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Uniworth Textiles Ltd.

BSE: 500138 Sector: Industrials
NSE: FABWORTH ISIN Code: INE486C01019
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Uniworth Textiles Ltd. (FABWORTH) - Auditors Report

Company auditors report

TO THE MEMBERS OF UNIWORTH TEXTILES LIMITED

Report on the Financial Statements

We have audited the accompanying Financial Statements of UNIWORTH TEXTILES LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2016the Statement of Profit and Loss the Cash Flow Statement and a summary of theSignificant Accounting Policies and other explanatory information for the year then ended.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies act 2013 ("the Act") with respect to the preparation ofthese Financial Statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgements and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgement including assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the financial statements.

Basis for Qualified Opinion

(a) Footnote to Note No.23 regarding interest provision on borrowings from some of theinstitutions and banks made in the financial statements under simple interest method atthe prevailing / estimated rates applicable on such loans in absence of relevant documents/ confirmations as also the on-going matters of disputes between the Company and itsBankers / Creditors over the issue of charging interest as stated in the said Footnote.

(b) Note No.15 (ii)(a)(ii)(b) and (ii)(c) regarding non-provision of certain debtsamount to Rs.5702.55 lacs.

(c) Note No.17(ii)(b) regarding of Rs.547.50 lacs due from a party in respect of whichwe are unable to form any opinion as to the nature and purpose of making such advance asalso recoverability of the same.

(d) Note No.17 (ii)(c) regarding non-provision for advance of Rs.211.70 lacs paid to anOverseas Consultant due to reasons stated therein.

(e) Note No 14 (ii)and (iii) regarding incorporation of the figures of Inventories ofRaw Materials Stores & Spares Finished Goods and Work in Progress in these FinancialStatements at their respective book balances due to reasons stated therein.

(f) Note No. 14 (iv) regarding non-receipt of confirmation for finished goods Rs. 89.51lacss lying with a third party since long. In absence any confirmation as to the quantityand condition of such materials correctness of valuation of the same could not beascertained.

(g) Non-provision / non-compliance of Items indicated in (a) to (e) above constitute adeparture from the Accounting Standards referred to in Section 133 of the Act. Withoutconsidering Item Nos.(a)(c) and (e) above whose impact on the Company’s Statementof Profit and Loss is presently non-ascertainable had the provisions indicated in ItemNos. (b) to (d) been made

i) the Loss for the year would have increased by Rs.6461.75 lacs

ii) Short Term Loans & Advances would have decreased by Rs.759.20 lacs

iii) Trade Receivables would have decreased by Rs.5702.55 lacs

iv) The Shareholders’ Fund would have been lower by Rs. 6461.75 lacs QualifiedOpinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the like effects of the matters described in the Basis forQualified Opinion paragraph above the aforesaid Financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31st March 2016 and its loss and its cash flows for the year ended on thatdate.

Emphasis of Matters

We draw your attention to the following matters in the Notes to the financialstatements:

1. following Notes to the financial statements describe the uncertainty related to theoutcome of the lawsuits / other legal matters indicated therein:

(a) Note No. 7 (ii) regarding application filed against the Company before DebtRecovery Tribunal for recovery of the dues (including interest) Rs. 2507.57 lacs bycertain banks.

(b) Note No. 12 (i) regarding investment amounting to Rs.14.05 lacs in Companies whichhave become sick and referred to the BIFR under the sick Industrial Companies (specialprovisions) Act 1985. In absence of the Rehabilitation scheme of these companies we areunable to comment on the amount of provision if any that may be required.

(c) Note No. 6 (footnote) regarding estimated amount of Rs.1674.44 lacs having beenprovided during the year 2002-03 as sales claims and commission relating to earlier yearsfrom overseas Customers of the Company which is pending for final settlement. Necessaryadjustment for such claims and commission will be made after final settlement andobtaining necessary approval from concerned regulatory.

(d) Note No 26 regarding demands of Rs. 13487.63 lacs for Excise Duty Income Tax andother matters disclosed under Contingent Liabilities which are contested by the Companyand pending before various forums / Authorities for final decisions.

2. Note No. 4(iv) Note No. 7 (iii) and Note No.16 (i) regarding non-receipt ofconfirmations in respect of borrowings from financial institutions / banks and also debitbalances in certain Current Accounts with banks due to restructuring being in processbook balances thereof have been considered in these financial statements.

3. Note No. 31 (iii) regarding balances receivables Rs. 2468.94 lacs and payable Rs.4697.45 lacs with a related party under reconciliation.

4. As indicated in the financial statements the Company has accumulated losses and itsnet worth has been fully eroded the Company has incurred net loss during the current andprevious years and the Company’s current liabilities exceeded its current assets asat the Balance sheet date. these conditions along with other matters set forth in Notesto financial statements indicate the existence of a material uncertainty that may castsignificant doubt about the Company’s ability to continue as a going concern.However these Financial statements of the Company have been prepared on a going concernbasis and pending decision of the BIFR under the sick Industrial Companies (specialprovision) Act1985 the accounts have been prepared on Going Concern assumption. In theevent of adverse decision the financial statements may require necessary adjustment ifthe Company ceases to be a Going Concern. During the year 2013-14 in one of the appeal byARCIL the reference filed by the Company stood abated pursuant to the order of AAIFR.Necessary writ petition and appeal have been filed by the Company against the above.Pending finalisation of the same the accounts have been prepared on going concernassumption.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

i) As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government in terms of Sub-section (11) of Section 143of the Act we enclose in the Annexure-A a statement on the matters specified in the saidOrder to the extent applicable to the Company.

ii) As required by section 143(3) of the Act we report that

a) we have sought and except for the matters described as under as also in the Basisfor Qualified Opinion paragraph obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purpose of our audit:

In respect of Trade Receivables particularly with regard to the disclosures made inNote Nos. 15 (ii)(a) (ii) (b) and (ii)(c).

b) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account;

d) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph in our opinion the Balance Sheet Statement of Profit and Loss andCash Flow Statement comply with the Accounting Standards specified under Section 133 ofthe Act read with Rule 7 of the Companies(Accounts) Rules 2014;

e) The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;

f) The matters described in sub-paragraph (1 2 &3) under the Emphasis of Mattersparagraph above in our opinion may have an adverse effect on the functioning of theCompany;

g) on the basis of written representations received from the Directors as on 31stMarch 2016 taken on record by the Board of Directors none of the Director isdisqualified as on 31st March 2016 from being appointed as a director in terms of section164(2) of the Act.

h) with respect to the adequacy of the Internal Financial Controls over FinancialReporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure - B.

i) With respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition wherever ascertainable.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable loss

iii. The Company is not required to transfer any amount to Investor Education andProtection Fund

For S. S. KOTHARI & CO.
Chartered Accountants
Firm Registration. No. 302034E
(P.K. Bhattacharya)
Place: Kolkata Partner
Date: 30th May 2016. Membership No. 015899

ANNEXURE - A TO THE AUDITORS’ REPORT

The Annexure referred to in our report to the members of Uniworth Textiles Limited theyear ended 31st March 2016.

We report that:

(i) (a) Whether the company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets; (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) Whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so whether the same have been properly dealt with in the books of account; (b) As stated by the Management the fixed assets have been physically verified at reasonable intervals by the Company. the physical verification so conducted did not reveal any discrepancy
(c) Whether the title deeds of immovable properties are held in the name of the company. If not provide the details thereof; (c) title Deeds for Freehold and Leasehold Immovable properties are held in the name of the Company.
(ii) Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so whether they have been properly dealt with in the books of account; (ii) Inventories of Raw Materials work in progress stores & spares and finished Goods(other than those lying with a third party) have been physically verified at reasonable intervals by the Company but no adjustment has been carried out for discrepancies if any due to reasons stated in Note No.14(ii). further as the extent of discrepancies are yet to be ascertained we are unable to ascertain whether such discrepancies were material or not. finished Goods also include materials lying with third parties Rs. 8951202 for which no confirmation has been made available to us.
(iii) Whether the company has granted any loans secured or unsecured to companies firms Limited Liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013. If so (iii) the Company has not granted any loan secured or unsecured during the year to any company firm Limited Liability partnerships or other party covered in the register maintained under section 189 of the Companies Act 2013.
(a) whether the terms and conditions of the grant of such loans are not prejudicial to the company’s interest; In this regard we have relied upon the entries recorded in the register maintained under section 189 of the Act
(b) whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular;
(c) if the amount is overdue state the total amount overdue for more than ninety days and whether reasonable steps have been taken by the company for recovery of the principal and interest;
(iv) In respect of loans investments guarantees and security whether provisions of section 185 and 186 of the Companies Act 2013 have been complied with. If not provide the details thereof. (iv) In our opinion and according to the information and explanations given to us the company has complied with the provisions of sections 185 and 186 of the Act with regard to loans and investments made.
(v) In case the company has accepted deposits whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under where applicable have been complied with? if not the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal whether the same has been complied with or not? (v) the Company has not accepted any deposit from the public within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act 2013.
(vi) where maintenanceof cost records has been specified by the Central Government under subsection (1) of section 148 of the Companies Act 2013 and whether such accounts and records have been so made and maintained. (vi) we have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Companies Act 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the records with a view to determine whether they are accurate or complete.
(vii) (a) whether the company is regular in depositing undisputed statutory dues including provident fund employees’ state insurance income-tax sales-tax service tax duty of customs duty of excise value added tax cess and any other statutory dues to the appropriate authorities and if not the extent of the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable shall be indicated; (vii) (a) According to the records of the Company the Company has regularly deposited during the year with appropriate authorities undisputed statutory dues including provident fund employees’ state insurance income tax sales tax wealth tax service tax customs duty excise duty value added tax cess and any other statutory dues where applicable. According to the information and explanations given to us no undisputed amount payable in respect of provident fund employees’ state insurance income tax sales tax wealth tax service tax customs duty excise duty value added tax and cess were outstanding as at 31st March 2016 for a period of more than six months from the dates they became payable.
(b) In case dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute). (b) According to the records of the Company following statutory dues have not been deposited by the Company on account of disputes:

 

nature of dues Amount (Rs. in lacs] Year (which it relates) Forum
Central Excise & penalty 5052.56 1997-98 to 2000-01 & 2001-02 CEsTAT New Delhi.
Central Excise 6400.00 1994-95 to 1996-97 Commissioner of Central Excise- Nagpur
Central Excise & penalty 9.43 2000-01 Commissioner of Central Excise- Raipur
Central Excise & penalty 105.81 2003-04 to 2005-06 Commissioner of Central Excise- Raipur
Central Excise & penalty 1890.00 2002-03 to 2007-08 Commissioner of Central Excise- Raipur
Income tax 15.31 Very old Income tax Dept.
Multiferious Demands 14.50 Very old Various forum/ Authorities

 

(viii) Whether the company has defaulted in repayment of loans or borrowing to a financial institution bank Government or dues to debenture holders? If yes the period and the amount of default to be reported (in case of defaults to banks financial institutions and Government lender wise details to be provided). (viii) The Company has defaulted in repayment of dues to financial institutions banks and debenture holders as under:

As per original Agreement all the following Loans have become due for repayments. However the Company’s negotiations with the term lenders for rescheduling / restructuring is in process:

 

Nature of Financial Assistance Amount (Rs in Lacs) period of default
a) Term Loan *
i) Financial Institution
ICICI 1 Not Ascertainable
principal 3504.44 1 k
Interest 5295.66
b) Debenture
Zero Coupon Redeemable Debenture 4750.00 sept 2014
c) Loan Repayable on demand (Working Capital loan) **

* Also refer to Note No. 4 ** Refer to Note No.7 (ii)

(ix) Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not the details together with delays or default and subsequent rectification if any as may be applicable be reported; (ix) The Company did not raise any money by way of initial public offer of further public offer (including debt instruments) during the year.
(x) Whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes the nature and the amount involved is to be indicated; (x) Based upon the audit procedure performed and the information and explanation given by the Company we report that no fraud on or by the Company has been noticed or reported during the year that causes the financial statements materially misstated.
(xi) Whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act? If not state the amount involved and steps taken by the company for securing refund of the same; (xi) According to the information and explanations given to us and based on our examination of the records of the Company the Company has paid/provided for managerial remuneration in accordance with the requisite approval mandated by the provisions of section 197 read with schedule V of the Act.
(xii) Whether the Nidhi Company has complied with the Net owned Funds to Deposits in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules 2014 to meet out the liability; (xii) In our opinion and according to the information and explanations given to us the Company is not a Nidhi Company. Accordingly paragraph 3(xii) of the order is not applicable.
(xiii) Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act 2013 where applicable and the details have been disclosed in the financial statements etc. as required by the applicable accounting standards; (xiii) According to the information and explanations given to us and based on our examination of the records of the Company transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.
(xiv) Whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so as to whether the requirement of section 42 of the Companies Act 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not provide the details in respect of the amount involved and nature of non-compliance; (xiv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
(xv) Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so whether the provisions of section 192 of Companies Act 2013 have been complied with; (xv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly paragraph 3(xv) of the order is not applicable.
(xvi) Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act 1934 and if so whether the registration has been obtained. (xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

 

for S. S. KOTHARI & CO.
Chartered Accountants
firm Registration. No. 302034E
(P.K. Bhattacharya)
place: Kolkata partner
Date: 30th May 2016. Membership No. 015899

Annexure - B to the Auditors’ Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of UniworthTextiles Limited ("the Company") as of 31 March 2016 in conjunction with ouraudit of the Financial Statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal financial Controls over financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI’). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. we conducted our audit in accordancewith the Guidance Note on Audit of Internal financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material deficiencies have been identified in the operating effectiveness of theCompany’s internal financial controls over financial reporting as at March 312016:

1. The Company’s internal financial controls over customer acceptance creditevaluation and establishing credit limits for sales in respect of certain very old debtswere not operating effectively which could potentially result in the Company’srecognising revenue without establishing reasonable certainty of ultimate collection;

2. The Company’s internal financial controls for inventory particularly withregard to timely completion of physical verifications and reconciliation of discrepancieswere not operating effectively which could potentially result in material misstatements inthe Company’s consumption and inventories.

3. The Company’s internal financial controls over payment of advances to overseasconsultants and certain other parties particularly with regard to the terms and conditionsof making such advance payments by the Company were not operating effectively which couldpotentially result in materially affecting the Company’s working capital and expenseaccount balances.

4. The Company’s internal financial controls over certain long outstandingcreditors for expenses particularly with regard to the adequacy for such expenses as alsoobtaining confirmations from the creditors were not operating effectively which couldpotentially result in materially affecting the Company’s working capital and expenseaccount balances.

For S. S. KOTHARI & CO.
Chartered Accountants
firm Registration. No. 302034E
(P.K. Bhattacharya)
place: Kolkata partner
Date: 30th May 2016 Membership No. 015899