The management has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies, procedures and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. This note presents information about the Company's exposure to each of the following risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. The Company has exposure to the following risks from its use of financial instruments.
G G G

Financial risk management

34.1

Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from dealers, institutional and export customers etc. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. In monitoring credit risk, debtors are Grouped according to their risk profile, i.e. their legal status, financial condition, ageing profile etc. Accounts receivable are mainly related to sale of shoes, hosiery, accessories and finished leather etc.

Credit risk

Credit risk Liquidity risk Market risk

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. a) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Trade Receivable Export customers - Non BSO companies Export customers - BSO companies Receivables from depots Receivables from institutional sale Others Receivable Security and other deposits Cash and cash equivalents 2012 Taka 2011 Taka

256,367,815

6,216,924 13,931,813 188,432,184 47,786,894 20,194,765 335,292,718 233,459,170

157,475,530

7,342,346 16,358,590 114,911,368 18,863,226

The maximum exposure to credit risk for accounts receivable as at 31 December by geographic regions was: Domestic Asia Australia Africa 236,792,760 19,575,055 -

845,314,468

734,499,450

33,134,592 241,121,785 302,767,543

256,367,815

157,475,530

135,947,019 15,295,139 1,725,058 4,508,314

56

b)

Ageing of receivables The ageing of gross accounts receivables as at 31 December was: Accounts receivable were aged as below: Invoiced 0-30 days Invoiced 31-60 days Export customers - Non BSO companies

2012 Taka

2011 Taka

Export customers - BSO companies Invoiced 0-30 days

6,216,924

6,216,924 -

7,342,346

6,163,994 1,178,352

Receivables from domestics Invoiced Invoiced Invoiced Invoiced Invoiced 0-30 days 31-60 days 61-90 days 91-365 days over 365 days

13,931,813

13,931,813

16,358,590

16,358,590

c)

Impairment losses

236,219,078

178,158,339 42,859,307 4,241,400 10,960,032 -

117,443,145

111,997,971 2,792,888 76,089 2,576,197

Impairment losses on the above receivables were recognised as per the Company policy mentioned in note 3.2.1.1. Quantitative disclosure for such impairment losses are as below: Receivables from depots Accounts receivable Provision for doubtful debts (note 9.1) Receivables from institutional sale Accounts receivable Provision for doubtful debts (note 9.1) Other Receivables 190,793,961 (2,361,777) 117,443,145 (2,531,777) 114,911,368

188,432,184

47,867,930 (81,036) 47,786,894

18,863,226 18,863,226

Receivable from Agents and employees Provision against advances to agents and employees (note 9.1)

20,175,474 (20,175,474) -

17,287,327 (17,287,327) -

57

58
As at 31 December 2012 Contractual cash flows Taka Taka Within 6 months or less Carrying amount Taka Maturity period Nominal Interest rate Within 6-12 months Taka 97,863,999 322,330,566 420,194,565 68,792,575 23,105,500 53,845,380 6,551,877 15,389,842 14,394,179 182,079,353 June June June December June December 2013 2013 2013 2013 2013 2013 December 2013 N/A N/A N/A N/A N/A N/A N/A June June June June June June 2013 2013 2013 2013 2013 2013 8.5% N/A N/A N/A N/A N/A 340,871,856 12,879,582 353,751,438 June 2013 December 2013 N/A N/A 97,863,999 322,330,566 420,194,565 June 2013 June 2013 N/A N/A N/A 340,871,856 12,879,582 353,751,438 81,610,676 7,333,000 2,011,250 15,692,857 13,279,976 265,352,718 385,280,477 58,333,411 81,610,676 7,333,000 2,011,250 15,692,857 13,279,976 265,352,718 385,280,477 68,792,575 23,105,500 53,845,380 6,551,877 15,389,842 14,394,179 182,079,353 97,863,999 165,887,679 263,751,678 340,871,856 12,879,582 353,751,438 58,333,411 81,610,676 7,333,000 2,011,250 13,279,976 137,967,825 242,202,727 35,000,000 7,759,067 23,105,500 53,845,380 6,551,877 15,389,842 14,394,179 121,045,845 156,442,887 156,442,887 15,692,857 127,384,893 143,077,750 61,033,508 61,033,508 23,333,411

34.2

Liquidity risk "Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity (cash and cash equivalents) is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. Typically, the Compay ensures that it has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations through preparation of the cash flow forecast, based on time line of payment of financial obligations and accordingly arrange for sufficient liquidity/fund to make the expected payments within due dates. Moreover, the Company has short term credit facilities with scheduled commercial banks to ensure payment of obligation in the event that there is insufficient cash to make the required payment. The requirement is determined in advance through cash flow projections and credit lines with banks are negotiated accordingly.

The following are the contractual maturities of financial liabilities:

Creditors for goods Payable to local suppliers Payable to BSO companies Payable to other foreign suppliers

Accounts payable

Creditors for expenses Payable to local suppliers Payable to BSO companies

Creditors for other finance Personal accounts of employees and agents Security and other deposits Tax deducted at source VAT deducted at source Salary and wages payable Others liabilities

Accrued liabilities Provision for bonus Provision for utility Provision for legal & audit fee Provision for royalty Joint venture commission Other accrued liabilities

Unclaimed dividend

Exposure to liquidity risk in respect of the Company's financial statements at 31 December 2012 does not vary significantly from above.

As at 31 December 2011 Contractual cash flows Taka Taka Taka Within 6 months or less Within 6-12 months

Carrying amount Taka

Maturity period

Nominal Interest rate

Accounts payable 404,165,187 5,098,382 409,263,569 72,815,182 227,920,069 300,735,251 58,234,811 22,558,000 35,426,199 32,377,079 14,573,848 15,051,289 178,221,226 June June June December June December December 2012 2012 2012 2012 2012 2012 2012 N/A N/A N/A N/A N/A N/A N/A June June June June June June 2012 2012 2012 2012 2012 2012 8.5% N/A N/A N/A N/A N/A 58,234,811 22,558,000 35,426,199 32,377,079 14,573,848 15,051,289 178,221,226 79,929,670 6,991,000 1,848,850 19,434,122 9,679,648 228,857,091 346,740,381 June 2012 December 2012 N/A N/A 72,815,182 227,920,069 300,735,251 72,815,182 88,186,671 161,001,853 June 2012 June 2012 N/A N/A N/A 404,165,187 5,098,382 409,263,569 404,165,187 5,098,382 409,263,569

Creditors for goods Payable to local suppliers Payable to BSO companies Payable to other foreign suppliers

Creditors for expenses Payable to local suppliers Payable to BSO companies

139,733,398 139,733,398 8,059,953 22,558,000 35,426,199 32,377,079 14,573,848 15,051,289 128,046,368

Creditors for other finance Personal accounts of employees and agents Security and other deposits Tax deducted at source VAT deducted at source Salary and wages payable Others liabilities 79,929,670 6,991,000 1,848,850 19,434,122 9,679,648 228,857,091 346,740,381 62,839,163

Accrued liabilities Provision for bonus Provision for utility Provision for legal & audit fee Provision for royalty Joint venture commission Other accrued liabilities

Exposure to liquidity risk in respect of the Company's financial statements at 31 December 2011 does not vary significantly from above. The differences in such exposure arises from payable to BB Export for subscription of share (Tk. 1,110,410) and provision for legal & audit fee (Tk. 52,250) which has a maturity period of less than six months.

Unclaimed dividend

62,839,163

79,929,670 6,991,000 1,848,850 9,679,648 114,286,330 212,735,498 40,000,000

19,434,122 114,570,761 134,004,883

50,174,858 50,174,858

22,839,163

59

34.3

Market risk Market risk is the risk that any change in market prices, such as foreign exchange rates and interest rates will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. a) Currency risk/foreign exchange rate risk The Company is exposed to currency risk on sales and purchases with foreign customers and suppliers including Bata Group (globally) and on royalty payment. Majority of the Company's foreign currency transactions are denominated in USD. The Company maintains USD bank account where all receipts are deposited and all corresponding payments are made. i) Exposure to currency risk The Company's exposure to foreign currency risk was as follows based on notional amounts: Foreign currency denominated assets Accounts receivable Cash at bank As at 31 December 2012 SGD EUR USD As at 31 December 2011 USD SGD EUR -

261,187 206,283 46,707 514,178

289,636 392,351 181,105 863,092 (1,774,200) (1,774,200) (911,108)

Eastern Bank Limited HSBC

Foreign currency denominated liabilities Net exposure Trade and other payables for exp.

Payable to other entities represents payable for Global footwear service fees, IT fees etc. The following significant exchange rates are applied during the year:

(3,881,063) (3,881,063) (3,366,885)

(756,000) (66,667) (756,000) (66,667) (756,000) (66,667)

(1,512,000) (66,667) (1,512,000) (66,667) (1,512,000) (66,667)

Exposure to currency risk as at 31 December 2012 in respect of the separate financial statements does not vary from above. The company has a foreign exchange loss amounting to Tk. 4,130,083 during the year ended 31 December 2012. Exchange rate as at 31 Dec 2011 31 Dec 2012 Taka Taka 79.68 65.22 105.05 81.83 63.13 105.94

ii)

US Dollar Singapore Dollar EURO (EUR)

Foreign exchange rate sensitivity analysis for foreign currency expenditures A strengthening or weakening of the Taka, as indicated below, against the USD, SGD and EUR at 31 December would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2012, albeit that the reasonably possible foreign exchange rate variances were different, as indicated below: At 31 December 2012 USD (2 percent movement) SGD (2 percent movement) EUR (1 percent movement) At 31 December 2011 USD (3 percent movement) SGD (3 percent movement) EUR (3 percent movement) Strengthening profit or loss Taka (5,365,467) 986,126 (70,033) 2,236,679 2,863,577 211,881 Weakening profit or loss Taka 5,365,467 (986,126) 70,033

(2,236,679) (2,863,577) (211,881)

60

b)

c)

Accounting classification and fair values

Interest rate risk The only interest bearing financial instrument for the Company is the short term deposit (STD) account maintained by the Company with its commercial banks. These are highly liquid and very short term deposits with nominal interest rate. Interest rate fluctuation for such investment have little impact on financial statements. Therefore, interest rate risk for the Company is insignificant. Fair value of financial assets and liabilities together with carrying amount shown in the statement of financial position are as follows: Carrying amount Taka 256,367,815 20,194,765 233,459,170 335,292,718 353,751,438 805,475,042 241,388,294 2012 Fair value Taka Carrying amount Taka 157,475,530 33,134,592 302,767,543 241,121,785 409,263,569 647,500,632 230,638,433 2011 Fair value Taka

Loans and receivables Trade receivable, net Receivable from agents and employees Other receivables Cash and cash equivalents Available for sale financial assets Security deposits

256,367,815 20,194,765 233,459,170 335,292,718 353,751,438 805,475,042 241,388,294

157,475,530 33,134,592 302,767,543 241,121,785 409,263,569 647,500,632 230,638,433

35.

*Accounting classification and fair values as at 31 December 2012 in respect of the separate financial statements does not vary significantly from the consolidated one. Segment reporting

Liabilities carried at amortised costs Creditors for goods Creditors for expenses Creditors for other finance

The Company has two operating segments, Domestic and Export & Unallocated which are the Company's strategic divisions. They are managed separately because they require different technology and marketing strategies. For each of the strategic divisions, the Company's management reviews internal management reports at least on a monthly basis. Of these two, only domestic segment is reportable. The following summary describes the operations in the Company's reportable segments: Domestic This segment is mainly engaged in manufacturing and marketing of leather, rubber, plastic and canvas footwear, hosiery and accessories as well as finished leather in domestic market.
Reportable business segment Export & Unallocated
Taka 000 Taka 000

Particulars

2012

Domestic
Taka 000

Total

Domestic 6,564,587 4,159,362 2,405,225 Taka 000

Reportable business segment Export & Unallocated

Taka 000 Taka 000

2011

Total

Revenue Cost of sales Gross profit Exchange gain/(loss) Other income Administrative, selling and distribution expenses Reportable segment result

Segment assets and liabilities The necessary information regarding assets and liabilities of operating segments are not separable and individually identifiable for this purpose. For this reason the assets and liabilities of the respective segments have not been presented here.

(1,163,436) 1,449,355

7,306,130 4,693,339 2,612,791 -

(519,591) (443,735)

78,376 25,167 53,209 (4,130) 26,777

(1,683,027) 1,005,620

7,384,506 4,718,506 2,666,000 (4,130) 26,777

(1,043,782) 1,361,443

(487,052) (1,530,834) (512,331) 849,112

83,259 127,232 (43,973) (2,517) 21,211

6,647,846 4,286,594 2,361,252 (2,517) 21,211

61

36.

36.1

During the year ended 31 December 2012, the Company entered into a number of transactions with related parties in the normal course of business. The names of the related parties, nature of these transactions and amount thereof have been set out below in accordance with the provisions of BAS 24: Related Party Disclosures. Related party transactions Nature of Nature of 2012 2011

Related party disclosures

Name of the party Bata Singapore Bata Peru

Bafin (Nederland) B.V

relationship

Group company Group company

Parent Company

transaction Purchase

Dividend Payment

Taka 000

Service received Claim Sales Sales

(282,102) (1,652) 49 2,870

(237,006)

Taka 000

(288,188) (1,160) 613 1,069

(239,400)

Bata Sri Lanka Bata Malaysia Bata South Africa Bata Thailand Bata Indonesia

Bata Zambia

Group company

Group company Group company

Sales

Group company

Service received Service provide Sales Sales

Service received

32,178 -

4,215

15,930

(44) 711 -

20,772 (169) -

211

Group company Group company

Service received Service received Trade mark licence fees Purchase Sales Service received Purchase

1,663 (3,242) (192)

Global Footwear Services Pte. Ltd., Singapore Bata Brands S.a.r.l., Luxembourg Bata Colombia Bata Kenya Bata Malawi

Group company

(101,381) (156,488) (422) (38)

(92,378) (139,733) (322) 53 -

Group company Group company Group company Group company

Purchase Sales

(1,220) 3,367 -

Bata Zimbabwe Euro Footwear Holdings s.a.r.l. Bata India Bata Netherland

Group company Group company Group company

Service provided Sales Service received Purchase

BB Export Limited

Group company

Purchase

(22,813) -

(7,348) (497)

999

476 37 -

(35,517) 25

(7,145) (3,307)

Subsidiary company

Payment for subscription of shares

62

36.2

Receivables/(payables) with related parties Name of the party Bata Singapore Bata Kenya Bata Zambia

Nature of

Group company

Group company

relationship

transaction Sales Purchase

Nature of

Taka 000

2012

(11,555) 574 -

Taka 000

2011

(5,098) 4,508 -

Bata Sri Lanka Bata Colombia Global Footwear Services Pte. Ltd., Singapore Bata Brands S.a.r.l., Luxembourg Euro Footwear Holdings s.a.r.l. Bata India BB Export Limited

Group company Group company Group company

Sales Sales

Group company Group company Group company

Sales

Service received

13,358 (49,307)

11,850 (95,453)

(351)

Group company

Trade mark licence fees Purchase Service received

(296,176)

37.

Non-cancellable operating lease rentals are payable as follows:

Operating lease payments disclosure

Subsidiary company

Subscription of shares

(1,325)

(7,183) -

(139,733) -

(7,063) (1,110)

Less than one year Between one and five years More than five years
38. 39.

2012 Amount 000 Taka

Capital expenditure and financial commitment There were no capital expenditure and financial commitments as at 31 December 2012 (2011: Nil)

2,348,975

316,855 1,571,558 460,562

2011 Amount 000 Taka

211,911 1,151,782 355,618 1,719,311

Contingent liabilities There are contingent liabilities on account of unresolved disputed corporate tax assessments and VAT claims by the authority aggregating to Tk. 328,524,000 (2011: Tk 312,514,000). Considering the merits of the cases, it has not been deemed necessary to make provisions for all such disputed claims. There is also contingent liability in respect of outstanding letters of credit of Tk. 218 million (2011: Tk. 231 million) and letter of guarantee of Tk. 5.7 million (2011: Tk. 4.7 million). Comparatives Previous year's figures have been rearranged, wherever necessary, to conform to current year's presentation. Other disclosures

40.

40.1 40.2 40.3

Interim dividend Bata paid an interim dividend @ Tk 17.00 per share of Tk 10 each aggregating to Tk 232,560,000 which was approved by the Board of Directors at its 209 th meeting held on 28 November 2012. Events after the reporting period The Board of Directors of Bata, at its 211th meeting held on 25 April 2013, proposed Tk 10.50 per share, amounting to a total of Tk.143,640,000 as final dividend for the year ended 31 December 2012, which represents 105% of the paid up capital. Total dividend for the year ended 31 December 2012 including the interim dividend (see note 40.2) thus comes to Tk.376,200,000, which is 275% of paid up capital. These dividends are subject to final approval by the shareholders at the forthcoming Annual General Meeting of the company.

63

Bata Shoe Company (Bangladesh) Limited Statement of Comprehensive Income for the year ended 31 December 2012
2012 Taka 2011 Total

Exhibit - I

Manufacturing Taka Revenue 6,328,331,186 2,198,150,251

Trading 1,056,174,549 467,849,420

Total

Taka

Taka

Cost of goods sold Other income Gross profit Administration, selling and distribution expenses Finance income Finance expenses

(4,130,180,935) 26,776,981

(588,325,129) -

(4,718,506,064) 2,665,999,671 26,776,981

7,384,505,735

(4,286,593,663) 2,361,252,350 21,210,803

6,647,846,013

Profit from operating activities Profit before contribution to WPPF Profit before tax Tax expense: Current tax Contribution to WPPF

(1,387,676,966) 837,250,266 14,186,445 847,775,544 805,621,718 (3,661,167)

(295,350,085) 172,499,335 3,019,412 (779,235) 174,739,512 165,767,585 15,292,563

(1,683,027,051) 1,009,749,601 1,022,515,056 971,389,303 (4,440,402) 17,205,857

(1,529,417,293) 853,045,860 3,554,238 835,389,529 793,620,053 8,500,000 (21,210,569)

(42,153,826) 273,380,437 284,180,437

(8,971,927)

(51,125,753) 288,673,000

(41,769,476) 204,503,000

Deferred tax Profit after tax for the year

10,800,000

521,441,281

150,475,022

15,292,563

671,916,303

299,473,000

10,800,000

580,617,053

213,003,000

64

65

66

kK lro
IjMVy TPr CPuU Tj
v~JrPyJJPrr lKuS / KmS j v~Jr xUqJ

IJKo/IJorJ KbTJjJ mJaJ xM TJJjL (mJuJPhv) KuKoPac-Fr v~JrPyJJr KyxJPm \jJm / mVo T IJoJr / IJoJPhr kKfKjKi KyxJPm IJVJoL 19 \Mj 2013 mMimJr IjMKfmq TJJjLr FTYKuvfo mJKwtT xJiJre xnJ~ Fm Fr oMufmL WJKwf xnJ~ IJoJr / IJoJPhr kP CkKf gJTJr Fm nJa khJj TrJr \jq KjpM TruJo Jq KyxJPm IJ\ 2013 fJKrPU IJKo / IJorJ FA hKuPu xJPj Jr TruJo

v~JrPyJJPrr Jr

kKfKjKir Jr

fJKrU 10.00 aJTJr rJ\ KaPTa (TJJjLPf xrKf v~JrPyJJPrr Jr ImvqA KouPf yPm)

xJLr Jr

CkKKf
IJKo/IJorJ FfJrJ 19 \Mj 2013 mMimJr xTJu 10:30aJ~ iJorJA TJrUJjJ, dJTJ~ IjMKfmq mJaJ xM TJJjL (mJuJPhv) KuKoPac-Fr FTYKuvfo mJKwtT xJiJre xnJ~ IJoJr/IJoJPhr CkKKf KuKkm TruJo v~JrPyJJPrr jJo Jr

kKfKjKir jJo Jr v~JrPyJJPrr lKuS / KmS j xnJTP kPmPvr kNPmt CkKKf kUJjJ khvtPjr IjMPrJi TrJ pJP
67

Form of Proxy

Shareholder's Folio / BO No. I/We

Please Quote

No. of Shares held

being shareholder(s) of BATA SHOE COMPANY (BANGLADESH) LIMITED, entitled to vote hereby appoint Mr./Ms. as my/our proxy to attend and vote for me/us and on my/our behalf at the 41st Annual General Meeting of the Company to be held on Wednesday 19 June 2013 and any adjournment thereof and poll that may be taken in consequenced thereof. As witness my/our hand this day of 2013

of

Signature of Shareholder (s) Date

Signature of Proxy Signature of Witness

(Signature of Shareholder (s) must be in accordance with specimen signature with the Company.)

Revenue Stamp of Tk. 10.00

I/We hereby record my/our presence at the 41st Annual General Meeting of Bata Shoe Company (Bangladesh) Limited at Dhamrai Factory, Dhaka on Wednesday 19 June 2013 at 10:30 a.m. Full name of the Shareholder (in block letter) Full name of the Proxy (in block letter) Signature Signature

ATTENDANCE

Shareholder's Folio / BO No. Shareholders are requested to hand over the Attendance Slip at entrance of the meeting hall.
68