The Karachi Stock Exchange Limited’s financial statement of the company for the period ended June 30, 2011/ resignation to act as statutory auditors

Karachi, June 21, 2013 (PPI-OT): Enclosed please find herewith copies of letters both date June 19, 2013 received from M/s. Haroon Zakaria and Company, Chartered Accountants, the contents of which you will find self explanatory.

The Exchange has taken a very serious view of the contents of the letter and advise you to submit your comments to the issues raised in the letter latest by 12:00 noon tomorrow.

Transmission Engineering Industries Limited

Financial Statement of the company for the period ended June 30, 2011/ resignation to act as statutory auditors

We thank you for your letter Ref No.KSE/C-622-3419 dated June 20, 2013.

In this regard it is requested to your office to kindly grant us more time as we prepare a detail answer for your office.

Transmission Engineering Industries Limited (The company)-June 30, 2011

Reference is hereby made to financial statements of the Company for the above captioned year wherein management of the Company has reported disposal of investment in its subsidiary company named Transmission Motor Company (Private) Limited in its financial statements for the above captioned year.

These were 2,000,000 no of ordinary shares reflecting 77% holding in the subsidiary Company and were disposed of for Rs.4 million i.e. Rs.2 per share out of which Rs. 282,274 was received through cash and Rs.3,717,276 through cheque. As per SECP’s information received by us through its show cause, the amount of Rs. 3,717,276 is actually tax refund received by the Company from income tax department.

The audit evidences provided to us by the Company to support the disposal of investment in subsidiary Company is as follows:

Notice of Extraordinary General Meeting-EOGM as published in newspaper regarding disposal of investment;

Written request from Mrs. Shamim Rizvi to purchase shares of the Subsidiary Company;

Minutes of EOGM wherein decision to dispose off shares was approved;

Information disseminated to KSE through letter dated May 27, 20111 pertaining to disposal of shares;

Voucher evidencing authorization of transaction of disposal.

Representation letter was taken from management on fair presentation.

Considering the Order of refund by Income tax department as was produced to us by the SECP, all above evidences are proved to be fabricated and fake and integrity of management is no longer reliable.

Considering these facts, we are withdrawing our audit opinion expressed on such financial statements for the year ended June 30, 2011 dated October 06, 2011 and we are also withdrawing our conclusion on half yearly financial statements for the period ended December 31, 2011 dated February 28, 2012.

Our resignation from the audit engagement and continuing professional services is also enclosed with this letter.

Impact of the transaction on the financial statements is summarized below:

Number of                                                           As                           Actually would had been
Financial         Head of Account in Balance Sheet               Reported                                 Reported
Statements                                                        Rupees                                   Rupees

6                 Tax refund due from Government                 8,940,450                        5,223,174
Nil               Long term investment                                                                            Rupees
                                                                                           Value                20,000,000
                                                                                           Less: Impairment     20,000,000
                                                                    Nil                                             Nil
31                Other income-net                              40,000,000                         Nil
Nil               Payable to Mrs. Shamim Rizvi                      Nil                             282,274

Resignation to act as statutory auditors

We would like to inform you that we are unable to act as auditors of your Company for the financial year ending June 30, 2012. The decision is made owing to false representations regarding fair presentation were made to us during the course of audit for the year ended June 30, 2011 and half yearly review for the period ended December 31, 2011. Further, as per information produced to us by the Securities and Exchange Commission of Pakistan (SECP), Company has forged its income tax refund by showing it as proceeds against disposal of investment in subsidiary Company.

For more information, contact:
Haroon Zakaria and Company
Chartered Accountants
The Karachi Stock Exchange Limited
Tel: (92-21) 111-001122
Fax: (92-21) 3241 0825, (92-21) 3241 5136