ASIAN STAR COMPANY LIMITED ELEVENTH ANNUAL REPORT … · ELEVENTH ANNUAL REPORT 2004-2005 ASIAN STAR COMPANY LIMITED NOTICE Notice is hereby given that the ELEVENTH ANNUAL GENERAL

ELEVENTH ANNUAL REPORT 2004-2005 ASIAN STAR COMPANY LIMITED

ASIAN STAR COMPANY LIMITED ELEVENTH ANNUAL REPORT 2004-2005

Board of Directors Shri Dinesh T. Shah Chairman Shri Arvind T. Shah Managing Director Shri Dharmesh D. Shah Jt. Managing Director Shri Vipul P. Shah Director Shri Rajendra J. Shah Director Shri Bhupendra K. Shroff Director Shri K. Mohanram Pai Director

Shri Apurva R. Shah Director Shri Hasmukh B. Gandhi Director Shri Priyanshu A. Shah Executive Director (w.e.f. 01/11/2004) Shri Atul B. Munim Director (Resigned w.e.f. 30/06/2005 )

Company Secretary Smt. Anuradha A. Banerjee

Bankers

Bank of India Canara Bank Corporation Bank State Bank of Hyderabad Central Bank of India IndusInd Bank Ltd. Syndicate Bank State Bank of Patiala State Bank of Indore ING Vysya Bank Ltd. State Bank of Travancore Andhra Bank Bank of Baroda Bank of Maharashtra

Auditors

V.A. Parikh & Associates Chartered Accountants

Registered Office

114-C, Mittal Court, Nariman Point, Mumbai 400 021

Registrar & Transfer Agents Bigshare Services Pvt. Ltd. E-2/3, Ansa Indl. Estate, Sakivihar Road, Sakinaka, Andheri (E), Mumbai 400 072. Tel : 2847 3474 Fax : 2847 5207


NOTICE Notice is hereby given that the ELEVENTH ANNUAL GENERAL MEETING of the members of ASIAN STAR COMPANY LIMITED will be held on Monday, 19th September, 2005 at 4 p.m. at S.S.Hall, Garware Club House, Wankhede Stadium, ‘D’ Road, Churchgate, Mumbai – 400 020 to transact the following business: ORDINARY BUSINESS 1. To receive and adopt Audited Profit & Loss Account for the year ended 31st March 2005 and Balance

Sheet as on that date together with the reports of Directors and the Auditors thereon. 2. To declare Dividend on Equity Shares. 3. To appoint a Director in place of Shri Dharmesh D Shah who retires by rotation and being eligible

offers himself for re-appointment. 4. To appoint a Director in place of Shri Rajendra J Shah who retires by rotation and being eligible offers

himself for re-appointment. 5. To appoint a Director in place of Shri Bhupendra K Shroff who retires by rotation and being eligible

offers himself for re-appointment. 6. To appoint V.A.Parikh & Associates, Chartered Accountants, the retiring auditors of the company as

auditors who shall hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting at such remuneration as may be fixed by the Board of Directors.

SPECIAL BUSINESS 7. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as

Ordinary Resolution : “RESOLVED THAT in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies Act, 1956, Shri. Priyanshu A. Shah who was appointed as an Additional Director and who ceases to hold office as a Director of the Company as per provisions of section 260 of the Companies Act, 1956 at the ensuing Annual General Meeting and in respect of whom the company has received a notice from a member in writing along with a deposit of Rs.500/- proposing his candidature for the office of Director as per the provisions of Section 257 of the Companies Act, 1956 be and is hereby appointed as Director of the Company, liable to retire by rotation.”

8. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as Special Resolution : “RESOLVED THAT in accordance with the provisions of Sections 269, 198, 309 of the Companies Act, 1956 and all other applicable provisions of the Companies Act, 1956 and modification/amendments thereof consent of the members be and is hereby accorded to the appointment of Shri Priyanshu A. Shah as Executive Director of the Company for a period of 3 years w.e.f. 1st November 2004 on the following terms :- a) Remuneration of Rs.50,000/- per month with such annual increments effective from April 1st of

each financial year commencing from April 1st 2005 as may be decided by the Board / Remuneration Committee subject to overall ceiling as laid down in Schedule XIII of the Companies Act, 1956.

b) Perquisites and benefits as per Schedule XIII of the Companies Act, 1956. c) Powers and duties as per the provisions of Articles of Association of the company. d) Powers to Board of Directors to increase the remuneration & provide perquisites within overall

limit of Schedule XIII of the Companies Act, 1956 as applicable.” 9. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as

Ordinary Resolution : “RESOLVED THAT pursuant to the proposed revision in Clause No. 49 of the Listing Agreement with the Stock Exchanges, the consent of the Company be and is hereby accorded to the payment to the Non-executive Directors of the Company such amount as may be approved by the Board of Directors from time to time but not exceeding the limit prescribed under the Companies Act, 1956 for each meeting of the Board of Directors and/or Committee(s) thereof attended by them.”


10. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as Special Resolution : “RESOLVED THAT pursuant to the provisions of section 17 and other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modifications or re-enactment thereof for the time being in force), the Object Clause of Memorandum of Association of the Company be altered , by insertion of the following as No. 87 of the other object clause subject to the approval of the members by postal ballot in the ensuing annual general meeting. Clause No.87 : To carry on the business of purchasing, selling, importing, exporting, producing, trading, manufacturing or otherwise dealing in all aspects of planning, investigation, research, design and preparation of preliminary, feasibility and project reports, construction, generation, Operation & Maintenance, Renovation & Modernisation of Power Stations and Projects, transmission, distribution, sale of Thermal, Hydro power and power generated through Non-conventional Renewable Energy sources, power development and also to undertake the business of other allied/ancillary industries those for utilization of steam generated at power stations, and other byproducts and install operate and manage all necessary plants, establishments and works. RESOLVED FURTHER THAT the any of the Directors of the company be and they are hereby jointly and severally authorised to do all such acts, deeds, matters and things as may be necessary for the purpose of implementing these resolutions.”

NOTES A. A member entitled to attend and vote is entitled to appoint a proxy or proxies to attend and vote instead

of himself and the proxy need not be a member of the Company. The instrument appointing proxy should, however, be deposited at the Registered Office of the Company not less than forty eight hours before the commencement of the meeting.

B. Shareholders are requested to bring their copies of the Annual Report to the Meeting. C. Members/Proxies should bring the Attendance Slip duly filled in for attending the meeting. D. In case of Joint holders attending the meeting, only such joint holder who is higher in the order of

names will be entitled to vote. E. Members who hold shares in dematerialized form are requested to write their Client ID and DP ID

numbers and those who hold shares in physical form are requested to write their Folio Number in the attendance slip for attending the meeting.

F. The Register of Members and Register of Transfers will remain closed from 16/09/2005 to 19/09/2005 (Both Days inclusive) for payment of dividend on equity shares. The dividend as recommended by the Board of Directors, if declared at this Annual General Meeting, will be paid on or after 19/09/2005 to those shareholders whose names appear on the Company’s Register of Members on 19/09/2005. In respect of shares held in electronic mode, the dividend will be paid on the basis of beneficial ownership as per details to be furnished by National Securities Depository Limited and Central Depository Services (India) Limited as at end of business on Monday 19/09/2005 for this purpose.

G. Consequent upon the introduction of Section 109A of the Companies Act, 1956, shareholders are entitled to make nomination in respect of shares held by them in Physical form. Shareholders desirous of making nomination are requested to send their requests in Form 2B (which will be made available on request) to the Registrar and Transfer Agent, Big Share Services Private Limited.

H. Re-appointment of Directors at the ensuing Annual General Meeting : Shri Dharmesh D. Shah, Shri Rajendra J Shah and Shri Bhupendra K Shroff retire by rotation and being eligible offer themselves for re-appointment. The information or details pertaining to these Directors to be provided in terms of Clause 49 of the Listing Agreement with the Stock Exchange is furnished in the statement attached herewith.

I. Explanatory Statement as required under Section 173(2) of the Companies Act, 1956 is annexed hereto. J. Unclaimed dividend for the year 1997-98 shall become due for transfer to the Investor Education &

Protection Fund on 11/08/2005 followed by the transfer of the amounts every year for the subsequent years. The members are therefore, requested to send their claim for dividend if any, to the Company for payment, for the relevant years from 1997-98 onwards before the respective amounts become due for transfer to the said funds.


K. The company’s equity shares are listed on the Stock Exchange, Mumbai. The Company has paid listing fees to the exchange for the year 2005-06.

Mumbai By Order of the Board of Directors Dated : June 30, 2005 Registered Office Anuradha A Banerjee 114-C, Mittal Court, Company Secretary Nariman Point, Mumbai 400 021


Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 Item 7: Shri Priyanshu A. Shah was appointed by the Board of Directors as an Additional Director of the Company by circular resolution dated 8th October 2004. Pursuant to section 260 of the Companies Act, 1956, Shri Priyanshu A. Shah holds office as Additional Director upto the date of ensuing Annual General Meeting. The Company has received a notice in writing from a member proposing the candidature of Shri Priyanshu A. Shah for the office of Director of the Company under the provision of section 257 of the Companies Act, 1956 along with a deposit of Rs.500/-. Shri Priyanshu A. Shah is a commerce graduate from the Mumbai University and a certified gemologist from the GIA, New York. He started his career four years ago and has been trained in all aspects of diamond & jewellery trade. Presently, he is managing company’s jewellery operations. His youth & enthusiasm will enable the company to expand its diamond jewellery operations. Item 8: The Board of Directors at its meeting held on 28th October, 2004 appointed Shri Priyanshu A. Shah as Executive Director of the Company for a term of 3 years w.e.f. 1st November 2004. His appointment and remuneration is fixed in accordance with Schedule XIII to the Companies Act, 1956, subject to the approval of the shareholders for which purpose resolution is set out in the notice as proposed. The Board of Directors has fixed the following remuneration to be paid to Executive Director during the term of 3 years, with powers to make such variation of increase therein as may be though fit from time to time, but within the ceiling/s laid down in Schedule XIII of the Companies Act, 1956, or any statutory amendment or relaxation thereof : a) Remuneration of Rs.50,000/- per month with such annual increments effective from April 1st of each

financial year commencing from April 1st 2005 as may be decided by the Board / Remuneration Committee subject to overall ceiling as laid down in Schedule XIII of the Companies Act, 1956.

b) Perquisites and benefits as per Schedule XIII of the Companies Act, 1956. c) Powers and duties as per the provisions of Articles of Association of the company d) Powers to Board of Directors to increase the remuneration & provide perquisites within overall limit of

Schedule XIII of the Companies Act, 1956 as applicable. Shri Priyanshu A. Shah is related to Shri Arvind T. Shah and to that extend he will be deemed to be interested in the resolution. The above may also be deemed to be an abstract of the terms of appointment of director referred to hereinabove and the nature of the concern or interest of the director, therein, as required by Section 302 of the Companies Act, 1956. Item No. 10 Explanatory statement relating to and reasons for proposing the special resolution under section 17 of the Companies Act, 1956, for amending the object clause:

With changing technologies and evolution of new technologies along with changes in markets, business practices and business environment, it is felt necessary that the company amend its object Clause. The company intends to install the facilities of power generation for its own use or captive usage or to tie up suitable arrangement with State Electricity Board. Your Directors recommend the resolution for your approval. None of the Directors are interested in the resolution. Section 17 of the Companies Act, 1956 requires amendment to the object clause to be approved through a special resolution. The Memorandum of Association of the company is open for inspection by the member at the Registered office of the company on every working day between 2.00 p.m. and 4.00 p.m.


As per Section 192A of the Companies Act, 1956 read with the companies (passing of the Resolution by Postal Ballot) Rules,2001, the aforesaid special resolution is required to be passed through postal ballot in the ensuing Annual General Meeting. Accordingly, the said draft special resolution and the Explanatory Statement are being sent to you along with a postal Ballot Form for your consideration. The company has appointed Mr. Pranav K. Kapadia, Chartered Accountant as scrutinizer for conduction of the postal ballot process in a fair and transparent manner. Mumbai By Order of the Board of Directors Dated : June 30, 2005 Registered Office Anuradha A Banerjee 114-C, Mittal Court, Company Secretary Nariman Point, Mumbai 400 021


Details of the Directors seeking re-appointment in Annual General Meeting to be held on 19th September, 2005 (In pursuance of Clause 49 of the Listing Agreement)

Name of Director Shri Dharmesh D. Shah

Shri Rajendra J. Shah Shri Bhupendra K. Shroff

Date of Birth 02/10/1965 16/04/1942 11/10/1937

Date of Appointment 02/03/1995 18/03/1995 30/06/2000

Expertise in specific functional areas

Sales & Marketing and Overseas Business

Taxation Corporate Law

Qualifications

B.Com FCA M.Com, FCS, LLB, C.I.A. (USA)

List of Companies in which outside Directorship held as on 31st March, 2005.

Carbon Accessories Ltd. Acrysil Ltd. Fine-line Circuits Ltd. Shantivijay Jewels Ltd. Rightangles.com (I) Ltd.

Asian Star Diamonds International Pvt. Ltd. Shardul Securities Ltd. Reliance Consultancy Services Pvt. Ltd. Axis Financial Consultant Services Pvt. Ltd. Khira Steel Works Pvt. Ltd. Shree Chaitanya Yarntex Pvt. Ltd.

Chairman/Member of the Committees of the Board of Directors of this/other companies in which he is Director. a) Audit Committee b) Remuneration Committee c) Shareholders Committee

d) Corporate Governance Committee

- - - -

As a Chairman 1. Shantivijay Jewels Ltd. 2. Fine-line Circuits Ltd. As a Chairman 1. Asian Star Co. Ltd. 2. Shantivijay Jewels Ltd. As a Member 1. Fine-line Circuits Ltd.

As a Chairman 1. Shantivijay Jewels Ltd. As a Member 1. Asian Star Co. Ltd.

As a Chairman 1. Asian Star Co. Ltd. As a Member 1. Shardul Securities Ltd. As a Member 1. Shardul Securities Ltd. As a Chairman 1. Asian Star Co. Ltd. As a Member 1. Shardul Securities Ltd. As a Member 1. Shardul Securities Ltd.


DIRECTORS' REPORT To The Members, ASIAN STAR COMPANY LIMITED MUMBAI Your Directors have pleasure in presenting the Eleventh Annual Report together with the Audited Statement of Accounts for the year ended March 31, 2005. Financial Results The performance of the company for the financial year ended 31st March 2005 is summarized below :

(Rs. in Crores) March March 31, 2005 31, 2004

Financial Results Total Income 1063.00 968.61 Less : Total Expenditure 1010.74 932.44 Operating Profit (PBDIT) 52.26 36.17 Less : Interest and Depreciation 17.77 9.85 Profit before Tax 34.49 26.32 Provision for Tax 11.05 6.59 Provision for Deferred Tax 1.39 0.09 Profit after Tax 22.05 19.64 Add : Balance in Profit and Loss Account Brought forward 29.67 14.43 Profit available for appropriation 51.72 34.07 Appropriation Proposed Dividend 2.13 2.13 Tax on Dividend 0.30 0.27 Transferred to General Reserve 2.00 2.00 Balance Carried forward to Balance Sheet 47.29 29.67 51.72 34.07 Results of Operations The year 2004-05 has been yet another successful year for the company. Your company has registered a growth of 9.7% in turnover with sales of Rs.1062.04 crores during the FY 2004-05 against the corresponding total sales of Rs.968 crores during the FY 2003-04. Profit After Tax for the year increased by 12.27% over the previous year. Your company has been awarded 1st position by Gem & Jewellery Export Promotion Council (GJEPC) for highest export of cut & polished diamonds in DTC category for F.Y. 2003-04 for the 4th consecutive year maintaining its leading position in the industry. Dividend The Directors have recommended a dividend of Rs.2 per Equity Share on 1,06,71,200 Equity Shares of Rs.10 each for the financial year ended 31st March 2005, which if approved at the forthcoming Annual General Meeting, will be paid to i) all those Equity Shareholder whose name appear in the Register of Members as on 19/09/2005 and ii) all those beneficial owners whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited. Performance and Prospects During the year your company has commenced Jewellery operations to have its presence in the rapidly developing domestic diamond jewellery market. The company has set up its own manufacturing facility at Andheri-Mumbai. The Indian diamond jewellery market has witnessed a visible shift from generic to branded products. Keeping this in view your company has also acquired substantial stake in Carbon Accessories Limited, a company registered in Bangalore. The company is selling diamond jewellery under a recognized brand name


‘CARBON’. The Indian economy is estimated to grow by 6.9% in 2004-05 (source : Economic Survey 2004-05) and your company foresees immense potential in domestic market and is also optimistic of its export prospects. Subsidiary Companies As required under Section 212 of the Companies Act, 1956, the audited statements of accounts of Asian Star Company Limited, New York (U.S.A.) & Intergem Inc. Los Angeles (U.S.A.) and the Auditors Report thereon for the year ended March 31, 2005 are annexed. Consolidated Financial Statement In accordance with the Accounting Standard 21, Consolidated Financial Statement issued by The Institute of Chartered Accountants of India, your Directors have pleasure in attaching the audited Consolidated Financial Statements for the year ended March 31, 2005. Directors’ Responsibility Statement On the basis of compliance certificates received from the executives of the company, subject to disclosures in Annual Accounts, and also on the basis of discussion with the Statutory Auditors of the Company from time to time, we state as under:

• That in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures, if any;

• That the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at 31st March 2005 and of the Profit and Loss account of the Company for the year ended on that date;

• That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

• That the Directors have prepared the annual accounts of the company on a going concern basis. • Your Company has received certificate under section 274(1)(g) of the Companies Act, 1956 and none

of the Directors are disqualified to act as Director. Corporate Governance Pursuant to Clause 49 of the listing agreement with The Stock Exchange, Mumbai, a report on Corporate Governance, along with the Auditors’ certificate regarding compliance of conditions of corporate governance and Management Discussion and Analysis is separately given in this Report. Listing Arrangements The Equity Shares of the Company are listed on The Stock Exchange, Mumbai. The Company has paid listing fees for the year 2005-06. Dematerialisation of Shares In terms of the listing agreement the company has tripartite agreements with the RTA i.e. Bigshare Services Private Limited and National Securities Depository Limited and Central Depository Services Limited respectively. Directors Pursuant to the provisions of Section 256 of the Companies Act, 1956 and article 154(a) of the Articles of Association of the Company Shri Dharmesh D. Shah, Shri Rajendra J. Shah and Shri Bhupendra K. Shroff retire by rotation and being eligible offer themselves for reappointment. During the year under report, Shri Priyanshu A. Shah was appointed as Additional Director of the Company and was also appointed as Executive Director. A notice has been received from a member to appoint Shri Priyanshu A. Shah as Director of the Company alongwith a refundable deposit of Rs.500. The appointment of Shri Priyanshu A. Shah as Executive Director is also proposed for approval of the members. Finance The Company is availing Working Capital requirements from the Consortium of Bankers and has obtained adequate finance during the year under review. Our debt is fully secured by stock-in-trade, book debts & office premises.


Fixed Deposit The Company has not accepted any deposits within the meaning of Section 58 - A of the Companies Act, 1956 and the Companies (Acceptance of Deposit) Rules, 1975. There are no deposits which are outstanding and / or which is claimed and not paid or unclaimed for which information is required to be given in the report. Insurance The Properties and Assets of the Company are adequately insured. Cash Flow Analysis In conformity with the provision of Clause 32 of the listing Agreement, the Cash Flow Statement for the year ended 31st March, 2005 is annexed hereto. Particulars of Employees The company has not paid any remuneration above Rs. 2,00,000 per month to any of its employees and as such no information is required to be annexed to this report. Notes on Accounts Notes forming part of Accounts are self-explanatory. Particulars under Companies (Disclosure of particulars to the report of Board of Directors) Rules, 1988 :- Conservation of Energy The activity of the company does not require large-scale consumption of energy and the company is not covered in the list of industries required to furnish information in Form - A relating to conservation of energy. Technology Absorption The Directors are in constant touch with ongoing research in the World for better line of products and to yield better quality, cost reduction and worldwide acceptability of its range of products. Foreign Exchange The Company has earned Rs.103,382.13 lacs in foreign exchange by way of exports and dividend received and has spend Rs.70,012.12 lacs in foreign exchange, for the imports of materials, foreign traveling and advertisement. Auditors V. A. Parikh & Associates, Chartered Accountants, the retiring Auditors of the Company, hold office up to the conclusion of the ensuing Annual General Meeting. The Company has received a certificate from the said firm to the effect that their appointment if made at Annual General Meeting, would be within the limits mentioned under Section 224 (1-B) of the Companies Act, 1956. You are requested to appoint the Auditors and fix their remuneration. Appreciation The Directors thank the Company’s Customers, Contractors, Shareholders, Bankers, Financial Institutions and Central & State Governments for their consistent support to the Company. The Directors also sincerely acknowledge the significant contributions made by all the employees for their dedicated services to the Company. Mumbai For and on behalf of the Board Dated : June 30, 2005 Registered Office Dinesh T. Shah 114-C, Mittal Court, Chairman Nariman Point, Mumbai 400021.


Annexure to Directors Report Management Discussion and Analysis Report Industry Structure & Development Year 2004-05 was another splendid year for Indian economy. Indian economy is estimated to grow by 6.9% in FY 2004-05 (source : Economic Survey 2004-05). The overall economic conditions have improved. The country is attracting capital and investments at accelerated pace. With the resurgence of industrial sector and buoyant exports, both business optimism and consumer confidence is rising. Year 2004-05 was a commendable year for the Indian Gem & Jewellery industry. During the year Gem & Jewellery exports has touched US$ 15.68b. Cut & polished diamond exports from India was recorded at US$ 11.18b in FY 2004-05 compared to US$8.63b in FY 2003-04. The export target for the gem & jewellery sector for the FY 2005-06 has been pegged at US$ 18b and the industry is all set to achieve it. (source : www.gjepc.org) Financial Review

(Rs. in Crores) March March 31, 2005 31, 2004

Sales 1062.04 968.00 Other Income 0.96 0.61 Total Income 1063.00 968.61 Operating Profit (PBDIT) 52.26 36.17 Interest 16.49 9.18 Depreciation 1.28 0.67 Profit before Tax 34.49 26.32 Taxation 12.44 6.68 Net Profit 22.05 19.64 Earnings per share in Rs. 20.66 18.41

1. During the year, sales grew by 9.7% i.e. from Rs.968 crores to Rs. 1062.04 crores. 2. Operating profit increased by 1.2% as compared to last year. This is mainly attributable to the

reduction in processing expenses. 3. Due to increase in interest rates at global levels, interest as a percentage of sales increased by 0.6%

as compared to last year. Profit before tax increased to Rs.34.49 crores from Rs. 26.32 crores last year.

4. Tax provision increased to Rs. 12.44 crores on account of withdrawal of tax benefits.

Business Analysis & Outlook Indian economy has consistently fared well in the past years. With governments continuous thrust on infrastructure development and growth oriented policies and reforms, coupled with increasing inflows of capital and investment in the country, Indian economy is likely to maintain growth momentum across all sectors. The Gem and Jewellery industry has performed extraordinarily well over the past few years and will maintain this trend in the years to come. Your company has diversified into Diamond Jewellery manufacturing to tap the fast growing domestic market, by integrating its wide experience and strong position in the cut & polished diamond segment. Opportunities & Threats With improving global economies and the high GDP growth rates projected for the country, Indian Gem and Jewellery industry foresee decent growth opportunities in the coming years. The Company with its global presence, sound manufacturing base and extensive marketing network across the globe is positioned to benefit from the global opportunities. The company faces challenges from domestic as well as international competitors. However, with its business and marketing strategies the company is able to successfully compete in the market.


Risks, Concerns & Internal Control Systems

• The company is potentially exposed to risk in exchange rate fluctuations. Company has sound policy to hedge against volatility in exchange rates and it is closely monitored and controlled by adequately experienced and professional staff. Company’s foreign exchange exposure is adequately covered.

• Increasing price of rough diamonds can affect the profit margins. Company cannot control the increasing prices but it is constantly thriving to increase the yield through improved production efficiency and adoption of latest technologies.

• Increasing interest cost at global level is another area of concern. Your company is closely monitoring the developments in financial market and is making constant endeavors to borrow the funds at lowest possible cost.

• The company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly complying applicable statues.

• The company is holder of ISO 9001 : 2000 certification from RWTUV, since 1998 for its established quality systems of processing of diamonds. The top management & audit committee of the Board review the findings and recommendation of the internal auditors.

Human Resources, Safety, Environment & Pollution Control The Company views its relationship with its employees to be its most important asset and also focuses on development of employees’ skill at all levels and supports with all employment benefits and favourable working conditions. The Company is committed to adhere DTC’s Best Practice Principles to encourage consumer confidence. The company has also made necessary arrangement along with proper infrastructure to provide safe and pollution free work environment at its administrative offices as well as at its processing centers. Cautionary Statement Statements in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates and expectations may constitute “forward looking statements” within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.


AUDITOR’S CERTIFICATE ON CORPORATE GOVERNANCE – MARCH 31, 2005 To The Members Asian Star Company Limited We have examined the compliance of conditions of Corporate Governance by Asian Star Company Limited, for the year ended on 31st March, 2005 as stipulated in clause 49 of the Listing Agreement of the said Company with Mumbai Stock Exchange. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement, for the year ended 31st March 2005. We are given to understand that the Company has not received any investor grievances nor any complaint is pending against the Company for the year ended 31st March 2005. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For V. A. Parikh & Associates Chartered Accountants Vasant A. Parikh Place : Mumbai Partner Date : June 30, 2005 Membership No. 31573 Corporate Governance I Company’s Philosophy Your company always strives to achieve optimum performance at all levels by adhering to corporate

governance practices, such as :

• Effective Management Control by Board

• Adequate representation of promoter, executive and independent directors on the Board

• Accountability for performance

• Transparent and timely disclosure of financial and management information

• Fair and transparent business practices

• Established Quality System of processing diamonds – ISO 9001 : 2000 from RWTUV, Germany

II Board of Directors

During the year 2004-05, the Board of Directors met five times (27/04/04, 25/06/04, 26/07/04, 28/10/04, 25/01/05) with clearly defined agenda of the meetings sent in advance with suitable notes to the Directors. The details of the Directors on the Board of your company for the year 2004-2005 are :


Name Category Designation Date of

Appointment

No. of meetings attended

AGM Attendance

Dinesh T Shah Promoter Director Chairman 02.03.95 5 Yes Arvind T Shah Promoter Director Managing Director 02.03.95 5 Yes Dharmesh D Shah Promoter Director Jt. Managing Director 02.03.95 5 No Vipul P Shah Promoter Director Director 02.03.95 3 Yes Rajendra J Shah Director Non-Executive Director 18.03.95 5 No K Mohanram Pai Director Non-Executive Director 18.03.95 5 Yes Atul B Munim* Director Non-Executive Director 18.03.95 1 No Apurva R Shah Director Non-Executive Director 24.09.99 5 Yes Bhupendra K Shroff Director Non-Executive Director 30.06.00 5 Yes Hasmukh B Gandhi Director Non-Executive Director 20.10.03 5 Yes Priyanshu A Shah Director Executive Director 08.10.04 2 -

The Composition of the Board of Directors includes 3 Executive Directors and 7 Non-Executive Directors. Board has also formed the following committees in terms of Clause 49 of the Listing Agreement. None of the Directors is a member of more than ten companies or acting as Chairman of more than five companies in which he is a Director. * Resigned w.e.f. 30th June, 2005.

III Audit Committee

The Composition of the Committee and the attendance of each member of the Committee are given below :

Name Designation Category of Directorship Profession Committee Meetings

Attendance Bhupendra K Shroff Chairman Non-Executive Director Company Law Advisor 4 Apurva R Shah Member Non-Executive Director Chartered Accountant 4 Arvind T Shah Member Executive Business 4 K Mohanram Pai Member Non-Executive Director Banking Professional 4

During the year 2004-05, the Audit Committee met four times (25/06/04, 26/07/04, 28/10/04, 25/01/05) with clearly defined agenda of the meetings.

The audit committee advises the management on the areas where internal audit can be improved. The Board of Directors notes the minutes of the audit committee meeting at subsequent Board meeting. The terms of reference to the Committee as stipulated in Clause 49 of the Listing Agreement are as follows :

a) reviewing the company’s financial reporting process and the disclosure of its financial information. b) reviewing with management the Annual Financial Statements before submission to the Board,

focusing primarily on i) any changes in accounting policies and practices ii) major accounting entries based on exercise of judgement by management iii) qualifications if any, of draft audit report iv) discussing with internal auditors any significant finding and follow up on such issues v) any related party transactions i.e. transactions of the company of material nature with

promoters and their relatives vi) matters specified under clause 49 of the listing agreement

c) reviewing the adequacy of internal audit function d) discussion with external auditors before the audit commences on the nature and scope of audit as

well as to have post-audit discussion to ascertain any area of concern. e) reviewing the company’s financial and risk management policies


IV Remuneration committee(non-mandatory) The committee met on 28th October 2004 and determined the terms of remuneration of Shri Priyanshu A.

Shah who was appointed as Execuitve Director w.e.f. 01/11/2004. All the members of the committee were present at the meeting except Shri Atul B Munim.

The details of actual payments made during the financial year 2004-05 to the Executive Directors of the

Company are given below :

Name Gross Salary (Rs) Arvind T Shah 6,60,000 Dharmesh D Shah 6,60,000 Priyanshu A Shah 2,50,000

Non-Executive Directors were paid sitting fees within the limits prescribed under the law. V Shareholders Committee

The following are the members : 1) Bhupendra K Shroff 2) Arvind T Shah 3) Apurva R Shah

The committee reviews redressing of shareholders & investors complaints like non-receipt of Balance Sheet, non-receipt of declared dividend, etc. The committee also reviews the functioning & activities of Registrar & Transfer Agent & related investor grievances. The Company obtained & filed with BSE, Secretarial Audit Report required under SEBI for each quarter as to reconciliation of total shares held in depository & physical form from a Practicing Chartered Accountant.

No. of queries/complaints Received Resolved Unresolved Letters from Shareholders 6 6 Nil

Compliance Officer and Address for Correspondence

Name & Designation Telephone Number Email Id Fax No. Vishal M. Shah - Secretarial Executive 2282 1886 [email protected] 22043747

VI Corporate Governance Committee The following are the members of the Corporate Governance Committee :

1) Rajendra J Shah 2) K Mohanram Pai 3) Arvind T Shah The Company has obtained a certificate from the Auditors of the company regarding compliance of conditions of corporate governance as stipulated in clause 49 of the listing agreement of the Mumbai Stock Exchange and the same has been annexed to Director’s Report.

VII Finance Committee

The members of Finance Committee met nine times (15/04/04, 26/07/04, 14/08/04, 27/09/04, 08/10/04, 01/11/04, 26/11/04, 09/02/05 and 12/03/05). This committee sits regularly to decide on matters pertaining to banking, finance and working capital requirements. The following are the committee members : 1. Dinesh T Shah 2. Arvind T Shah 3. Vipul P Shah 4. Dharmesh D Shah


VIIIGeneral Body Meetings

i) Details on Annual General Meetings (AGM) :

Location and time, where last three AGMs were held :

Year Location Date Time 2001-02 Garware Club, Mumbai September 18, 2002 3.30 pm 2002-03 Senate Hall, Mumbai September 11, 2003 11.30 am 2003-04 Senate Hall, Mumbai September 27, 2004 12 noon

ii) Whether any special resolutions passed in the previous 3 AGMs ? No iii) Whether special resolutions were put through postal ballot last year ? No iv) Whether any special resolution is proposed to be conducted through postal ballot ? Yes v) Procedure for postal ballot ?

The company has sent postal ballot forms to the members with postage prepaid envelope. The self-addressed envelope bears the name of the scrutinizer appointed by the Board of Directors of the company.

IX Disclosures

i) All materially significant related party transactions are detailed out in note no. 3 of Schedule L (II) attached to the Balance Sheet.

ii) Details of non-compliance by the company, penalties, strictures imposed on the company by the Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years ? None.

iii) Whistle Blower Policy : The Company is in the process of formulating a mechanism for employees to report to the

management about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy.

X Means of Communication Quarterly results are taken on record by the Board of Directors and submitted to the Stock Exchange,

Mumbai in terms of the requirements of Clause 41 of the Listing Agreement. Quarterly results are published in The Financial Express and Dainik Sagar. The Company posts its financial results on SEBI website for all quarters.

XI General Shareholders Information

The Company has entered into an agreement with M/s. Big Share Services Pvt. Ltd. for processing of dematerialisation (physical form) and share transfer of equity shares.

S. no. Information

1 Annual General Meeting - Date and Time 19th September, 2005 at 4.00 p.m. - Venue S.S. Hall, Garware Club House, Wankhede Stadium, ‘D’ Road, Churchgate, Mumbai 400 020.

2. Financial Calendar (Tentative Schedule) - Financial reporting for the first quarter Second fortnight of July 2005 - Financial reporting for the second quarter Second fortnight of Oct 2005 - Financial reporting for the third quarter Second fortnight of Jan 2006 - Financial reporting for the fourth quarter Second fortnight of April 2006

3. Book Closure Date (Both days inclusive) 16/09/2005 to 19/09/2005


4. Dividend Payment Date Dividend as recommended by the Board of Directors, if declared at the meeting, will be paid within prescribed time, subject to deduction of tax if any.

5. Listing on Stock Exchange at : The Stock Exchange, Mumbai

Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 023

6. Stock Code : ASAN.BO

The Stock Exchange, Mumbai

7. Stock Market Data :

Month Price in BSE during each month

High Low April’04 999.75 950.05 May’04 950.00 949.80 June’04 1045.00 901.00 July’04 990.00 882.05 Aug’04 950.00 929.95 Sep’04 950.00 949.00 Oct’04 905.00 905.00 Nov’04 1210.00 900.00 Dec’04 1301.00 1100.00 Jan’05 1158.50 1121.00 Feb’05 1109.65 1065.00 Mar’05 1142.00 1060.00

0

1000

2000

3000

4000

5000

6000

7000

AprMay Ju

n JulAug Sep Oct Nov Dec Ja

nFeb Mar

FY 2004-05

BSE

SEN

SEX

0

200

400

600

800

1000

1200

ASC

L SH

AR

E PR

ICE

Sensex ASCL

8. Registrar & Share : Bigshare Services Pvt. Ltd. Transfer Agents E-2/3 Ansa Indl. Estate, Saki Vihar Road, Saki Naka,Andheri (East), Mumbai 400 072. Tel : 2847 3474 Fax : 2847 5207


9. Share Transfer System : The share transfer are approved by Shareholders

Committee. Share transfers are registered within a period of 15 days from the date of receipt, if the documents are complete in all respect. During the year under review, the company has followed the guidelines issued by SEBI for dematerialisation of shares sent for transfer by the investors.

10. Distribution of Shareholding as on March 31, 2005 :

Category No. of shareholders Percentage No. of shares Percentage

1-500 620 93.24 66135 0.62 501-1000 11 1.65 8157 0.08 1001-2000 4 0.60 5935 0.06 2001-3000 0 0.00 0 0.00 3001-4000 1 0.15 3700 0.03 4001-5000 1 0.15 4700 0.04 5001-10000 2 0.30 20000 0.19 Above 10001 26 3.91 10562573 98.98 Total 665 100.00 10671200 100.00

11. Categories of shareholding as on March 31, 2005 :

Category No. of Shares Percentage of Shareholding

Indian Promoters 8000000 74.97

Private Corporate Bodies 1576279 14.77

Indian Public 285221 2.67

OCBs 809700 7.59 12. Dematerialisation of Shares and Liquidity : Over 217299 equity shares i.e 2.04% of

equity shares have been dematerialized upto March 31, 2005.

13. Plant locations : 8-1269/70/71, Plot No.5, F-11/12, WICEL Rangildas Mehta’s Street, Opp. SEEPZ, MIDC (Marol) Opp. Terapanthi Bhavan, Central Road, Andheri (East),

Gopipura, Kaji Maidan, Mumbai 400 093. Surat, Gujarat –395 001.

14. Members can contact us at our registered office : Asian Star Company Limited

114-C, Mittal Court, Nariman Point, Mumbai 400 021. Tel.: 022- 2282 1886 Fax : 022- 2204 3747.


AUDITORS’ REPORT To, The Members of Asian Star Company Limited.

1. We have audited the attached Balance Sheet of Asian Star Co. Ltd. as at 31st March, 2005, Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those

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

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of

India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of said order.

4. Further to our comments in the Annexure referred to above, we state that:

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of Account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in the sub-section (3C) of Section 211 of the Companies Act, 1956.

e) On the basis of written representations received from the Directors, as on 31st March 2005 and taken on record by the Board of Directors, we report that none of the Directors of the Company is disqualified as on 31st March, 2005 from being appointed as a Director in terms of clause (g) of subsection (1) of section 274 of Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of the Company’s affairs as at 31st March, 2005 ;

ii) in the case of Profit and Loss Account, of the profit for the year ended on that date ; and

iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

For V. A. Parikh & Associates Chartered Accountants Vasant A. Parikh Place : Mumbai Partner Date: June 30, 2005 Membership No. 31573


ANNEXURE TO AUDITORS’ REPORT Re: Asian Star Company Limited Referred to in paragraph 3 of our report of even date:

1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b. As explained to us, all the assets have been physically verified by the Management at the end of the accounting year and no material discrepancies were noticed on physical verification as compared to the book records.

c. The assets disposed off during the year are not significant and therefore do not affect the going concern assumption.

2. a. The stock of finished goods and raw-materials have been physically verified by the management at

the end of the accounting year.

b. In our opinion, and according to the information and explanations given to us, the procedures of physical verifications of stocks followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c. In our opinion the Company has maintained proper records of inventory. No discrepancies were noticed on physical verification as compared to the book records.

3. a. The Company has not granted any loan (secured or unsecured) to companies, firms or other parties

covered in the register maintained under Section 301 of the Act. In view of this sub clause (b), (c) and (d) of this clause are not applicable.

e. The Company has not taken any loan (secured or unsecured) from companies, firms or other parties covered in the register maintained under Section 301 of the Act. In view of this sub clause (f) and (g) of this clause are not applicable.

4. In our opinion and according to the information and explanations given to us, the company has an

adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and also for sale of goods and services. During the course of our audit, no major weaknesses were noticed in the internal control system.

5. a. In our opinion and according to the information and explanations given to us, we are of the opinion

that the contracts or arrangements that need to be entered into the register maintained under Section 301 have been properly entered in the said register.

b. In our opinion and according to the information and explanations given to us, the transactions entered in the register maintained under Section 301 in respect of each party have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time and as per the Company’s business need and exigencies.

6. In our opinion and according to the information and explanations given to us the Company has not

accepted any deposits from the public within the meaning of the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under.

7. In our opinion coverage of internal audit carried out by a firm of Chartered Accountants is

commensurate with the size of the Company and the nature of it’s business.

8. The Central Government has not prescribed maintenance of Cost records under Section 209 (1) (d) of the Companies Act, 1956 as explained by the management.


9. a. According to the records of the Company and as per information and explanation given to us, the Company is generally regular in depositing with appropriate authorities undisputed amount of Provident Fund, Investor Education and Protection Fund, Employee’s State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other statutory dues applicable to it and there were no undisputed dues outstanding as on 31st March, 2005 for a period of more than six months from the date they become payable.

b. In our opinion and according to the information and explanation given to us, there are no dues in respect of Sales Tax, Income Tax, Custom Duty, Wealth Tax, Service Tax, Excise Duty, and Cess that have not been deposited on account of any dispute.

10. The Company neither has any accumulated losses at the end of the financial year nor it has incurred any cash loss during the financial year or immediately preceding financial year.


defaulted in repayment of dues to any Financial Institution or Bank.

12. In our opinion and according to the information and explanations given to us the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures or other securities.

13. The Company is not a chit/nidhi/mutual benefit fund/society and hence clause (xiii ) of the Order is not

applicable.

14. In our opinion, the Company has maintained proper records of transactions and contracts in respect of dealing or trading in shares, securities and other investments and timely entries have been made therein. All shares and other investments have been held by the Company in its own name.


given any guarantee for any loans taken by others from bank or financial institution.

16. According to the information and explanations given to us, the Company has not taken any term loan during the year.

17. In our opinion and according to the information and explanations given to us the short term funds raised

by the Company have not been used for long term investment.

18. The Company has not issued any preference shares during the financial year.

19. The Company has not issued any debentures during the financial year.

20. The Company has not raised any money by public issue during the year.

21. In our opinion and according to the information and explanations given to us no fraud on or by the Company has been reported during the year.

For V. A. Parikh & Associates

Chartered Accountants

Vasant A. Parikh Place : Mumbai Partner Date : June 30, 2005 Membership No. 31573


BALANCE SHEET AS AT MARCH 31, 2005

Sche March 31, 2005 March 31, 2004dule (Rs. in lacs) (Rs. in lacs)

SOURCES OF FUNDS

Shareholders Funds Share Capital A 1,067.12 1,067.12 Reserves & Surplus B 20,466.17 21,533.29 18,504.53 19,571.65

Loan Funds Secured Loans C 60,100.85 46,222.29

Deferred Tax Liability 230.89 92.10

81,865.03 65,886.04

APPLICATION OF FUNDS

Fixed Assets D Gross Block 3,268.72 2,176.26 Less : Depreciation 377.04 2,891.68 257.03 1,919.23

Investments E 1,664.47 932.57

Current Assets, Loans & Advances F Inventories 30,497.50 19,543.30 Sundry Debtors 42,579.17 39,776.51 Cash & Bank Balances 5,345.52 6,351.53 Loans & Advances 5,042.58 2,606.48

83,464.77 68,277.82

Less: Current Liabilities & Provisions G Liabilities 3,230.77 3,433.93 Provisions 2,929.38 1,821.82

6,160.15 5,255.75 Net Current Assets 77,304.62 63,022.07

Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenses 4.26 12.17 81,865.03 65,886.04 Significant Accounting Policies & Notes forming part of Accounts L

As per our report of even dateFOR V. A. PARIKH & ASSOCIATES For and on behalf of the BoardChartered Accountants

VASANT A. PARIKH ANURADHA BANERJEE DINESH T. SHAH DHARMESH D. SHAH Partner Company Secretary Chairman Joint Managing Director

Mumbai Mumbai Dated: June 30, 2005 Dated: June 30, 2005


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005


INCOME

Sales & Services H 106,204.48 96,799.63 Other Income I 95.74 106,300.22 60.84 96,860.47

EXPENDITURE

Material Cost J 92,680.01 84,521.47 Purchase of Finished Goods 1,558.67 1,694.79 Manufacturing & Other Expenses K 6,827.08 7,019.32 Interest 1,649.38 918.44 Depreciation 127.87 66.46 Preliminary Expenses Written Off 7.91 102,850.92 7.91 94,228.39

PROFIT

Profit Before Tax 3,449.30 2,632.08 Provision for Tax 1,104.97 658.70 Provision for Deferred Tax 138.79 9.20 Profit After Tax 2,205.54 1,964.18 Prior Year Adjustments (0.55) - Balance Brought forward 2,966.69 1,443.27 Balance Available for Appropriation 5,171.68 3,407.45

APPROPRIATION Proposed Dividend 213.42 213.42 Tax on Dividend 29.93 27.34 Transfer to General Reserve 200.00 200.00 Balance Carried to Balance Sheet 4,728.33 2,966.69 5,171.68 3,407.45

Earning Per Share (Basic & Diluted) 20.66 18.41 Significant Accounting Policies & Notes forming part of Accounts L

As per our report of even dateFOR V. A. PARIKH & ASSOCIATES For and on behalf of the BoardChartered Accountants

VASANT A. PARIKH ANURADHA BANERJEE DINESH T. SHAH DHARMESH D. SHAHPartner Company Secretary Chairman Joint Managing Director



SCHEDULES

'A' to 'L' Annexed to & Forming Part of The Accountsfor the year ended March 31, 2005

SCHEDULE ' A '

SHARE CAPITAL March 31, 2005 March 31, 2004 (Rs. in lacs) (Rs. in lacs)

Authorised 1,50,00,000 shares of Rs.10 each 1,500.00 1,500.00

Issued, Subscribed & Paid-up 1,06,71,200 equity shares of Rs. 10 each 1,067.12 1,067.12 (1,06,71,200)

1,067.12 1,067.12

SCHEDULE ' B '

RESERVES & SURPLUS

Capital Reserves

As per Last Balance Sheet 0.16 0.16

Share Premium

As per Last Balance Sheet 1,736.28 1,736.28

General Reserve

As per Last Balance Sheet 13,801.40 13,601.40 Transfer from Profit & Loss Account 200.00 200.00 14,001.40 13,801.40 Surplus as per Profit & Loss Account 4,728.33 2,966.69

20,466.17 18,504.53


SCHEDULE ' C '

March 31, 2005 March 31, 2004SECURED LOANS (Rs. in lacs) (Rs. in lacs)

Working Capital Loan from Banks 60,100.85 46,222.29 Secured bya. Hypothecation of Stock in Trade & Book Debtsb. Hypothecation of Premises at Mumbai & Suratc. Guaranteed by some of the Directors in their personal capacity Repayable within one year

60,100.85 46,222.29

SCHEDULE ' D '

FIXED ASSETS (Rs. in lacs)

GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK

Description of Assets As at Additions Deductions As at As at For the Deductions As at As at As at April 1, March 31, April 1, Year March 31, March 31, March 31,

2004 2005 2004 2005 2005 2004

Goodwill 50.00 - - 50.00 - - - - 50.00 50.00

Office Premises 630.97 50.81 - 681.78 49.52 10.55 - 60.07 621.71 581.45

Factory Building 498.10 110.60 - 608.70 2.25 18.78 - 21.03 587.67 495.85

Plant & Machinery 655.86 823.22 1.35 1,477.73 120.88 65.68 - 186.56 1,291.17 534.98

Vehicles 172.38 62.24 17.75 216.87 40.94 19.85 7.86 52.93 163.94 131.43

Furniture & Fixtures 168.95 64.69 - 233.64 43.44 13.01 - 56.45 177.19 125.51

CURRENT YEAR 2,176.26 1,111.56 19.10 3,268.72 257.03 127.87 7.86 377.04 2,891.68 1,919.23

PREVIOUS YEAR 1,304.05 905.29 33.08 2,176.26 199.24 66.46 8.68 257.03 1,919.23 1,104.82


SCHEDULE ' E '

INVESTMENT March 31, 2005 March 31, 2004(Rs. in lacs) Rs. in lacs)

In Shares Long Term Investments: Unquoted: Wholly owned subsidiary- Asian Star Co. Ltd. , USA 178.75 178.75 5(5) Shares of US$ 100000 each.

Wholly owned subsidiary - Intergem Inc., USA 46.94 46.94 1000(1000) Shares of US$ 100 each.

Star Holdings Ltd. 11.31 11.31 250 (250) Shares of US$ 100 each

Carbon Accessories Ltd. 200.00 - 20,00,000 (Nil) Shares of Rs. 10 each

437.00 237.00 Current Investments: Quoted: Bharati Tele Ventures Ltd. 21.93 - 10,000 (Nil) Shares of Rs. 10 each

Divi's Laboratories Ltd. 172.50 - 14,519 (Nil) Shares of Rs.10 each

GlaxoSmithkline Pharmaceuticals Ltd. 36.43 - 5,000 (Nil) Shares of Rs. 10 each

Petron Engineering Construction Ltd. 13.22 - 10,000 (Nil) Shares of Rs. 10 each

Punjab National Bank 116.04 - 29,715 (Nil) Shares of Rs. 10 each

Reliance Energy Limited 279.62 - 50,000 (Nil) Shares of Rs. 10 each

Tata Steel 498.28 - 1,20,000 (Nil) Shares of Rs. 10 each

Biocon Ltd. - 1.73 Nil (550) Shares of Rs.5 each

CMC Ltd. - 21.72 Nil (4,478) Shares of Rs.10 each

Dredging Corporation of India Ltd. - 5.01 Nil (1,252) Shares of Rs.10 each

IBP Co. Ltd. - 62.00 Nil (10,000) Shares of Rs.10 each

Indian Petrochemicals Corporation Ltd. - 59.50 Nil (35,000) Shares of Rs.10 each


SCHEDULE ' E '

Petronet LNG Ltd. - 20.27 Nil (1,35,100) Shares of Rs.10 each

Power Trading Corporation of India Ltd. - 0.69 Nil (4,300) Shares of Rs.10 each

Market Value (Current Year Rs. 1,076.78 lacs) (Previous Year Rs. 173.39 lacs)

1,138.02 170.92

LESS : Provision for diminution in value of investments (61.24) -

1,076.78 170.92 In Partnership Firm Jewel Art 150.69 524.65

1,664.47 932.57


SCHEDULE ' F '

CURRENT ASSETS, LOANS & March 31, 2005 March 31, 2004ADVANCES (Rs. in lacs) (Rs. in lacs)

CURRENT ASSETS

Inventories (As verified, valued & certified by a Director) Raw Materials 22,581.45 16,030.00 Work in Process 188.22 - Finished Goods 7,715.91 3,513.30 Consumables 11.92 -

30,497.50 19,543.30 Sundry Debtors (Unsecured) For a period more than six months Considered good 1,812.49 788.14 Considered doubtful - 117.58

1,812.49 905.72 Others Considered good 40,766.68 38,988.37 Considered doubtful - -

40,766.68 38,988.37

Less: Provision for doubtful debts - 117.58 42,579.17 39,776.51

Cash & Bank Balances Cash on Hand 5.04 5.21

Balances with Scheduled Bank In Current Accounts 571.32 1,382.24 In Fixed Deposits 4,769.15 4,964.08

5,345.52 6,351.53 LOANS & ADVANCES (Unsecured, Considered good)

Advance Income Taxes 2,737.60 1,661.74 Other Advances 2,100.52 738.94 Staff Loans 4.46 4.03

4,842.58 2,404.71 Deposits with Others

For Office Premises 169.06 179.05 With Others 30.94 22.72 200.00 201.77

5,042.58 2,606.48

83,464.77 68,277.82


SCHEDULE ' G '

March 31, 2005 March 31, 2004CURRENT LIABILITIES (Rs. in lacs) (Rs. in lacs)

Current Liabilities

Creditors for Goods 2,349.53 2,694.46 Creditors for Processing 773.27 691.44 Creditors for Others 107.94 48.00

3,230.74 3,433.90 Temporary Overdraft 0.01 - Unclaimed Dividend 0.02 0.03

3,230.77 3,433.93 Provision

Proposed Dividend 213.42 213.42 Tax on Dividend 29.93 27.34 Taxation 2,686.03 1,581.06

2,929.38 1,821.82

6,160.15 5,255.75

PRELIMINARY EXPENSES

At the beginning 12.17 20.08 Written off during the year 7.91 7.91

4.26 12.17


SCHEDULE ' H '

March 31, 2005 March 31, 2004SALES & SERVICES (Rs.in lacs) (Rs.in lacs)

Sales - Diamonds 104,986.34 96,799.63 Sales - Jewellery 1,201.41 - Sales of Silver Model 4.36 - Sales of Platinum Mounting 2.82 - Jewellery Making Charges 9.55 -

106,204.48 96,799.63

SCHEDULE ' I '

March 31, 2005 March 31, 2004OTHER INCOME (Rs.in lacs) (Rs.in lacs)

Dividend Received 11.28 4.35 Profit on Sale of Shares / Derivatives 19.42 - Share of Profit from Partnership Firm 65.04 56.49

95.74 60.84

SCHEDULE ' J '

MATERIALS COST

Stock at the Commencement 16,030.00 11,876.00 Purchases during the year 103,622.29 85,684.77

119,652.29 97,560.77

Less : Stock at the Close (22,581.45) (16,030.00)

Variation in Stock of Work in Process Stock at the Commencement - - Less: Stock at the Close 188.22 - (188.22) -

Variation in Stock of Finished Goods Stock at the Commencement 3,513.30 6,504.00 Less: Stock at the Close 7,715.91 3,513.30 (4,202.61) 2,990.70

92,680.01 84,521.47


SCHEDULE 'K'

March 31, 2005 March 31, 2004MANUFACTURING & (Rs.in lacs) (Rs.in lacs)OTHER EXPENSES

Manufacturing Expenses

Processing Expenses 4,516.26 5,167.27 Wages 32.90 - Contribution to E.S.I.C. 1.22 - Contribution to Provident Fund 1.78 - Electrical Charges 20.53 - Factory expenses 13.99 4.27 Consumables 376.67 207.16

4,963.35 5,378.70

Employee's Emoluments

Director's Remuneration 15.70 15.60 Salary & Bonus 465.24 319.84 Ex-Gratia, Leave Encashment 20.57 - Gratuity 4.16 6.18 Contribution to Provident Fund 34.81 23.94 Group Insurance 4.83 2.96 Contribution to E.S.I.C. 5.70 2.87 M.L.W.F. Charges 0.25 0.09 Staff Welfare Expenses 20.18 571.44 16.07 387.55

Administrative Expenses

Bank Commission & Charges 124.30 156.00 Electrical Charges 33.67 31.11 Telephone & Fax Charges 44.80 34.59 Local Travelling & Conveyance 10.92 4.41 Legal & Professional fees 23.13 20.41 Printing & Stationery 15.20 7.41 Repairs & Maintenance 60.53 16.29 Postage & Courier 8.31 4.83 Motor Car Expenses 17.38 12.64 Insurance Premium 112.41 110.94 Rent & Compensation 27.77 12.62 Document Stamp Charges 11.95 34.29 Donation 110.57 115.07 Audit Fees 1.98 1.08 Office Canteen Expenses 15.52 11.08 Office Expenses 9.04 6.46 Director's Sitting Fees 0.83 0.60 Municipal Tax 0.92 0.71 Profession Tax 0.06 0.03 Provision for doubtful debt - 117.58 Provision for diminution in 61.24 - value of investment Sundry Expenses 3.09 1.05 Security Service Expenses 11.48 1.42 Loss on Sale of Assets 4.94 15.63 Property Tax 3.78 - Sales Tax 0.03 - Wealth Tax 0.89 0.64 Membership & Subscription 1.58 716.32 7.62 724.51


SCHEDULE 'K'

Selling & Distribution Expenses

Advertisement 20.32 38.12 Sales Expenses 48.80 4.50 Entertainment Expenses 4.07 4.16 Foreign Travelling 119.41 107.45 Commission on Export 67.45 74.06 Re-Assortment Charges 10.14 12.83 Freight & Clearing Charges 65.48 65.54 Agency Charges 1.81 1.85 E.C.G.C. Premium 231.60 213.16 Packing Expenses 6.89 575.97 6.89 528.56

6,827.08 7,019.32


SCHEDULE ‘ L ’ Notes annexed to and forming part of the Balance Sheet as at 31st March, 2005 and Profit & Loss Account for the year ended on that date. I-SIGNIFICANT ACCOUNTING POLICIES A. General

The financial statements have been prepared using mercantile system of accounting under the historical cost convention. It recognises significant items of income and expenditure on accrual basis.

B. Sales

Income from the sale of diamonds / studded jewellery is recognised when the sale has been completed with the passing of the title.

C. Other Income Interest

Interest income is recognised on accrual basis. Insurance claim

Insurance claim on loss by theft of diamonds is recognised on the basis of acceptance of claim by the Insurance Company.

Income from Investments Income from investment is accounted in the year in which the unconditional right to

receive such income is established. D. Depreciation

Depreciation on fixed assets has been provided at the rates and in the manner prescribed in schedule XIV to the Companies Act, 1956 on straight line basis.

E. Foreign Currency Transactions

E.1 Transactions denominated in foreign currencies are normally recorded at the Exchange rate prevailing at the time of the transaction.

E.2 Monetary items denominated in foreign currencies at the year-end are translated at year-

end rate.

E.3 In case of forward contracts, the difference between the year end rate and rate on the date of contract is recognised as exchange difference. The proportionate difference between the forward rate and the exchange rate on the date of transaction is recognised over the life of the contract.

E.4 Non monetary foreign currency items are carried at cost.

E.5 Any income or expense on account of exchange difference either on settlement or on

translation is adjusted to the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

F. Fixed Assets

Cost of Fixed Assets comprises of purchase price, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use. Fixed Assets are stated at cost less accumulated depreciation.

G. Borrowing Costs

All borrowing costs, which are of revenue nature, are charged to Profit and Loss Account. H. Investment

Investment is valued at cost. Provision for diminution in value is made only if such diminution is otherwise than temporary in the opinion of the management. Current Investments are valued at cost


or market value, whichever is lower. Investment in Partnership firm is accounted after including share of profit thereon as per last available audited information.

I. Inventories

I.1 Raw Materials:

Stock of rough diamonds is stated at weighted average cost or net realizable value whichever is lower. Stock of gold is valued at cost on FIFO basis or net realizable value whichever is lower.. Stock of polished diamonds (for jewellery operations) is valued at technically evaluated cost or net realizable value whichever is lower. Specific items of cost are allocated and assigned to inventory wherever practicable.

I.2 Work in Process is valued at technically evaluated cost. Finished goods are valued at

technically evaluated cost or estimated net realizable value, whichever is lower. Cost includes cost of material and related conversion cost. In view of the nature of variation in the values of individual diamonds and the differential in their processing costs, it is not practicable to compute the cost of polished diamonds using either FIFO or weighted average cost. In view of the numerous grades, it is not practicable to use specific costs. The method of valuation is therefore in compliance with “AS2”issued by the Institute of Chartered Accountants of India to the extent practicable.

I.3 Consumables are valued at cost.

J. Retirement Benefits J.1 Provident Fund

The contribution to provident fund is made at a pre-determined rate to the provident fund and charged to the profit and loss account on an accrual basis.

J.2 Gratuity

Contribution towards gratuity is made to Gratuity Trust created under the group gratuity scheme entered with Life Insurance Corporation of India (LIC). The contribution is as per the actuarial valuation by LIC.

K. Taxation Current Tax is determined as the amount of tax payable in respect of taxable income for the year after considering various reliefs admissible under provisions of the Income Tax Act, 1961. The deferred tax for timing difference between the book and tax profit for the year is accounted for using tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax asset arising from timing difference are recognised to the extent that there is virtual certainty that sufficient future taxable income will be available.

L. Amortization

Preliminary expenses and expenses incurred on issue of shares are amortized over a period of ten years from year in which it became payable.

M. Contingent Liability

All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable that the future outcome may be materially detrimental to the Company.


II-NOTES FORMING PART OF THE ACCOUNTS

1. Surplus on account of exchange difference on outstanding forward exchange contracts to be recognised in profit and loss account of subsequent accounting period aggregate to Rs 138.78 lacs.(For F.Y. 2003-04 it was Rs. 8.70 lacs).

2. There is no amount due to registered small scale industrial undertaking according to the information

available with the Company. 3. Related Party Disclosure

Name Relationship Nature of Transaction Volume

(Rs in lacs)

Amount Out

standing as on

31.03.2005 (Rs in lacs)

Asian Star Co. Ltd. (USA) Wholly Owned Subsidiary

Export of Polished Diamonds Import of Diamonds Dividend Received

8,640.78

230.30 4.38

3,755.49

169.83 3.72

Intergems Inc. Wholly Owned Subsidiary

Export of Polished Diamonds

2,555.23

1,322.47

Carbon Accessories Ltd. Asian Star has Substantial interest in the Capital of Company and some of the Directors are Common.

• Sale of Jewellery 395.59 271.98

Vipul Trading Co. Some of the Directors are Partners.

• Purchase of Diamonds

200.02

Nil

Shah Enterprise Some of the Directors are Partners

• Contract for Processing diamonds

• Purchase of Assets • Rent

115.02

9.30 1.13

Nil

Nil 1.13

Shah Manufacturers One of the Director is Partner

• Contract for Processing diamonds

398.60 39.83

Rahil Agencies

Some of the Directors are Partner

• Premises taken on lease

- Lease Deposit - Rent

50.00 0.36

50.00 Nil

Jewel Art Company and some of the directors are partners

• Capital Withdrawn • Profit earned • Deemed export

of Polished Diamonds

• Purchase of gold, diamonds, studded jewellery, assets,

439.00

65.04

2,572.62

655.66

150.69

861.30

2.73


consumables & staff loan.

Arvind T. Shah

Director • Directors Remuneration



6.60

30.00 0.96

Nil

30.00 Nil

Dinesh T. Shah

Director • Premises taken on lease


30.00 0.96

30.00 Nil

Dharmesh D. Shah

Director • Directors Remuneration



6.60

20.00 0.72

Nil

20.00 Nil

Vipul P. Shah

Director • Premises taken on lease


30.00 0.96

30.00 Nil

Priyanshu A. Shah Director • Directors Remuneration

2.50

Nil

4 Particulars of Investment in Partnership Firm :

Name of the Firm : Jewel Art Total Capital of the Firm : Rs 1,394.65 lacs Name of the Partner Share of Balance as Profit on 31.3.05 ( Rs. in lacs ) 1. Dinesh T. Shah 15 % 374.57 2. Arvind T. Shah 15 % 276.57 3. Dharmesh D. Shah 15 % 346.57 4. Vipul P. Shah 30 % 401.91 5. Asian Star Co. Ltd. 10 % 150.69 6. Priyanshu A Shah 15 % 44.34

5 Deferred Tax Liability

• Pursuant to Accounting Standard on Accounting for Taxes on income, Deferred Tax Liability of Rs 138.79 lacs arising on account of temporary differences for the current year has been adjusted in the Profit and Loss Account.


• Break up of Deferred Tax Liability as on 31st March, 2005 is as given below; Deferred Tax Liability Rs in lacs Rs in lacs Deferred Tax Liability as on 1.4.2004 134.28 Add: Provision for Deferred Tax made during the year arising on account of timing difference in Depreciation 118.15 252.43

======= Less: Deferred Tax Asset as on 1.4.2004 42.18 Less: Bad debts (42.18)

Add: Diminution in value of investment 20.62 Add: Disallowance under Income Tax Act 0.92 21.54 (to be allowed in next year) ======== ========

Deferred Tax Liability as on 31.3.2005 230.89 ========

6. Contingent Liability

All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable that the future outcome may be materially detrimental to the Group. Asian Star Co. Ltd. has paid Rs 182 lacs to Income Tax Department against the demands raised by them on completion of tax assessment (out of this, demand for Rs.77 lacs became due after 31.3.05 and was paid subsequently). The company is of the opinion that the disallowances made by Income Tax Department are not tenable and has filed appeals against these demands. The same shall be charged to Profit & Loss account, if required, on disposal of appeals.

7 Segment reporting

Primary Segment Company has only one primary reportable segment viz. Diamonds. Secondary Segment Details as per Geographic Region REGION

Region wise Sales

Rs in lacs

Direct Segment Assets

(Debtors) Rs.in lacs

1. Exports

ASIA

62,178.06 24,860.06

USA

24,539.21 11,203.36

EUROPE

12,251.00 4,485.38

SOUTH AFRICA

10.98 Nil


EXCHANGE GAIN / (LOSS) ON ABOVE

1,891.35 1.39

2. Local

5,317.15 2,028.98

TOTAL

1,06,187.75 42,579.17

Segment Reporting and Related Information requires that an enterprise report a measure of total assets for each reportable segment. The fixed assets and inventories used in the company’s business are not identifiable to any particular reportable segment and can be used interchangeably among geographical segments. Consequently, management believes that it is not practical to provide segment disclosures relating to total assets since a realistic analysis among the various geographic segments is not possible. Therefore, information has been restricted to direct debtors of each geographical segment.

8 Earning Per Share :-

2004-2005 2003-2004 2,205.54 1,964.17

1,06,71,200 1,06,71,200 10 10

Profit After Tax (Rs. in lacs) Number Of Equity Shares Nominal Value Per Equity Share (Rs.) Earning Per Share(Basic) (Rs.) 20.66 18.41

9 Licenced and installed capacity : - N.A.

A. Information in respect of goods manufactured :

POLISHED DIAMONDS UNITS 2004-2004 2003-2004 Licenced Capacity Carats N.A. N.A. Installed Capacity Carats N.A. N.A. *Production Carats 7,02,225.92 7,13,269.52 (*Including Manufactured by others on job work basis)

STUDDED JEWELLERY UNITS 2004-2005 2003-2004 Licenced Capacity Pcs. 60,000 N.A. Installed Capacity Pcs. 60,000 N.A. *Production Pcs. 17,761 N.A. (*Including Manufactured by others on job work basis)

B. Particulars of Purchase, Sales, Manufacture and Stock of finished goods. POLISHED DIAMONDS 2004-2005 2003-2004 Quantity in

carats Rupees in

lacs Quantity in

carats Rupees in lacs

Opening Stock 58,390.00 3,513.30 51,667.00 6,504.00 Purchase 6,912.36 1,096.09 10,968.51 1,694.79 Manufactured* 7,02,225.92 1,00,796.40 7,13,269.52 86,905.19 Sales 7,11,986.15 1,04,512.91 7,17,512.14 96,683.29 Closing Stock 55,540.00 7,283.09 58,390.00 3,513.30 *Net of Weight Loss 134.10 ----- 136.04 -----


STUDDED JEWELLERY

2004-2005 2003-2004

Quantity in Pcs.

Rupees in lacs

Quantity in Pcs.

Rupees in lacs

Opening Stock Nil Nil Nil Nil Purchase 3,310.00 462.59 Nil Nil Manufactured 17,761.00 1,171.64 Nil Nil Sales 18,263.00 1,201.41 Nil Nil Closing Stock 2808.00 432.82 Nil Nil C. Analysis of Material Consumed ROUGH DIAMONDS 2004-2005 2003-2004 Quantity in

carats Rupees in

lacs Quantity in

carats Rupees in

lacs Consumption 15,07,234.37 95,936.92 17,50,450.72 81,530.76 Sales 34,148.70 473.43 1,180.60 116.34 RAW GOLD 2004-2005 2003-2004 Quantity in

Gms. Rupees in

lacs Quantity in

Gms. Rupees in

lacs Consumption 60,442.55 374.09 Nil Nil Sales Nil Nil Nil Nil POLISHED DIAMONDS (for Jewellery Manufacturing)

2004-2005 2003-2004

Quantity in Cts.

Rupees in lacs

Quantity in Cts.

Rupees in lacs

Consumption 5,099.02 717.62 Nil Nil Sales Nil Nil Nil Nil

2004-2005 (Rs in lacs)

2003-2004 (Rs in lacs)

10. Value of imported and indigenous consumption Imported Raw material Indigenous Raw material

65,761.94 67.75%

31,309.35

32.25%

60,283.50 73.94%

21,247.26

26.06% TOTAL 97,071.29 81,530.76 11. Interest Charged to profit & loss account is net of

Interest received 268.13 317.97

Tax Deducted at source 52.33 63.39 12. Expenses (Income) in respect of previous years debited / Credited during the year.

Nil Nil

13. Value of Import on CIF Basis Raw Materials (Rough Diamonds)

69,965.13

63,392.21

14. Expenditure in Foreign Currency Foreign Traveling 35.06 38.89 Advertisement 11.93 Nil 15. Earning in Foreign exchanges a. FOB value of Diamonds exported 1,03,375.43 94,990.78

abc

Refer Grouping HI of ASCL Balance Sheet (incl A’ Star)


b. FOB value of Jewellery exported 2.32 Nil c. Dividend Received 4.38 4.34 16. Breakup of remuneration paid to Managing/Wholetime

Directors

a. Salary 15.70 15.60 b. Contribution to Provident & other Fund 0.23 0.18 The Company has been advised that the computation of net profit pursuant to section 349 of the Companies Act, 1956 need not be enumerated since no commission has been paid to directors.

17. Auditors Remuneration

Audit Fees 1.68 0.92 Tax Audit 0.31 0.16 18. Estimated amount of contracts remaining to be executed on capital account not provided for (Net of advances)

Nil Nil

19. The figures of Previous year have been regrouped / reclassified wherever necessary and possible so

as to confirm with the figures of the current year. 20. Additional Information as required under Part IV of Schedule VI to the Companies Act, 1956.

Balance Sheet Abstract and Company's General Business Profiles.

Registration No.

State Code

1 Registration Details 86017 11 Balance Sheet Date 31 03 2005 2

Capital raised during the year (Amount in Rs.'000)

Public Issue Right Issue Nil Nil

Bonus Issue Private Placement

Nil Nil 3

Position of Mobilization and Deployment of Funds (Amount in Rs.'000)

Total Liabilities

Total Assets

81,86,504 81,86,504

Sources of Funds

Paid up Capital

Reserves & Surplus

1,06,712 20,46,618

Secured Loans

Unsecured Loans

60,10,085 Nil Deferred Tax

Liability

23,089

Application of Funds

Net Fixed Assets

Investments

2,89,169 1,66,446


Net Current Assets

Miscellaneous Expenditure

77,30,462 427

Accumulated Losses

Nil 4

Performance of Company (Amount in Rs.'000)

Turnover

Total Expenditure

1,06,30,022 1,02,85,089

Profit Before Tax

Profit After Tax

3,44,933 2,20,556

Earning Per Share

Dividend Rate %

Rs. 20.66 20 5

Generic names of principal products, Services of the Company

Item Code No.

Product Description

710239.01 Cut & Polished Diamonds

As per our report of even date attached For V.A. PARIKH & ASSOCIATES For and on behalf of the Board Chartered Accountants VASANT A. PARIKH ANURADHA BANERJEE DINESH T. SHAH DHARMESH D. SHAH Partner Company Secretary Chairman Joint Managing Director



CASH FLOW STATEMENT FOR THE YEAR ENDED ON 31ST MARCH, 2005March 31, 2005 March 31, 2004

( Rs. in lacs) ( Rs. in lacs)A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax & extraordinary items 3,449.33 2,632.08 Adjustment for - Depreciation 127.87 66.46 - Interest 1,649.38 918.44 - Unrealised Foreign Exchange (Gain) / Loss (249.53) (804.55) - Dividend Received (11.29) (4.35) - Profit From Partnership firm (65.04) (56.49) - Gratuity 4.16 6.18 - Preliminary Expenses 7.91 7.91 - (Profit)/Loss on fixed assets 4.94 15.63 - Profit on sale of investments (19.42) - - Diminution in value of Investment written off 61.24 - Operating profit before working capital changes 4,959.55 2,781.31 Adjustment for- Receivables (2,801.26) (5,342.02) - Inventories (10,954.21) (1,163.30) - Loans & Advances (2,436.10) (1,291.21) - Current Liabilities 898.06 3,937.14 Cash generated from / (used in) operations (10,333.96) (1,078.08) - Taxation (1,104.97) (658.70) - Gratuity (4.16) (6.18) - Prior year Adjustments (0.55) - Cash flow before extraordinary items (11,443.64) (1,742.96) - Extraordinary items - - Net cash from / (used in) operating activities (11,443.64) (1,742.96)

B. CASH FLOW FROM INVESTING ACTIVITIES- Purchase of fixed assets (1,111.55) (904.78) - Sale of fixed assets 6.30 8.25 - Purchase of Investments (1,338.02) (550.22) - Dividend Received 11.29 4.35 - Sale of Investments 629.32 - Net Cash from / (used in) investing activities (1,802.66) (1,442.40)


C. CASH FLOW FROM FINANCING ACTIVITIES - Secured Loans 14,133.13 4,683.19 - Interest (1,649.38) (918.44) - Proposed Dividend (213.42) (213.42) - Tax on Dividend (29.93) (27.34) Net cash from / (used in) financing activities 12,240.40 3,523.99 Net increase / (decrease) in cash & cash equivalents (1,005.90) 338.63 Unrealised Foreign Exchange Gain /( Loss) (0.11) 6.88 Cash & cash equivalants as at 1st April (Opening) 6,351.53 6,006.02 Cash & cash equivalants as at 31st March (Closing) 5,345.52 6,351.53

For and on behalf of the Board.

Anuradha Banerjee Dinesh T. Shah Dharmesh D. ShahMumbai Company Secretary Chairman Joint Managing DirectorDated: June 30, 2005

AUDITORS' REPORT

We have verified the attached Cash Flow Statement of Asian Star Company Limited, derived from audited financial statements and the books and records maintaIned by the company for the year ended March 31, 2005 and March 31,2004 and found the same in agreement therewith.

FOR V.A. PARIKH & ASSOCIATESChartered Accountants

VASANT A. PARIKHMumbai PartnerDated: June 30, 2005


Statement pursuant to Section 212 of the Companies Act, 1956 relating to Company’s interest in the Subsidiary

A. Name of the Subsidiary Company Asian Star Company Limited (New York)

Intergem, Inc. (Los Angeles)

B. Date from which it became Subsidiary September 27,1996 June 25, 2001 C. Number of Shares held by Asian Star Company Limited

with its nominee in the subsidiary as at 31/3/2005 5 Equity Shares of US $100,000 fully paid

1000 Equity Shares of US $ 100 fully paid

D. Extent of interest of Holding Company 100% 100% in the Subsidiary as at 31/03/2005 E. Net aggregate amount of profits of the Subsidiary Company as far as it concerns the members of the company

a. Dealt with in the company’s account

i. for the financial year of the subsidiary Nil Nil

ii. for the previous year of the subsidiary US $ 55,000 Nil since it become the subsidiary of the company (Rs. 24.06 lacs)

b. Not dealt with in the company’s account

i. for the financial year of the subsidiary US $ 35,643 US $ 19,076

(Rs. 15.59 lacs) (Rs. 8.35 lacs)

ii. for the previous years of the subsidiary US $ 184,377 US $ 37,418 since it became the subsidiary of the company (Rs. 80.66 lacs) (Rs. 16.37 lacs) Note : Converted at the rate of exchange US$ 1= Rs. 43.75 prevailing on 31/03/2005

For and on behalf of the Board DINESH T. SHAH DHARMESH D. SHAH ANURADHA BANERJEE Chairman Joint Managing Director Company Secretary Mumbai Dated: June 30, 2005


ASIAN STAR COMPANY LIMITED (New York) (A Subsidiary Company) Independent Auditors’ Report The Board of Directors ASIAN STAR COMPANY LIMITED 551 Fifth Avenue, Suite # 3502 New York, N.Y. 10176-0001 Gentlemen, We have examined the Balance Sheet of Asian Star Company Limited, New York, as of March 31, 2005 and Related Statement of Income, Retained Earning, Supporting Schedules and Cash Flow for the year then ended. Our examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures, as we considered necessary in the circumstances. In our opinion, the financial statements indicated above present fairly the financial position of Asian Star Company Limited, New York, as at March 31, 2005 and the results of operations for the year then ended, in conformity with generally accepted accounting principles. May 19, 2005 Ervin Friedman, CPA New York


ASIAN STAR COMPANY LIMITED (NEW YORK)BALANCE SHEET AS AT MARCH 31, 2005

(Amount in US$)ASSETS March 31,2005 March 31,2004

Current Assets Cash Assets 670,716 73,041 Accounts Receivable 6,948,134 6,312,424 Inventory 3,208,985 2,838,970 Loan Receivable 184,476 11,012,311 179,731 9,404,166 Property and Equipments Furniture & Fixtures 82,413 82,413 Less : Accumulated Depreciation 62,293 20,120 55,454 26,959 Other Assets Security Deposits 18,814 29,985 TOTAL ASSETS 11,051,245 9,461,110

LIABILITIES

Current Liabilities Accounts Payable 10,274,652 8,734,849 Accrued Expenses & Taxes Payable 46,573 15,683 Advances Payable - 6,200 Cash Dividend Payable 10,000 10,331,225 10,000 8,766,732

Stockholders' Equity Capital Stock 500,000 500,000 Retained Earnings 220,020 194,378 Total Stockholders' Equity 720,020 694,378 Total Liabilities & Stockholders' Equity 11,051,245 9,461,110

STATEMENT OF INCOME FOR THE YEAR ENDED MARCH 31, 2005

Sales - Operating Revenue - Schedule A 24,242,211 20,439,331 Cost of Sales - Schedule B 23,822,986 20,071,996 Gross Operating Profit 419,225 367,335

General & Administrative Expenses - Schedule C 392,549 325,744 Operating Profit 26,676 41,591 Other Income - Schedule D 27,258 - Income Before Taxes Based on Income 53,934 41,591 Federal Corporate Income Tax 6,290 5,198 New York State Corporate Tax 5,584 3,303 New York City Corporate Tax 6,417 3,637 Total Corporate Tax 18,291 12,138 Net Income 35,643 29,453


STATEMENT OF RETAINED EARNING FOR THE YEAR ENDED MARCH 31, 2005

Opening Balance 194,377 174,925 Add : Net Income for the year 35,643 29,453 Total 230,020 204,378 Less : Cash Dividend payable 10,000 10,000 Balance carried forward to Balance Sheet 220,020 194,378

SUPPORTING SCHEDULES FOR THE YEAR ENDED MARCH 31, 2005

Schedules 'A'Operating Revenues Sales 24,242,211 20,439,331 Total Operating Revenues 24,242,211 20,439,331

Schedules 'B'Cost of Sales Inventory at the beginning 2,838,970 2,058,470 Purchases 24,130,711 20,804,800 Freight, Duty & Customs 62,290 47,696 Cost of Goods available for sale 27,031,971 22,910,966 Less : Inventory at the end 3,208,985 2,838,970 Total Cost of Sales 23,822,986 20,071,996

Schedules 'C'General & Administrative Expenses Salaries - Officers 63,200 43,200 Salaries - Others 22,579 59,112 Advertising 33,477 2,750 Alarm 3,948 2,867 Bad Debts 2,187 10,385 Depreciation 6,839 8,656 Contributions 2,400 - Dues & Subscriptions 5,852 1,427 Insurance 71,033 64,771 Interest, Discount & Bank Charges 16,580 19,364 Professional Fees 20,260 16,605 Rent 86,102 50,767 Repairs 8,047 2,795 Stationery & Printing 9,364 6,324 Travel 14,580 8,611 Payroll Taxes 6,817 13,130 Telephone 12,912 12,350 Packing Supplies 3,202 - Outside Services 3,170 2,630 Total General & Administrative Expenses 392,549 325,744


Schedules 'D'Other Income Interest Income 27,258 - Total Other Income 27,258 -

Notes to Financial Statements for the year ended March 31, 2005

1. Significant Accounting Policies Revenue Recognition Sales of Goods are recorded based on Shipment of Goods.

Inventories Inventories are priced at the lower of Cost or Market

Property and Depreciation The Cost of Property, Furniture, Fixtures and Improvements are recorded at cost and generally the straight line method of computing depreciation has been applied for both income tax and financial reporting purposes.

2. Purchases include merchandise received from ASIAN STAR COMPANY LIMITED, Mumbai, India in the in the amount of US$ 1,92,32,958

3. Accounts payable includes the amount of US$ 85,83,983 owed to ASIAN STAR COMPANY LIMITED, Mumbai, India for merchandise received.


INTERGEM INC. (Los Angeles) (A Subsidiary Company) The Board of Directors INTERGEM, INC. 550 South Hill Street #1256 Los Angeles, California 90013-2289 We have examined the accompanying Balance Sheet, Income Statements, Retained Earnings and all related schedules and notes of Intergem, Inc. of Los Angeles, California, U.S.A for the year ended March 31, 2005 in accordance with standards established by the American Institute of Certified Public Accountants. Our examination was made in accordance with Generally Accepted Auditing Standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the Financial Statements indicated above present fairly the financial position of Intergem, Inc. of Los Angeles, California, U.S.A as of March 31, 2005 and the results of its operations for the year then ended in conformity with Generally Accepted Accounting Principles. June 23, 2005 Jimmy Colabavala

Los Angeles


INTERGEM INC. (LOS ANGELES)BALANCE SHEET AS AT MARCH 31, 2005

(Amount in US$)ASSETS March 31,2005 March 31,2004

Current Assets Cash Assets 72,642 67,351 Accounts Receivable 5,741,106 5,658,666 Inventory 3,136,539 4,124,543 Prepaid Expenses - 8,950,287 28,261 9,878,821 Property & Equipments Leasehold Improvements 5,262 - Less : Accumulated Depreciation (351) 4,911 - -

Equipment 9,741 9,741 Less : Accumulated Depreciation (8,209) 1,532 (7,188) 2,553

Furniture & Fixtures 15,629 - Less : Accumulated Depreciation (3,828) 11,801 - -

Other Assets Utility Deposits 4,902 3,402 Other Assets 3,004 7,906 3,004 6,406

TOTAL ASSETS 8,976,437 9,887,780

LIABILITIES

Current Liabilities Accounts Payable 3,785,207 6,646,374 Trade Accounts 4,974,000 3,049,000 Accrued Taxes 150 2,296 Payroll Taxes Payable 1,229 783 Other Accrued Expenses 7,657 8,768,243 209 9,698,662

Notes Payable - Officer 51,700 51,700

Stockholders' Equity Capital Stock 100,000 100,000 Retained Earnings 56,494 37,418 Total Stockholders' Equity 156,494 137,418 Total Liabilities & Stockholders' Equity 8,976,437 9,887,780

STATEMENT OF INCOME FOR THE YEAR ENDED MARCH 31, 2005

Sales - Operating Revenue - Schedule A 8,465,958 8,420,485 Cost of Sales - Schedule B 8,165,709 8,146,958 Gross Operating Profit 300,249 273,527

General & Administrative Expenses - Schedule C 246,367 218,683 Operating Profit 53,882 54,844 Selling Expenses - Schedule D 34,806 35,985 Net Income 19,076 18,859


STATEMENT OF RETAINED EARNING FOR THE YEAR ENDED MARCH 31, 2005

Opening Balance 37,418 18,559 Add : Net Income for the year 19,076 18,859 Total 56,494 37,418 Less : Cash Dividends payable - - Balance carried forward to Balance Sheet 56,494 37,418

SUPPORTING SCHEDULES FOR THE YEAR ENDED MARCH 31, 2005

Schedules 'A'Operating Revenues Sales 8,465,958 8,420,485 Total Operating Revenues 8,465,958 8,420,485

Schedules 'B'Cost of Sales Purchases 7,177,706 11,106,530 Increase/Decrease in inventory 988,003 8,165,709 (2,959,572) 8,146,958 Total Cost of Sales 8,165,709 8,146,958

Schedules 'C'General & Administrative Expenses Salaries 59,700 86,800 Alarm 1,197 1,272 Auto Expense 2,455 4,013 Auto Lease 4,231 4,231 Bank Service Charges 2,084 2,030 Bad Debts 54,143 15,575 Contribution 200 7,616 Depreciation 5,200 3,252 Dues & Subscriptions 1,040 784 Insurance - Employee Group 4,824 7,390 Insurance - General 39,376 28,280 Miscellaneous Expense - 570 Office Expense 11,441 12,118 Other Taxes 9,461 5,454 Parking 2,508 2,544 Payroll Taxes 5,169 8,119 Postage 192 259 Professional Fees 2,500 3,320 Rent 34,359 17,999 Repairs & Maintenance - - Supplies Expense - - Telephone 6,287 246,367 7,057 218,683 Total General & Administrative Expenses 246,367 218,683

Schedules 'D'Selling Expenses Advertising 10,000 - Freight & Delivery 19,887 20,033 Travel 4,919 34,806 15,952 35,985 Total Selling Expenses 34,806 35,985


Notes to Financial Statements for the year ended March 31, 2005

1. Significant Accounting Policies Revenue Recognition Sales of goods are recorded based upon total sales made by the Company during the fiscal year & includes accounts receivables as of March 31,2005. These were based upon shipment of goods which is representation of the management of Intergem, Inc.

2. Inventory Closing Inventory is valued by using the method Lower of Cost or Market value as described in Regulations section 1.4741-4

3. Property & Depreciation The basis used for Fixed Assets including Furniture & Fixtures and Equipment is at Cost. Depreciation is taken by using the method 200% Declining Balance on Half Year convention as required by the Internal Revenue Code. This method is used for both Accounting and Tax purposes.

4. Purchases from Asian Star Company Limited, Mumbai, India Total Purchases from Asian Star Company Ltd., Mumbai, India was $ 5,671,917.42 for the fiscal year ended March 31, 2005.

5. Accounts Payable to Asian Star Company Limited, Mumbai, India Accounts Payable amount inculdes $ 3,022,781.97 to Asian Star Company L:td., Mumbai, India for the fiscal year ended March 31, 2005.


AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS ASIAN STAR COMPANY LIMITED We have examined the attached Consolidated Balance Sheet of ASIAN STAR COMPANY LIMITED, (“The Company”) and its subsidiaries as at March 31, 2005, the Consolidated Profit and Loss Account and Consolidated Cash Flow Statement for the year ended on that date. These Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statements. We believe that our audit provides a reasonable basis for our opinion. We did not audit the Financial Statements of subsidiaries. These Financial Statements have been audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of the subsidiaries, is based solely on the reports of the other auditors. We report that the consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited Financial Statements of the company and its subsidiaries included in the consolidated Financial Statements. On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual audited Financial Statements of the Company and its subsidiaries, we are of the opinion that the said consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India, i) in the case of the Consolidated Balance Sheet , of the consolidated state of affairs of the Company and its

subsidiaries as at March 31, 2005 , ii) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of the

Company and its subsidiaries for the year ended on that date and iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Company and its

subsidiaries for the year ended on that date.

For V. A. Parikh & Associates Chartered Accountants Place : Mumbai Vasant A. Parikh Date : June 30, 2005 Partner


CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2005


SOURCES OF FUNDSShareholders Funds Share Capital A 1,067.12 1,067.12 Reserves & Surplus B 20,614.61 21,681.73 18,640.04 19,707.16

Loan Funds Secured Loans C 60,100.85 46,222.29

Deferred Tax Liability 230.89 92.10

82,013.47 66,021.55

APPLICATION OF FUNDSFixed Assets D Gross Block 3,318.19 2,213.53 Less : Depreciation 409.69 2,908.50 281.19 1,932.34

Investments E 1,429.40 706.88

Current Assets, Loans & Advances F Inventories 33,273.67 22,564.77 Sundry Debtors 42,882.92 39,661.81 Cash & Bank Balances 5,670.74 6,412.45 Loans & Advances 5,130.60 2,708.19

86,957.93 71,347.22

Less : Current Liabilities & Provisions G Liabilities 6,357.24 6,155.24 Provisions 2,929.38 1,821.82

9,286.62 7,977.06 Net Current Assets 77,671.31 63,370.16

Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenses 4.26 12.17 82,013.47 66,021.55 Significant Accounting Policies & Notes forming part of Accounts L

As per our report of even date

FOR V. A. PARIKH & ASSOCIATES For and on behalf of the BoardChartered Accountants




CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005


INCOME Sales & Services H 109,486.14 98,823.92 Other Income I 81.99 109,568.13 56.50 98,880.42

EXPENDITURE Material Cost J 92,695.01 82,948.39 Purchase of Polished Diamonds 4,466.20 5,207.91 Manufacturing & Other Expenses K 7,115.92 7,062.23 Interest 1,644.58 927.31 Depreciation 133.28 71.25 Preliminary Expenses Written Off 7.91 106,062.90 7.91 96,225.00

PROFIT Profit Before Tax 3,505.23 2,655.42 Provision for Tax 1,113.20 664.26 Provision for Deferred Tax 138.79 9.20 Profit After Tax 2,253.24 1,981.96 Prior year Adjustments (0.55) - Balance Brought Forward 3,075.20 1,534.00 Balance Available for Appropriation 5,327.89 3,515.96

APPROPRIATION Proposed Dividend 213.42 213.42 Tax on Dividend 29.93 27.34 Transfer to General Reserve 200.00 200.00 Balance Carried to Balance Sheet 4,884.54 3,075.20 5,327.89 3,515.96

Significant Accounting Policies & Notes forming part of Accounts L

As per our report of even date

FOR V. A. PARIKH & ASSOCIATES For and on behalf of the BoardChartered Accountants




SCHEDULES 'A' to 'L' annexed to & forming part of the Consolidated Accounts for the year ended March 31, 2005

SCHEDULE ' A ' March 31, 2005 March 31, 2004SHARE CAPITAL (Rs. in lacs) (Rs. in lacs)

Authorised 1,50,00,000 Shares of Rs.10 each 1,500.00 1,500.00

Issued, Subscribed & Paid-up 1,06,71,200 equity shares of Rs. 10 each 1,067.12 1,067.12 (1,06,71,200)

1,067.12 1,067.12

SCHEDULE ' B '

RESERVES & SURPLUSCapital Reserves As per Last Balance Sheet 0.16 59.47 Less : During the year - 59.31

0.16 0.16

Share Premium As per Last Balance Sheet 1,736.28 1,736.28

General Reserve As per Last Balance Sheet 13,801.40 13,601.40 Transfer from Profit & Loss Account 200.00 200.00 14,001.40 13,801.40 Surplus as per Profit & Loss Account 4,884.54 3,075.20

Translation Reserve (7.77) 27.00

20,614.61 18,640.04


SCHEDULE ' C ' March 31, 2005 March 31, 2004(Rs. in lacs) (Rs. in lacs)

SECURED LOANS

Working Capital Loan from Banks 60,100.85 46,222.29 Secured bya. Hypothecation of Stock in Trade & Book Debtsb. Hypothecation of Premises at Mumbai & Suratc. Guaranteed by some of the Directors in their personal capacity Repayable within one year 60,100.85 46,222.29

SCHEDULE ' D '

FIXED ASSETS (Rs. in lacs)

Description of Assets As at Additions Deduction As at As at For the Deductions As at As at As at April 1, March 31, April 1, March 31, March 31, March 31,

2004 2005 2004 2005 2005 2004

Goodwill 50.00 - - 50.00 - - - - 50.00 50.00

Office Premises 630.96 50.81 - 681.77 49.52 10.55 - 60.07 621.70 581.44

Factory Building 498.10 110.60 - 608.70 2.24 18.78 - 21.02 587.68 495.86

Plant & Machinery 660.42 823.22 1.64 1,482.00 124.25 66.14 0.25 190.14 1,291.86 536.17

Vehicles 172.38 62.24 17.75 216.87 40.94 19.85 7.86 52.93 163.94 131.44

Furniture & Fixtures 201.67 77.18 - 278.85 64.24 17.96 (3.33) 85.53 193.32 137.43

CURRENT YEAR 2,213.53 1,124.05 19.39 3,318.19 281.19 133.28 4.78 409.69 2,908.50 1,932.34

PREVIOUS YEAR 1,328.41 918.20 33.08 2,213.53 218.62 71.25 8.68 281.19 1,932.34 1,109.79

GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK


SCHEDULE ' E '

INVESTMENT March 31, 2005 March 31, 2004 (Rs. in lacs) (Rs. in lacs)

In Shares Long Term Investments: Unquoted: Star Holdings Ltd. 11.31 11.31 250 (250) Shares of US$ 100 each

Carbon Accessories Ltd. 190.62 - 20,00,000 (Nil) Shares of Rs. 10 each

201.93 11.31 Current Investments: Quoted: Bharati Tele Ventures Ltd. 21.93 - 10,000 (Nil) Shares of Rs. 10 each

Divi's Laboratories Ltd. 172.50 - 14,519 (Nil) Shares of Rs.10 each

GlaxoSmithkline Pharmaceuticals Ltd. 36.43 - 5,000 (Nil) Shares of Rs. 10 each

Petron Engineering Construction Ltd. 13.22 - 10,000 (Nil) Shares of Rs. 10 each

Punjab National Bank 116.04 - 29,715 (Nil) Shares of Rs. 10 each

Reliance Energy Limited 279.62 - 50,000 (Nil) Shares of Rs. 10 each

Tata Steel 498.28 - 1,20,000 (Nil) Shares of Rs. 10 each

Biocon Ltd. - 1.73 Nil (550) Shares of Rs.5 each

CMC Ltd. - 21.72 Nil (4,478) Shares of Rs.10 each

Dredging Corporation of India Ltd. - 5.01 Nil (1,252) Shares of Rs.10 each

IBP Co. Ltd. - 62.00 Nil (10,000) Shares of Rs.10 each

Indian Petrochemicals Corporation Ltd. - 59.50 Nil (35,000) Shares of Rs.10 each


SCHEDULE ' E '

Petronet LNG Ltd. - 20.27 Nil (1,35,100) Shares of Rs.10 each

Power Trading Corporation of India Ltd. - 0.69 Nil (4,300) Shares of Rs.10 each

Market Value (Current Year Rs. 1,076.78 lacs) (Previous Year Rs. 173.39 lacs)

1,138.02 170.92

LESS : Provision for diminution in value of investments (61.24) -

1,076.78 170.92 In Partnership Firm Jewel Art 150.69 524.65

1,429.40 706.88


SCHEDULE ' F 'March 31, 2005 March 31, 2004

CURRENT ASSETS, LOANS & (Rs. in lacs) (Rs. in lacs)ADVANCES

CURRENT ASSETSInventories (As verified, valued & certified by a Director) Raw Materials 22,581.45 16,030.00 Work in Progress 188.22 - Finished Goods 10,492.08 6,534.77 Consumables 11.92 33,273.67 - 22,564.77

Sundry Debtors (Unsecured) For a period more than six months Considered good 2,751.88 1,640.63 Considered doubtful - 117.58

2,751.88 1,758.21

Others Considered good 40,131.04 38,021.18 Considered doubtful - -

40,131.04 38,021.18

Less: Provision for doubtful debts - 117.58 42,882.92 39,661.81

Cash & Bank Balances Cash on Hand 6.46 7.02 Balances with Scheduled Bank In Current Accounts 895.13 1,441.35 In Fixed Deposits 4,769.15 5,670.74 4,964.08 6,412.45

LOANS & ADVANCES (Unsecured, Considered Good) Advance Income Taxes 2,736.94 1,661.74 Other Advances 2,178.82 826.16 Staff Loans 4.46 4.03

4,920.22 2,491.93 Deposits with Others For Office Premises 169.06 179.05 With Others 41.32 37.21

210.38 216.26 5,130.60 2,708.19

86,957.93 71,347.22


SCHEDULE ' G ' March 31, 2005 March 31, 2004(Rs. in lacs) (Rs. in lacs)

CURRENT LIABILITIES

Current Liabilities Creditors for Goods 3,252.92 4,059.43 Creditors for Processing 773.27 691.45 Creditors for Others 2,331.02 6,357.21 1,404.32 6,155.20

Interest Accrued but not Due 0.01 -

Unclaimed Dividend 0.02 0.04 6,357.24 6,155.24

Provision Proposed Dividend 213.42 213.42 Tax on Dividend 29.93 27.34 Taxation 2,686.03 2,929.38 1,581.06 1,821.82

9,286.62 7,977.06

PRELIMINARY EXPENSES

At the beginning 12.17 20.08 Written Off during the year 7.91 7.91

4.26 12.17


March 31, 2005 March 31, 2004(Rs. in lacs) (Rs. in lacs)

SCHEDULE ' H '

SALES & SERVICES Sales - Diamonds 108,268.00 98,823.92 Sales - Jewellery 1,201.41 - Sales of Silver Model 4.36 - Sales of Platinum Mounting 2.82 - Jewellery Making Charges 9.55 -

109,486.14 98,823.92

SCHEDULE ' I '

OTHER INCOME

Dividend Received 6.91 0.01 Profit on Sale of Shares / Derivatives 19.42 - Share of profit/(loss) from Carbon Accessories Ltd. (9.38) - Share of profit/(loss) from Partnership Firm 65.04 56.49

81.99 56.50

SCHEDULE ' J '

MATERIALS COST

Stock at the Commencement 16,030.00 11,876.00 Purchases during the year 103,391.99 119,421.99 85,602.03 97,478.03

Less : Stock at the Close (22,581.45) (16,030.00)

Variation in Stock of Work in Progress Stock at the Commencement - - Less : Stock at the Close 188.22 (188.22) - -

Variation in Stock of Finished Goods Stock at the Commencement 6,534.77 8,035.13 Less : Stock at the Close 10,492.08 (3,957.31) 6,534.77 1,500.36

92,695.01 82,948.39


SCHEDULE 'K' March 31, 2005 March 31, 2004(Rs. in lacs) (Rs. in lacs)

MANUFACTURING &OTHER EXPENSES

Manufacturing Expenses Processing Expenses 4,516.26 5,167.27 Wages 32.90 - Contribution to E.S.I.C. 1.22 - Contribution to Provident Fund 1.78 - Electrical Charges 20.53 - Factory Expenses 13.99 4.27 Consumables 376.67 4,963.35 207.16 5,378.70

Employee's Emoluments Director's Remuneration 15.70 15.60 Salary & Bonus 536.07 416.17 Ex-Gratia, Leave Encashment 20.57 - Gratuity 4.16 6.18 Contribution to Provident Fund 34.81 23.94 Group Insurance 14.78 15.53 Contribution to E.S.I.C. 5.70 2.87 M.L.W.F Charges 0.25 0.09 Staff Welfare Expenses 20.18 652.22 16.07 496.45


SCHEDULE 'K' March 31, 2005 March 31, 2004(Rs. in lacs) (Rs. in lacs)

Administrative Expenses

Bank Commission & Charges 125.24 156.93 Electrical Charges 33.67 31.11 Telephone & Fax Charges 53.44 43.47 Local Travelling & Conveyance 19.69 15.66 Legal & Professional Fees 33.36 29.53 Printing & Stationery 19.41 10.31 Repairs & Maintenance 64.15 17.57 Postage & Courier 8.40 4.95 Motor Car Expenses 21.51 17.58 Insurance Premium 154.29 144.36 Rent, Compensation 81.96 44.11 Document Stamp Charges 11.95 34.29 Donation 110.57 115.07 Audit Fees 1.98 1.08 Office Canteen Expenses 15.52 11.08 Office Expenses 14.18 12.01 Director's Sitting Fees 0.83 0.60 Municipal Tax 0.92 0.71 Profession Tax 0.06 0.04 Provision for diminution in value of investment 61.24 - Provision for doubtful debts - 117.58 Sundry Expenses 29.81 14.39 Security Service Expenses 13.79 3.32 Loss on sale of Assets 4.94 15.63 Exchange loss/(gain) on Consolidation (1.29) (230.39) Property Tax 3.78 - Sales Tax 0.03 - Wealth tax 0.89 0.64 Other Tax 4.26 2.50 Membership & Subscription 5.85 894.43 12.12 626.25

Selling & Distribution Expenses

Advertisement 39.88 39.38 Sales Expenses 48.80 4.50 Entertainment Expenses 4.07 4.16 Foreign Travelling 119.41 107.45 Commission on Export 67.45 74.06 Assortment Charges 10.14 12.83 Freight & Clearing Charges 74.43 96.55 Agency Charges 1.81 1.85 E.C.G.C. Premium 231.60 213.16 Packing Expenses 8.33 605.92 6.89 560.83

7,115.92 7,062.23


SCHEDULE “ L ” NOTES annexed to and forming part of the Consolidated Balance Sheet as at 31st March, 2005 and Consolidated Profit & Loss Account for the year ended on that date. I-SIGNIFICANT ACCOUNTING POLICIES A. General

The financial statements have been prepared using mercantile system of accounting under the historical cost convention. It recognises significant items of income and expenditure on accrual basis.

B. Sales

Income from the sale of diamonds / studded jewellery is recognised when the sale has been completed with the passing of the title.

C. Other Income Interest Interest income is recognised on accrual basis.

Insurance claim

Insurance claim on loss by theft of diamonds is recognised on the basis of acceptance of claim by the Insurance Company.

Income from Investments Income from investment is accounted in the year in which the unconditional right to receive

such income is established. D. Depreciation

Depreciation on fixed assets has been provided at the rates and in the manner prescribed in schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation of subsidiaries has been provided on Straight Line Basis except Intergem Inc. where it is provided on declining balance method.

E. Foreign Currency Transactions

E.1 Transactions denominated in foreign currencies are normally recorded at the Exchange rate

prevailing at the time of the transaction.

E.2 Monetary items denominated in foreign currencies at the year-end are translated at year-end rate.

E.3 In case of forward contracts, the difference between the year end rate and rate on the date of

contract is recognised as exchange difference. The proportionate difference between the forward rate and the exchange rate on the date of transaction is recognised over the life of the contract.

E.4 Non monetary foreign currency items are carried at cost.

E.5 Any income or expense on account of exchange difference either on settlement or on

translation is adjusted to the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.


F. Fixed Assets

Cost of Fixed Assets comprises of purchase price, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use. Fixed Assets are stated at cost less accumulated depreciation.

G. Borrowing Costs:

All borrowing costs, which are of revenue nature, are charged to Profit and Loss Account.

H. Investment

Investment is valued at cost. Provision for diminution in value is made only if such diminution is otherwise than temporary in the opinion of the management. Current Investments are valued at cost or market value, whichever is lower. Investment in Partnership firm is accounted after including share of profit thereon as per last available audited information.

I. Inventories I.1 Raw Materials:

Stock of rough diamonds is stated at weighted average cost or net realizable value whichever is lower. Stock of gold is valued at cost on FIFO basis or net realizable value whichever is lower. Stock of polished diamonds (for jewellery operations) is valued at technically evaluated cost or net realizable value whichever is lower. Specific items of cost are allocated and assigned to inventory wherever practicable.

I.2 Work in Process is valued at technically evaluated cost. Finished goods are valued at

technically evaluated cost or estimated net realizable value, whichever is lower. Cost includes cost of material and related conversion cost. In view of the nature of variation in the values of individual diamonds and the differential in their processing costs, it is not practicable to compute the cost of polished diamonds using either FIFO or weighted average cost. In view of the numerous grades, it is not practicable to use specific costs. The method of valuation is therefore in compliance with “AS2”issued by the Institute of Chartered Accountants of India to the extent practicable.

I.3 Consumables are valued at cost.

J. Retirement Benefits J.1 Provident Fund

The contribution to provident fund is made at a pre-determined rate to the provident fund and charged to the profit and loss account on an accrual basis.

J.2 Gratuity

Contribution towards gratuity is made to Gratuity Trust created under the group gratuity scheme entered with Life Insurance Corporation of India (LIC). The contribution is as per the actuarial valuation by LIC.

K. Taxation Current Tax is determined as the amount of tax payable in respect of taxable income for the year after considering various reliefs admissible under provisions of the Income Tax Act, 1961. The deferred tax for timing difference between the book and tax profit for the year is accounted for using tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax asset


arising from timing difference are recognised to the extent that there is virtual certainty that sufficient future taxable income will be available.

L. Amortization

Preliminary expenses and expenses incurred on issue of shares are amortized over a period of ten years from year in which it became payable.

M. Contingent Liability

All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable that the future outcome may be materially detrimental to the Company.

N. (i) In order to comply with Accounting Standard 21 issued by Institute of Chartered Accountants of

India, the Company has prepared the accompanying consolidated financial statements, which include the financial statements of the Company along with its subsidiaries. Details of subsidiaries are as under.

Name of Subsidiary Country of Percentage of Incorporation ownership (Previous Year) ________________________________________________________________________ 1) Asian Star Co. Ltd. USA 100 (100) 2) Intergem Inc. USA 100 (100)

(ii) The consolidated financial statements of the group have been based on a line by line consolidation of Profit & Loss Account and Balance Sheet of the Company and its subsidiaries.

(iii) The effects of inter-company transactions between consolidated companies are eliminated in

consolidation.

II-NOTES FORMING PART OF THE ACCOUNTS

1. Surplus on account of exchange difference on outstanding forward exchange contracts to be

recognised in profit and loss account of subsequent accounting period aggregate to Rs 138.78 lacs.(For F.Y. 2003-04 it was Rs. 8.70 lacs).

2. There is no amount due to registered small scale industrial undertaking according to the information

available with the Company.

3. Deferred Tax Liability

Pursuant to Accounting Standard on Accounting for Taxes on income, Deferred Tax Liability of Rs 138.79 lacs arising on account of temporary differences for the current year has been adjusted in the Profit and Loss Account.


• Break up of Deferred Tax Liability as on 31st March, 2005 is as given below;

Deferred Tax Liability Rs in lacs Rs in lacs Deferred Tax Liability as on 1.4.2004 134.28 Add: Provision for Deferred Tax made during the year arising on account of timing difference in Depreciation 118.15 252.43

======= Less: Deferred Tax Asset as on 1.4.2004 42.18 Less: Bad debts (42.18)

Add: Diminution in value of investment 20.62 Add: Disallowance under Income Tax Act (to be allowed in next year) 0.92 21.54 ======= ======= Deferred Tax Liability as on 31.3.2005 230.89 =======

4. Contingent Liability

All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable that the future outcome may be materially detrimental to the Group. Asian Star Co. Ltd. has paid Rs 182 lacs to Income Tax Department against the demands raised by them on completion of tax assessment (out of this, demand for Rs.77 lacs became due after 31.3.05 and was paid subsequently). The company is of the opinion that the disallowances made by Income Tax Department are not tenable and has filed appeals against these demands. The same shall be charged to Profit & Loss account, if required, on disposal of appeals.

. As per our report of even date Attached

For V.A. PARIKH & ASSOCIATES For and on behalf of the Board Chartered Accountants VASANT A. PARIKH ANURADHA BANERJEE DINESH T. SHAH DHARMESH D.. SHAH Partner Company Secretary Chairman Joint Managing Director



CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED ON MARCH 31, 2005March 31, 2005 March 31, 2004

(Rs. in lacs) (Rs. in lacs)A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax & extraordinary items 3,505.23 2,655.42 Adjustment for - Depreciation 133.28 71.25 - Interest 1,644.58 927.31 - Unrealised Foreign Exchange (Gain) / Loss (249.53) (804.55) - Dividend Received (6.91) (0.01) - (Profit)/Loss from Partnership firm (65.04) (56.49) - (Profit)/Loss from Carbon Accessories Ltd 9.38 - Gratuity 4.16 6.18 - Preliminary Expenses 7.91 7.91 - (Profit)/Loss on fixed assets 4.94 15.63 - (Profit)/Loss on sale of investments (19.42) - - Diminution in value of Investment written off 61.24 - Operating profit before working capital changes 5,029.82 2,822.65 Adjustment for- Receivables (3,219.72) (4,984.38) - Inventories (10,708.90) (2,653.64) - Loans & Advances (2,422.41) (1,297.39) - Current Liabilities 1,303.25 5,011.08 Cash generated from / (used in) operations (10,017.96) (1,101.68) - Taxation (1,113.20) (664.26) - Gratuity (4.16) (6.18) - Prior year expenses (0.55) - Cash flow before extraordinary items (11,135.87) (1,772.12) - Extraordinary items - - Net cash from / (used in) operating activities (11,135.87) (1,772.12)

B. CASH FLOW FROM INVESTING ACTIVITIES- Purchase of fixed assets (1,124.05) (918.20) - Sale of fixed assets 9.67 8.76 - Purchase of Investments (1,338.02) (550.24) - Dividend Received 6.91 0.01 - Sale of Investments 629.33 - Net Cash from / (used in) investing activities (1,816.16) (1,459.67)

C. CASH FLOW FROM FINANCING ACTIVITIES - Secured Loans 14,133.13 4,683.20 - Interest (1,644.58) (927.31) - Capital - (59.31) - Proposed Dividend (213.42) (213.42) - Tax on Dividend (29.93) (27.34) Net cash from / (used in) financing activities 12,245.20 3,455.82 Exchange Difference on Translation (34.77) 27.00 Net increase / (decrease) in cash & cash equivalents (741.60) 251.04 Unrealised Foreign Exchange Gain /( Loss) (0.11) 6.88 Cash & cash equivalants as at 1st April (Opening) 6,412.45 6,154.53 Cash & cash equivalants as at 31st March (Closing) 5,670.74 6,412.45

FOR V. A. PARIKH & ASSOCIATES For and on behalf of the Board

Chartered Accountants

VASANT A. PARIKH ANURADHA BANERJE DINESH T. SHAH DHARMESH D. SHAH Partner Company Secretary Chairman Joint Managing Director

Mumbai Mumbai Dated : June 30, 2005 Dated : June 30, 2005

Documents

ASIAN STAR COMPANY LIMITED ELEVENTH ANNUAL REPORT … · ELEVENTH ANNUAL REPORT 2004-2005 ASIAN STAR COMPANY LIMITED NOTICE Notice is hereby given that the ELEVENTH ANNUAL GENERAL