KARNATAKA STATE INDUSTRIAL INVESTMENT ... MEMORANDUM KARNATAKA STATE INDUSTRIAL INVESTMENT & DEVELOPMENT CORPORATION LIMITED (A Company wholly owned by Government of Karnataka) Registered

INFORMATION MEMORANDUM

KARNATAKA STATE INDUSTRIAL INVESTMENT & DEVELOPMENT CORPORATION LIMITED

(A Company wholly owned by Government of Karnataka) Registered Office: Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001.

Tel.: (080) 22258131-33 Fax: (080) 22255740. E-mail: [email protected] Website: www.ksiidc.com

Private Placement of Unsecured Non-Convertible Redeemable Non-Cumulative Bonds of

Rs. 10,00,000/- each for cash at par aggregating to Rs. 150 Crores GENERAL RISK: Investors are advised to read the Risk Factors carefully before taking an investment decision in this offering. For taking an investment decision, the investors must rely on their own examination of the Issuer and the Offer/ Issue including the risks involved. The Offer/ Issue being made on private placement basis, this Information Memorandum has not been filed with Securities & Exchange Board of India (SEBI). The Securities have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of the investors is invited to the summarized and detailed Risk Factors mentioned elsewhere in this Information Memorandum. ISSUER’S ABSOLUTE RESPONSIBILITY: The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Information Memorandum is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. CREDIT RATING: ‘AA- (SO)’ by CRISIL [pronounced as Double A minus (structured obligation)] The rating indicates high degree of safety with regard to timely payment of interest and principal on the instrument. ‘LA+(SO)’ by ICRA Limited (pronounced as A plus structured obligation) rating to the proposed bond issue. This rating indicates adequate-credit-quality rating. The rated instrument carries average credit risk. The rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The Rating agency has the right to suspend, withdraw the rating at any time on the basis of new information etc. LISTING: The Unsecured Non-convertible Redeemable Non-cumulative Bonds are proposed to be listed on The Stock Exchange, Mumbai (BSE).

TRUSTEES TO THE ISSUE Canara Bank Executor, Trustee and Taxation Section BSE Towers, 51, 1st Cross, J.C. Road, Bangalore – 560 027. Tel No. 080-22239186, 22223170. Fax No. 080-22233849. E-mail: [email protected]

REGISTRAR TO THE ISSUE

Kirloskar Computer Services Limited 412-415, 10 Cross, 5th Main Road, RMV 2nd Stage, Bangalore – 560 094. Tel No. 080-23519311, 22359384. Fax No. 080-23519294.

Private & Confidential – For Private Circulation Only(This Information Memorandum is neither a Prospectus

nor a Statement in Lieu of Prospectus)

sd/- (R. N. Chawhan) Executive Director 2

KSIIDC

TABLE OF CONTENTS

INDEX TITLE PAGE NO.

DEFINITIONS/ ABBREVIATIONS 3

RISK FACTORS AND MANAGEMENT PROPOSALS THEREOF 4-7

HIGHLIGHTS OF THE CORPORATION 7

PART I

I. GENERAL INFORMATION 8-12

II. CAPITAL STRUCTURE 12-13

III. TERMS & PARTICULARS OF THE PRESENT ISSUE 13-19

IV. COMPANY & MANAGEMENT 20-29

V. SIGNIFICANT REGULATORY MATTERS RELATED TO THE CORPORATION 29

VI. ORGANISATION STRUCTURE & MANAGEMENT 29-30

VII. STOCK MARKET DATA OF THE EQUITY SHARES OF THE CORPORATION 30

VIII. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE

30-31

IX. BASIS FOR ISSUE PRICE 31

X. OUTSTANDING LITIGATIONS, DEFAULTS AND MATERIAL DEVELOPMENTS 31-32

XI. INVESTOR GRIEVANCES & REDRESSAL SYSTEM 32

PART II

I. GENERAL INFORMATION 33-35

II. FINANCIAL INFORMATION 36-48

III. STATUTORY AND OTHER INFORMATION 49

V. OTHER DETAILS 50-60

VI. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 61

PART III

DECLARATION 62


KSIIDC

DEFINITIONS/ ABBREVATIONS

Term Meaning/ Definition/ Complete Term Act The Companies Act, 1956 as amended from time to time till date Articles Articles of Association of the Company Application Form The form in terms of which, the investors shall apply for the Redeemable Non-

Convertible Bonds the Company/ the Issuer/ KSIIDC/ the corporation

Karnataka State Industrial Investment Development Corporation Limited, a premier State Level Industrial Development Corporation established under Companies Act, 1964 and having its Registered Office Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001

Board/ BoD/ BOD Board of Directors of the Company or a Committee constituted thereof Bond(s)/ Debenture(s) Redeemable Non Convertible Bonds in the nature of Debentures of Rs. 10,00,000/-

each offered through private placement route under the terms of this Information Memorandum

Debentureholder(s) The Holder(s) of the Bond(s) in Dematerialised/Physical form Beneficial Owner(s) Debentureholder(s) holding Bond(s) in dematerialized form (Beneficial Owner of the

Debenture(s) as defined in clause (a) of sub-section of Section 2 of the Depositories Act, 1996)

BSE/ the concerned Stock Exchange

The Stock Exchange, Mumbai

CRISIL Credit Rating Information Services of India Ltd. ICRA ICRA Limited DDA Deemed Date of Allotment for the Bonds DP Depository Participant Depository (ies) National Securities Depository Limited (NSDL) DIP Disclosure and Investor Protection Guidelines of SEBI DRR Debenture/ Bond Redemption Reserve FY/ F.Y. Financial Year FIs Financial Institutions Issue/ Offer/ Offering Private Placement of Redeemable Non-Convertible Bonds in the nature of Debentures

of Rs. 10,00,000/- each for cash at par aggregating Rs. 150 Crores.Information Memorandum/ Offer Document

Information Memorandum dated 20-10-2005 for Private Placement of Redeemable Non-Convertible Bonds in the nature of Debentures of Rs. 10,00,000/- each for cash at par aggregating Rs. 150 Crores to be issued by KSIIDC

IT Income Tax IT Act The Income Tax Act, 1961 (as amended from time to time) IS Information Systems Memorandum Memorandum of Association of the NSDL National Securities Depository Limited OTS One Time Settlement OCS Out-of-court Settlement PAN Permanent Account Number Registrars to the Issue/ Registrars/ Registrar & Transfer Agents

Kirloskar Computer Services Limited, 412-415, 10 Cross, 5th Main Road, RMV 2nd Stage, Bangalore – 560 094

ROC/ RoC Registrar of Companies, Karnataka RBI The Reserve Bank of India Regional Stock Exchange

Stock Exchange, Bangalore

SEBI Securities and Exchange Board of India constituted under the Securities and Exchange Board of India Act, 1992 (as amended from time to time)

SEBI Guidelines SEBI (Disclosure and Investor Protection Guidelines 2000 (as amended from time to time)

Trustees Canara Bank, Executor, Trustee and Taxation Section, BSE Towers, 51, 1st Cross, J.C. Road, Bangalore – 560 027.

TDS Tax Deducted at Source


KSIIDC

RISK FACTORS Following are certain issues for the investors to consider before taking an investment decision in the offer. In some of the risk factors reference has been invited for detailed para mentioned elsewhere in this Information Memorandum, which can be used to obtain more details about the said risk. Internal Factors (a) Redemption Reserve: Creation of Redemption Reserve is not envisaged for the proposed issue of Bonds. KSIIDC has been

raising resources from domestic market in the form of unsecured borrowings. Since the resources raised by KSIIDC are being utilised for the purpose of its business i.e. providing credit and other facilities to the industry, the assets of KSIIDC are mostly in form of loans and advances. Hence it is proposed that the Bonds shall be unsecured in nature in that they shall not be secured against any asset of KSIIDC. KSIIDC has appointed a trustee to protect the interest of the investors. There will a tripartite agreement between Government of Karnataka, KSIIDC and debenture trustee in this regard. The debenture trustee will monitor this fund and ensure that accruals in to it are utilised, to promptly meet the interest and redemption obligations of the bond.

(b) Credit Risk: The business of lending carries the risk of default by borrowers. Any term lending activity is exposed to credit risk

arising from the risk of default by the borrowers. KSIIDC has put up a systematic credit evaluation process in place.

KSIIDC has diversified portfolio in terms of industry, service sector and transport sector. It has diversified clientele for all these segments.

Lending is done on selective basis. KSIIDC monitors the performance of its asset portfolio on a regular basis and also constantly evaluates the changes and developments in industries to which it has substantial exposure. Further, there is guarantee from Government of Karnataka to service the interest and principal obligations of these bonds and hence the credit risk of KSIIDC is minimised.

(c) Credit Rating: CRISIL has assigned “AA- (SO)” to this debt issue. The rating indicates high degree of safety with regard to

timely payment of interest and principal on the instrument. The repayment of principal and payment of interest is guaranteed by the Government of Karnataka vide Letter No. CI 25 CMI 98(P), dtd: 17.10.2005.

LA+(SO) by ICRA Limited the rating indicates adequate-credit-quality rating. The instrument carries average credit risk.

Please note that rating is not a recommendation to buy, sell or hold securities and investors should take their own decision.

(d) Contingent Liabilities: Details as on March 31, 2005. i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 3174.76 lakhs.

(Previous year – Rs. 2636.72 Lakhs) ii) Guarantees issued – Rs. 1812.55 lakhs (Previous year – Rs. 1812.55 lakhs)

iii) Claims against the corporation not acknowledged as debts Rs. 200.94 lakhs (Previous year Rs. 200.94 lakhs) Sl. No. Name of the Company Guarantee in Favour Amount (Rs.) 1. Hedge & Gole SBI 20,00,000 2. Thungabhdra Fibres Ltd. IDBI 34,00,838 3. Thungabhdra Fibres Ltd. ICICI 4,68,773 4. Gangavathi Sugars Corporation Bank 116,00,000 5. Scotie India Ltd. SBI 9,99,434 6. Mysore Tools Ltd. SBM 12,66,404 7. ESI 3,58,461

TOTAL 2,00,93,910

iv) Income tax Demands pending against the Corporation amounting to Rs. 731.61 lakhs, (Previous year Rs. 731.61 lakhs) on account of reopening of Income Tax assessments, are being contested at various levels by filing necessary appeals and the same are shown under contingent liabilities.

(e) The Comptroller and Auditor General of India has yet to give its COMMENTS on Auditor’s Report under Section 619(4) of the

Companies Act, 1956 on the accounts of KSIIDC Ltd, Bangalore, for the year ended 31 March 2005. (f) Observation as per Statutory Auditor’s Report on the Accounts for the year ending March 31, 2005.

Qualification by the Auditors Replies of the Corporation 1. The Corporation has securitised the future rent receivable

from Khanija Bhavan building during an earlier year which is not in accordance with the accrual system of accounting prescribed under Sec 209(3) (b) of the Companies Act, 1956 resulting in:

a) Understanding the other income to the extent of Rs. 789.70 lakhs resulting in overstatement of loss by the same amount for the year.

b) Understatement of current liabilities and cumulative loss to the extent of Rs. 74.84 lakhs, being the net present value of a portion of rent receivable pertaining to the period beyond 31.03.2005

The future lease rentals under an “operating lease” are un-recognised financial assets. In the context of securitization, a portion of these financial assets is transferred (together with significant risks and rewards attached to the assets) by assigning the right to receive the rentals in favour of purchaser/s. Thus, this portion of the asset has been de-recognised as far as KSIIDC is concerned and the purchaser has no recourse on KSIIDC. Thus, the full amount received on securitization of rent receivables is treated as income in the year in which the transaction has taken place, based on an expert opinion.


KSIIDC

2. The company has not made provision in respect of certain “Other Debits” though the respective loan accounts have been treated as Non Performing Assets, which is not in accordance with the prudential norms on income Recognition and asset Classification issued by the Reserve Bank of India/ Industrial Development Bank of India, in the absence of details, the impact of the same on the financial statements is not ascertainable.

In respect of non-performing assets wherein the assessment of the unsecured portion has been done, the other debits are also taken into consideration while arriving at the unsecured portion of the advance and full provision for unsecured portion has been made. In respect of other loan assets no provision has been made on the ‘other debits’ considering that any realization from the security available will be first appropriated towards the ‘Other debits’ and therefore there is no doubt in regard to the recovery of the ‘other debits’.

3. The Income Tax assessments of the Company for earlier years have been reopened in respect of claim of depreciation in respect of Leased Assets costing Rs. 1,209.08 lakhs. The matter has been contested in appeals. Pending completion of the proceedings and in view of the issued involved, we are unable to express any opinion on the said transactions undertaken in the earlier years and also its impact on the financial statements.

The Income Tax Assessments in respect of certain previous assessment years have been re-opened. An appeal has been preferred on these orders before the appropriate authority, which is pending for disposal.

4. In note No. 13(v) under notes forming part of accounts, in respect of non-performing assets (loans and advances) where the value of the security for the loans and advances have not been assessed and for erosion in value of securities if any, are not provided in the accounts. In the absence of assessment in this regard, the impact on financial result of the corporation for the year cannot be quantified.

The loans and advances are granted with sufficient amount of margin and security and are considered fully secured, even though the present value of securities are not assessed as on the date of balance sheet. The classification and provisioning for non-performing assets are based on circulars issued by RBI/ IDBI from time to time. However the Corporation does not value the assets at the end of each year for ascertaining the erosion if any. Wherever the corporation based on its judgement has reasons to believe that there is erosion of security in respect of such cases, the corporation has assessed the present market value of securities and made additional provision for any shortfall thereon. The same has been brought as a note No. 13(v) in notes forming part of accounts.

5. The accounting of service charges on building on lease hold land in earlier years amounting to Rs. 331.91 lakhs (net of depreciation) which is not in accordance with AS-10 issued by the ICAI resulting in overstatement of Fixed Assets and understatement of cumulative Loss to that extent. Further the losses for the year is overstated to the extent of Rs. 15.26 lakhs due to depreciation charged for the year in this regard.

The corporation also acts as a designated agency of the Government to plan and formulate proposals for industrial and urban infrastructure development. The service charges are mostly in the form of consultancy charges and therefore are directly related to the cost of the project. In terms of the Accounting Policy No. 6 service charges on annual incremental expenditure is charged to respective identified project accounts. This expenditure in respect of building on lease hold land is capitalized along with other expenditure.

6. Reference is invited to the following in schedule O (Notes forming part of Accounts)

a) Note No. 13 (I) regarding amount due from KIADB, which is contingent upon acceptance by their Board

a) KIADB has accepted the liability. However, the correct liability, rate of interest to be charged and the repayment schedule have to be mutually worked out.

b) Note No. 13 (q) (I), regarding interest recoverable, which is contingent upon acceptance by the Government.

b) The Government has agreed to pay interest.

7. e) We further report that, without considering the impact of items mentioned in paragraphs 3,4,5,7(a) and 7(b), the effect of which is not presently ascertainable, had the observations made by us in Paragraph 2 and 6 above been considered:

(i) The Loss for the year would have been Rs. 6,548.62 lakhs (as against the reported figure of Rs. 7353.58 lakhs)

(ii) The Current Liabilities would have been Rs. 10,423.84 lakhs (as against the reported figure of Rs. 10,349.00 lakhs)

(iii) The Net Block of Fixed Assets would have been Rs. 23,032.59 lakhs (as against the reported figure of Rs. 23,364.50 lakhs)

(iv) The cumulative loss would have been Rs. 53,698.48 lakhs (as against the reported figure of Rs. 53,291.73 lakhs) (g) Market Risk: Increased interest rate volatility exposes KSIIDC to market rate risk arising out of maturity/ rate mismatches. Risk arising

from interest rate volatility is inherent to the business of financial intermediation and term lending. This risk is minimised at KSIIDC by linking the interest rates on term lending to the weighted average cost of funds. There are no floating rates both for long term borrowings and long term lending. The interest rates on long term borrowings are fixed at the time of contract and in turn interest rates on lending are also fixed at the time of contract and thus the interest rate volatility impacting KSIIDC’s portfolio is minimised.

(h) Outstanding Litigations 1. Misc. Petitions under Section –31 of the State Financial Corporation’s Act, 1951 filed by KSIIDC against the borrower Company

and its Guarantors/ Sureties.


KSIIDC

120 cases are pending before the City Civil Judge Court at Bangalore. Amount involved is Rs. 2374566806.60. The KSIIDC has filed the said Misc. Petitions, invoking personal guarantees of the promoter directors to recover its dues under the provisions of State Financial Corporation’s Act, 1951. These petitions are pending before the City Civil Judge Court at Bangalore for various reasons.

2. Orders/ Decrees obtained in Misc. Petitions under Section-31 of the SFCs Act, 1951 by the KSIIDC against the borrower Company/ Guarantors/ Sureties-43 cases. Amount involved is Rs. 133,59,54,938/-. The KSIIDC obtained orders/ decrees in Misc. Petitions against borrower Company/ promoter directors. In this regard, KSIIDC filed Execution Petitions before the various jurisdictions of the Court in Karnataka for recover the decreed amount from the borrower Company/ Guarantors.

3. Cases filed under Section-138 of the Negotiable Instrument Act, by KSIIDC against the borrower Company/ guarantors. 35 cases are pending. Amount involved is Rs. 5,14,00,000/-. The Cheques issued by the borrower Company were dishonored for insufficient of funds in the borrower Company’s A/c’s. In this regard, KSIIDC filed Criminal Cases against the borrower Company and its promoter directors before the Magistrate Courts, Bangalore for recovery of its dues.

4. Motor Accident Claims by the KSIIDC against the accused – 06 Nos. KSIIDC claimed certain amounts from the Insurance Department.

5. Special Leave Petition before Supreme Court of India – 2 Cases are pending. The Hon’ble High Court of Karnataka allowed the appeal filed by the borrower Company/ Guarantors against KSIIDC. In this regard, the KSIIDC filed Special Leave Petition before the Hon’ble Supreme Court of India. These petitions are pending.

6. Arbitration Suits – 3 Nos. Arbitration Suits filed by the borrower/ Firm against the KSIIDC for award of the surplus amount of Rs. 55.00 lakhs available with KSIIDC in sale of assets of the Firm. These Suits are pending before the City Civil Judge Court at Bangalore.

7. Original Suits – 39 Nos filed by the borrower companies against KSIIDC. Mortgaged Property disputes.

8. Writ Petitions – 36 filed by the borrower companies/ sureties against KSIIDC. These Writ Petition were filed by the Borrowers/ companies/ sureties against KSIIDC are challenging the orders passed by KSIIDC under Section –29 of the State Financial Corporation’s Act, 1951.

9. Labour Cases – 2 Cases: These cases are against assisted unit, making KSIIDC a formal party in view of the take over of the unit under Section – 29 of the SFCs Act by KSIIDC.

(i) Nature of Bonds: The Bonds are unsecured, non-convertible, redeemable bonds and are in the form of Debentures. The bonds are issued in Demat form/ physical form.

(j) Net Loss: Net Loss of the Company reduced from Rs. 84.97 crores in the year ended March 31, 2004 to Rs 33.76 crores in the year ended March 31, 2005 showing a reduction of 60.27%. Operational Income of the Company increased from Rs. 42.12 crores in the year ended March 31, 2004 to Rs 56.99 crores in the year ended March 31, 2005 showing a growth of 35.30%. Other Income of the Company increased from Rs. 5.03 crores in the year ended March 31, 2004 to Rs 6.08 crores in the year ended March 31, 2005 showing a growth of 20.87%. Total income of the Company went up by Rs. 15.92 crores from Rs. 47.15 crores in year ended March 31, 2004 to Rs. 63.07 crores in year ended March 31, 2005. Financial Expenses decreased from Rs. 125.11 crores in year ended March 31, 2004 to Rs. 89.53 crores in year ended March 31, 2005. While the total income of the Company went up by Rs. 15.92 crores, the total expenditure of the Company decreased by Rs. 35.38 crores showing a reduction of 26.78%.

(k) Non Performing Assets (NPA) : The total NPAs of KSIIDC in has been increasing over the past 3 years. Net NPAs has increased from 54.39% as on March 31, 2003 to 75.15% as on March 31, 2005 NPAs have increased on account of tightening of NPA norms and continued recession. The ratio of NPA has increased in recent years because of slow down of fresh financial sanctions and consequent reduction in disbursement resulting in very little accretion to the standard asset block. KSIIDC has initiated measures for NPA containment by setting up an in-house department to deal exclusively with sticky accounts. Besides, the Recovery Departments actively monitor all the assisted units for timely recovery of dues and initiate pro-active remedial actions. Efforts of Recovery Department are reinforced by the Default Review Committee, a sub-committee of the Board to review the cases. There is a separate One Time Settlement Committee, again an Empowered Committee of the Board to deal with one time settlement request of the borrowers. There is a Sick Units Monitoring Cell to extend suitable package of reliefs and concessions for the revival of potentially viable sick units as per the guidelines of RBI. Under the Rules of KSIIDC, KSIIDC can take over the assets/management of the industrial units and sell them for realisation of dues without the intervention of the court. The advances of KSIIDC are backed by securities in the form of land, building, plant and machinaries of the industrial unit and other suitable collateral securities.

Management Perception (a) Explanation of Losses: KSIIDC was a profit making organisation till 1988-99 (for over three decades). It started incurring cash

losses from 2001-02. The main reasons for the losses are: (i) High cost of borrowed funds (mainly from IDBI, SIDBI and banks) rendering the financial products offered less attractive. (ii) Low returns on the equity investment (less than 1.5%). (iii) Large exposure in priority sectors, which are not doing well. (iv) Low recoveries on account of recessionary conditions, import liberalization and obsolescence of technologies. (v) Increased provisioning towards non-performing assets. (vi) Mis-match in asset and liability resulting in interest arrears and consequent increase in financial costs. (vii) Declining financial support from the Government.


KSIIDC

(b) Revival and restructuring efforts undertaken: KSIIDC realized its position and is repositioning itself to pro-actively play its role to contribute to the industrialization of the State. To achieve this objective, a major manpower of KSIIDC was deployed for recovery of dues. Certain schemes aimed at augmenting recovery from sticky loan accounts were formulated and implemented. Notable among them are: a) Implementation of a comprehensive and transparent policy for one time settlement of dues from the non performing assets. b) Implementation of a scheme for restructuring of debts specifically aimed at enhancing interest recoveries.

The liquidity crunch which prevailed in the first half of the year eased to a large extent during the second half of the year due to the sanction and implementation of a negotiated settlement of dues to IDBI and SIDBI, the major creditors, with whom KSIIDC was following up for quite sometime. The salient features of the negotiated settlement package are: a) Payment of the entire loan outstanding to both institutions in three annual installments falling due during January/ February

2006, 2007 and 2008. b) Conversion of the interest arrears to both the institutions (including the interest funded earlier; FITL) as on the cut off date

(30.09.2004) into cumulative redeemable preference shares (CRPS) carrying dividend @1% per annum and redeemable in three years at the end of the financial years 2012, 2013 and 2014.

c) The negotiated settlement amount (principal) to carry interest @ 6% per annum from the cut off date and such interest to be payable in the next five years after payment of principal amount, without interest.

d) Waiver of zero coupon debentures, formed out of the differential interest amount computed while sanctioning an earlier package.

The negotiated settlements contributed to recapitalisation thereby improving the capital adequacy ratio. A major amount of the recovery during the year was applied to retire high cost borrowings resulting in substantial savings in interest payout. All the above steps have resulted in bringing down the overall cost of funds to KSIIDC, thereby enhancing the viability of the future operations. The effort to further reduce the cost of borrowings is continuing. In this direction, approval of the Government of Karnataka has been obtained for converting the existing guarantee limits of Rs. 200 crores into a revolving guarantee. This would facilitate fresh market borrowings at the prevailing lower rates, which applied to redeem the existing high cost bonds, will result in future interest savings. The buoyant capital markets position would not only result in significant inflow of funds on account of planned disinvestments but also will add to the profitability of the operations. With the above favourable factors, coupled with continuation of aggressive recovery from advances and thrust on sale of assets taken over, it is estimated that KSIIDC would achieve cash break even during the current financial year (FY 2006). KSIIDC will have to build a healthy loan assets portfolio for the future to consolidate its financial position and to continue to contribute to the cause of industrialization. The support of the Government at this crucial juncture has been sought in the form of fresh guarantees to secure further borrowings. Nevertheless, KSIIDC is also, on a stand alone, scouting for low cost financial resources to achieve the above objective. External Factors 1. Natural calamities like floods, droughts and earthquakes could hamper the project of the Corporation & its implementation. 2. The operations of the Corporation are subject to regulations by the Government. Major changes in Government policies might

have an adverse bearing on the operations of the Corporation. 3. The financial statements and derived ratios there from contained in the Information Memorandum are prepared/computed as

per the permissible accounting practices. While due care has been taken to reflect the true economic reality regarding the financials of the Corporation as far as possible, the investors may want to make their own adjustments to the same before arriving at an investment decision in the offer.

Notes to Risk Factors • The present private placement of the Corporation aggregates Rs. 150 Crores. The financial information as contained in

Auditor’s Report including the notes to accounts, significant accounting policies as well as auditors’ qualifications has been duly certified by the Statutory Auditors of the Corporation. As far as possible, these audited numbers have been used for computation or derivation of other financial information contained in the Information Memorandum. However, such other financial information as are not contained in the Auditor’s Report has been certified by the management of the Corporation.

• Investors are also advised to refer to the Notes to Accounts and the Auditor’s Report appearing later in this Information Memorandum.

• Interest of Promoters/Directors: The Directors of the Corporation are interested only to the extent of shares held by them. • No loans and advances have been made to persons/companies in which the directors are interested. • Investors are advised to refer to the glossary of common terms used in the bond structures appearing in the beginning of the

Information Memorandum. HIGHLIGHTS 1. KSIIDC is a Non-Banking Finance Company (NBFC) registered with RBI vide letter no. DNBS(BG) 3530/09.01.04/97-98 dated

April 15, 1998. 2. KSIIDC is a premier State Level Industrial Development Corporation established under the Companies Act in 1964. 3. KSIIDC is wholly owned by Government of Karnataka with an equity base of Rs. 190.33 Crores. 4. Credit Rating: “AA- (SO)” by CRISIL. The rating indicates high degree of safety with regard to timely payment of interest and

principal on the instrument. 5. LA+(SO) by ICRA Limited the rating indicates adequate-credit-quality rating. The instrument carries average credit risk.. 6. The bonds are unconditionally & Irrevocably guaranteed by Govt. of Karnataka regarding payment of interest and repayment of

principal. 7. KSIIDC has a consistent record of paying interest and principal on bonds on due dates.


KSIIDC

PART I

KARNATAKA STATE INDUSTRIAL INVESTMENT & DEVELOPMENT CORPORATION LIMITED (KSIIDC)

(A Company wholly owned by Government of Karnataka) Registered Office: Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001.

Tel.: (080) 22258131-33 Fax: (080) 22255740. E-mail: [email protected] Website: www.ksiidc.com

Private Placement of Unsecured Redeemable Non-Convertible Non-Cumulative Bonds of Rs.10,00,000/- each for cash at par aggregating to Rs. 150 Crores

I. GENERAL INFORMATION

OFFER OF BONDS KSIIDC is seeking offer for subscription of Unsecured Redeemable Non-Convertible Non-Cumulative Bonds of Rs. 10,00,000/- each for cash at par aggregating Rs. 150 Crores AUTHORITY FOR THE PRESENT ISSUE This present issue of Bonds is being made pursuant to the Resolutions passed at the meeting of the Board of Directors held on August 22, 2005. REGISTRATION, GOVERNMENT APPROVALS AND GOVERNMENT GUARANTEE The Government of Karnataka (GoK) has accorded guarantee vide Letter No. CI 25 CMI 98(P), dtd: 17.10.2005 for the repayment of the principal amount and interest on the due dates in respect of the bonds. This guarantee is unconditional and irrevocable and shall be in force until all the bonds issued by KSIIDC or its succeeding entities pursuant to the above are redeemed. DISCLAIMER CLAUSE This Information Memorandum (“Memorandum”) is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public generally to subscribe for or otherwise acquire the Bonds to be issued by KARNATAKA STATE INDUSTRIAL INVESTMENT & DEVELOPMENT CORPORATION LIMITED (KSIIDC/ the Issuer/ the Company/ the Corporation). The Memorandum is for the exclusive use of the Institutions to whom it is delivered and it should not be circulated or distributed to third parties. This Information Memorandum for issue of Bonds on private placement basis has been prepared in conformity with the extant SEBI circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003. Therefore, as per the applicable provisions, copy of this Information Memorandum has not been filed or submitted to SEBI. It is to be distinctly understood that the Information Memorandum should not, in any way, be deemed or construed that the same has been cleared or vetted by SEBI. SEBI does not take any responsibility either for the financial soundness of any scheme or the project for which the Issue is proposed to be made, or for the correctness of the statements made or opinions expressed in the Information Memorandum. The Issuer Company certifies that the disclosures made in this Information Memorandum are generally adequate and are in conformity with the captioned SEBI circular. This requirement is to facilitate investors to take an informed decision for making investment in the proposed Issue. It should also be clearly understood that while the Issuer is primarily responsible for the correctness, adequacy and disclosure of all relevant information in the Information Memorandum, it also certifies that it has disclosed various material information including those relating to litigation like commercial disputes etc in the Information Memorandum for the said Issue. Further the Issuer confirms that: a. this Information Memorandum is in conformity with the documents, materials and papers relevant to the Issue; b. all the legal requirements connected with the said Issue as also the guidelines, instructions, etc., issued by SEBI, the

government and any other competent authority in this behalf have been duly complied with; and c. the disclosures made in this Information Memorandum are true, fair and adequate to enable the investors to make a well

informed decision as to the investment in the bond Issue. The Issue of Bonds being made on private placement basis, filing of this Information Memorandum is not required, however the same does not absolve the Issuer Company from any liabilities under Section 63 or Section 68 of the Companies Act, 1956 or from the requirement of obtaining such statutory and other clearances as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up at any point of time, with the Issuer Company, any irregularities or lapses in this Information Memorandum. DISCLAIMER STATEMENT FROM THE ARRANGER In light of SEBI circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003; it is advised that the Issuer Company has exercised self due-diligence to ensure complete compliance of prescribed disclosure norms etc in this Memorandum. The role of the Arranger in the assignment is confined to marketing and placement of the bonds on the basis of this Memorandum as prepared by the Issuer Company. The Arranger has neither scrutinized nor vetted nor has it done any due-diligence for verification of the contents of this Memorandum. The Arranger shall use this Memorandum for the purpose of soliciting subscription(s) from qualified institutional investor(s) in the bonds to be issued by the Issuer Company on private placement basis. It is to be distinctly understood that the aforesaid use of this Memorandum by the Arranger should not in any way be deemed or construed that the Memorandum has been prepared, cleared, approved or vetted by the Arranger; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Memorandum; nor does it take responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. The Arranger or any of its directors, employees, affiliates or representatives do not accept any responsibility and/or liability for any loss or damage arising of whatever nature and extent in connection with the use of any of the information contained in this Memorandum.


KSIIDC

DISCLAIMER STATEMENT FROM THE ISSUER The Issuer Company accepts no responsibility for statements made otherwise than in the Information Memorandum or any other material issued by or at the instance of the Issuer Company and anyone placing reliance on any other source of information would be doing so at his/her/their own risk. FILING OF INFORMATION MEMORANDUM As per extant SEBI guidelines/ regulations, filing of this Information Memorandum is not required either with SEBI, RoC or any other regulatory authority (ies). The present issue of bonds being made on private placement basis, copy of this Information Memorandum along with the documents as specified under the head “Material Contracts and Documents for Inspection” required to be filed with Registrar of Companies (RoC) under Section 60 of the Companies Act, 1956 shall not be applicable and hence the same has not been delivered to RoC for registration nor has the same been filed with SEBI for vetting/ comments/ registration. DISCLAIMER CLAUSE OF THE STOCK EXCHANGE As required, a copy of this Information Memorandum has been submitted to The Stock Exchange, Mumbai (hereinafter referred to as BSE) for hosting the same on its web site. It is to be distinctly understood that such submission of the Information Memorandum to BSE or hosting the same on its web site should not in any way be deemed or construed that the Information Memorandum has been cleared or approved by BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; nor do it warrant that this Issuer’s securities will be listed or continue to be listed on the Exchange; nor does it take responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever. DISCLAIMER IN RESPECT OF JURISDICTION This offer of Bonds is made in India to Companies, Corporate Bodies, Trusts registered under the Indian Trusts Act, 1882, Societies registered under the Societies Registration Act, 1860 or any other applicable laws, provided that such Trust/ Society is authorised under constitution/ rules/ bye-laws to hold debentures in a Company, Indian Mutual Funds registered with SEBI, Indian Financial Institutions, Insurance Companies, Commercial Bank including Regional Rural Bank and Co-operative Banks (subject to RBI Permission) as defined under Indian laws). The Information Memorandum does not, however, constitute an offer to sell or an invitation to subscribe to securities offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Information Memorandum comes is required to inform himself about and to observe any such restrictions. Any disputes arising out of this issue will be subject to the exclusive jurisdiction of the courts at Bangalore (Karnataka). All information considered adequate and relevant about the Issuer and the Issuer Company has been made available in this Information Memorandum for the use and perusal of the potential investors and no selective or additional information would be available for a section of investors in any manner whatsoever. LISTING The Company is an unlisted company and therefore the equity shares of the Company are not listed on any recognized Stock Exchange. The company has made an application to The Stock Exchange, Mumbai (BSE) to list the Bonds to be issued and allotted under this Information Memorandum. MINIMUM SUBSCRIPTION As the Issue of Bonds is being made on private placement basis, the requirement of minimum subscription shall not be applicable. CAUTIONARY NOTE Though not applicable to the issue of bonds, as a matter of abundant caution, attention of applicants is specially drawn to the provisions of sub-section (1) of Section 68A of the Act, which is reproduced below: “Any person who: a) makes, in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or b) otherwise induces a company to allot, or register any transfer of, shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.” MINIMUM-MAXIMUM TARGET The company proposes to make Issue of Unsecured Redeemable Non-Convertible Non-Cumulative Bonds aggregating Rs. 150 Crores. ISSUE SCHEDULE The Issue opens for subscription at the commencement of Banking hours and close at the close of banking hours on the dates indicated or earlier or on such extended date as may be decided by the Corporation at its sole and absolute discretion without giving any reasons or prior notice. The Corporation at its sole and absolute discretion reserves the right to close the issue without assigning any reason whatsoever. In such a case, investors will be intimated about the revised time schedule by the Corporation. The Corporation also reserves the right to keep multiple Deemed Date(s) of Allotment at its sole and absolute discretion without any notice.

ISSUE OPENS ON October 24, 2005 ISSUE CLOSES ON March 15, 2006 DEEMED DATE OF ALLOTMENT January 31, 2006 for subscriptions banked till January 15, 2006 DEEMED DATE OF ALLOTMENT March 31, 2006 for subscriptions banked till March 15, 2006


KSIIDC

STATUTORY AUDITORS M/s M N S & Co. Chartered Accountants 163, 2nd Floor, R. V. Road, Minerva Circle, Bangalore – 560 004. Phone : (080) 26572290, 26573319, 26566868 Telefax : (080) 51312509 E-Mail : [email protected]

REGISTRAR TO THE ISSUE Kirloskar Computer Services Limited 412-415, 10 Cross, 5th Main Road, RMV 2nd Stage, Bangalore – 560 094. Tel No. 080-23519311, 22359384. Fax No. 080-23519294.

TRUSTEES TO THE ISSUE Canara Bank Executor, Trustee and Taxation Section BSE Towers, 51, 1st Cross, J.C. Road, Bangalore – 560 027. Tel No. 080-22239186, 22223170. Fax No. 080-22233849. E-mail: [email protected]

BANKERS TO THE ISSUE HDFC Bank Limited ICICI Bank Limited

ARRANGERS TO THE ISSUE AK Capital Services Limited Flat No. N, Sagar Apartments, 6, Tilak Marg, New Delhi - 110 001. Tel.: (011) 23385704, 23382380, 23388235 Fax: (011) 23385189 E-mail: [email protected], [email protected] Allianz Securities Limited 2nd Floor, 3, Scindia House, Janpath, New Delhi – 110 001. Tel.: (011) 51514670, 51514671, 51514662 Fax: (011) 51514665 E-mail: [email protected]

COMPLIANCE OFFICER AND COMPANY SECRETARY Mr. B. Premkumar, Company Secretary Karnataka State Industrial Investment & Dev. Corp. Ltd. Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001. Tel.: (080) 22258131-33 Fax: (080) 22255740. E-mail: [email protected]

The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. BROKERS TO THE ISSUE Apart from to the Arrangers appointed by the Issuer Company, there is/are no other broker(s) appointed by the Issuer company for the purpose of marketing the Issue. Therefore no person/ firm/ company other the Arrangers to the Issue, whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue. CREDIT RATING Credit Rating Limited (hereinafter referred to as ‘CRISIL’) has assigned ‘ AA- (SO)’ rating to the Bond Issue of the company. The rating indicates high degree of safety with regard to timely payment of interest and principal on the instrument. LA+(SO) by ICRA Limited The rating indicates adequate-credit-quality rating. The instrument carries average credit risk.. Please note that, the rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The Rating agency has the right to suspend, withdraw the rating at any time on the basis of new information etc. CREDIT ENHANCEMENT The Government of Karnataka (GoK) has given an unconditional and irrevocable and continuing guarantee vide letter No. CI 25 CMI 98(P), dtd: 17.10.2005 for repayment of principal and interest due thereon during the entire tenure of the Bonds. STRUCTURED PAYMENT MECHANISM

Issue Account & Escrow Account

KSIIDC will open two no-lien Accounts viz, an issue account and an Escrow account with a Designated Bank in Bangalore (to be finalised in consultation with ICRA) before the allotment of the Bonds. The proceeds raised from the issue of the bonds shall be credited in the issue account and the amount to be paid to the bondholders is to be credited in the Escrow account. The bondholders shall have exclusive charge on any amount credited in the Escrow account. All withdrawal from the said Escrow account shall be made only after obtaining the approval from the Trustees to the Bondholders and such withdrawal shall be exclusively for (a) payment of principal and/ or interest to the bondholders and/or (b) for making investments, as provided herein below. Any credit balance lying in the Escrow account can be withdrawn, with the approval of the Trustees, by KSIIDC at the end of the tenure of the bonds when all the dues to the bondholders have been paid.

mailto:[email protected]


KSIIDC

Guarantee Commission Account

KSIIDC shall open a separate no-lien account (“Guarantee Commission Account”) with a designated bank. KSIIDC undertakes to do the following, till any amount is outstanding to the Bondholders, (a) before drawal of any funds from the Issue Account, KSIIDC shall deposit Rs. 1.5 crore in the Guarantee Commission Account and thereafter, within 15 days from the beginning of every financial year, KSIIDC shall deposit the Guarantee Commission payable in the given financial year to the GoK for the Guarantee relating to the rated Bonds; (b) any withdrawal by KSIIDC from the Guarantee Commission Account shall be exclusively for the purpose of making payment of the Guarantee Commission to the GoK and KSIIDC shall give prior intimation to the Trustee about such withdrawal and (c) KSIIDC shall provide to the Trustee and to ICRA a certificate from the designated bank (“Bank Certificate”) confirming the balance in the Guarantee Commission Account within 3 working days from the last date for deposit of the Guarantee Commission as aforesaid.

Tripartite Agreement The transaction envisages a tripartite agreement between KSIIDC, the GoK and the Trustee to the Bondholders.

Compliance Certificate The Trustee shall ensure that all the terms of the Structure Obligation (as mentioned herein) are complied with and shall forward to ICRA a copy of the Compliance Certificate towards fulfillment of all the conditions set out for the Structured Obligation. Thereafter, on receipt of a No-objection Letter from ICRA, the Trustee shall issue the Compliance Certificate to the Company with a copy of the Compliance Certificate to the Designated Bank. The proceeds of the Bonds from the Issue account will be available to the Company only after obtaining of the Compliance Certificate from the Trustee. Provided that the Company shall be permitted to withdraw upto a sum of Rs. 60 crore prior to the obtaining of the Compliance Certificate if the Company has delivered to ICRA and to the Trustee an undertaking (in a format acceptable to ICRA) that it shall comply with all the terms of the Structured Obligation and shall obtain the Compliance Certificate as mentioned herein. The Designated Bank shall be given a standing instruction that unless it receives a copy of the Compliance Certificate from the Trustee within the time stipulated hereunder, it shall not permit withdrawal of funds (except upto Rs. 60 crs.) by the Company from the issue Account (other than for refunding the proceeds to the Investors). If the Company fails to obtain the Compliance Certificate within a period of sixty days from the Issue opening date, then it shall refund the entire Bonds proceeds to the Investors.

Intimation of GoK At least 45 days prior to forthcoming due date, KSIIDC shall intimate Finance Secretary and/ or designated official, GoK with a copy of trustees, about (a) the forthcoming due date and (b) the amount payable to the bondholders as interest and/ or principal on the said due date and shall also request the GoK to ensure that adequate funds are available in the Escrow account for servicing the bondholders on the forthcoming due date. In case KSIIDC fails to intimate the GoK as per above schedule, trustees shall intimate the GoK at least 40 days prior to forthcoming due date.

Payment Mechanism KSIIDC shall credit adequate funds in the Escrow account for servicing the bondholders on the forthcoming due date. As and when funds are credited in the Escrow account, KSIIDC and/ or the Designated Bank shall send to the Trustees an intimation regarding the balance for funds in the said Escrow Account. The interest and/ or principal payment cheques shall be dispatched to the bondholders at least 7 working days prior to the due date for payment.

Investment of funds in the Escrow Account and the Guarantee Commission Account

The funds in the Escrow Account and the Guarantee Commission Account may from time to time be invested in highest rated debt instrument/ highest rated deposits of Banks which are rated MAAA for medium term or A1+ for Short Term or in Central Government Securities. The maturity date of the investments should be at least 15 days prior to the forthcoming due date. The bondholders shall have exclusive charge on such investments and returns on such investments. The proceeds realised from the sale/ encashment of the investments including the returns thereon shall forthwith be credited in the Escrow account or the Guarantee Commission account as applicable.

Monitoring of the Escrow Account

The Trustee will monitor the balance in the Escrow account from time to time and shall take all the necessary steps (including invocation of the guarantee) as provided herein in case of shortfall.

Event of Shortfall If on the 10th working day prior to every due date for payment of interest and/ or principal, the amount in the said Escrow account, after taking steps as mentioned in the above para on “Investment of funds in the Escrow Account” is not sufficient for servicing the bondholders on the forthcoming due date then the Trustees shall forthwith intimate the Finance Secretary and/ or designated official, GoK to transfer adequate funds in the Escrow Account to make up the shortfall at least 7 working days prior to the due date failing which the Trustees shall proceed to invoke the Guarantee.

Invoking of Government Guarantee

In the event of the GoK ailing to transfer funds in the Escrow Account to make up the shortfall 7 working days prior to the due date for payment of interest/ principal, the Trustees shall forthwith invoke the Guarantee issued by the GoK. On invocation of the guarantee, the GoK must transfer funds into the Escrow Account to the extent of shortfall without any delay.


KSIIDC

DETAILS OF RATING DONE IN THE LAST 3 YEARS Borrowing Programme Financial Year Present Rating Rs. 50 Crore 2001-02 LA+(SO) by ICRA Ltd.

II. CAPITAL STRUCTURE (In Rs.) As on March 31, 2005 Amount1 SHARE CAPITAL A Authorised Share Capital

25,00,00,000 Equity Shares of Rs. 10/- each 2,50,00,00,000B Issued & Subscribed Share Capital

19,03,25,150 Equity Shares of Rs. 10/- each fully paid 190,32,51,500D. PAID-UP SHARE CAPITAL AFTER THE PRESENT ISSUE

19,03,25,150 Equity Shares of Rs. 10/- each 190,32,51,500C. RESERVES & SURPLUS ( In terms of Sec. 36(i) (vii) of IT Act, 1961 3,25,00,000E. SHARE PREMIUM ACCOUNT

a. Before & After the Issue NilF. LOAN FUNDS

a. Secured Loans 1,31,357 b. Unsecured Loans 8,64,73,22,800

(The entire equity share capital of KSIIDC is held by Government of Karnataka and its Nominees) UNDERWRITING The present Issue of Bonds on private placement basis has not been underwritten. NOTES ON CAPITAL STRUCTURE Dates and Details of Changes in the Authorised Share Capital of the Company during last 10 years.

Date of Amendment

Clause No. of Articles of Association

Description of Amended Clause of Articles of Association

29-09-1993 (29th AGM)

Clause IV Memorandum of Association Article 5 Articles of Association

The Authorised Share Capital of the company enhanced from Rs. 50,00,00,000 to Rs. 100,00,00,000 divided into 100,00,000 equity shares of Rs. 100/- each.

29-03-1997 (EGM)


The Authorised Share Capital of the company enhanced from Rs. 100,00,00,000/- (Rupees One Hundred Crores) to Rs. 130,00,00,000/- (Rupees One Hundred Thirty Crores only) divided into 8,00,00,000 (Eight Crores) equity shares of Rs. 10/- (Rupees Ten Only) each and 5,00,00,000 (Five Crores) Redeemable Preference Shares of Rs. 10/- (Rupees Ten only) each.

27-03-1998 (At the EGM)


The Authorised Share Capital of the company enhanced from Rs. 130,00,00,000/- (Rupees One Hundred Thirty Crores) to Rs. 160,00,00,000/- (Rupees One Hundred Sixty Crores only) dividend into 8,00,00,000 (Eight Crores) equity shares of Rs. 10/- (Rupees Ten only) each and 8,00,00,000 (Five Crores) Redeemable Preference Shares of Rs. 10 (Rupees Ten only) each.

28-03-2002 (EGM)


The Authorised Share Capital of the company enhanced from Rs. 160,00,00,000/- (Rupees One Hundred Sixty Crores) to Rs. 200,00,00,000/- (Rupees Two Hundred Crores only) dividend into 20,00,00,000 (Twenty Crores) equity shares of Rs. 10/- (Rupees Ten only) each.

30-09-2004 (At the 40th AGM)


The Authorised Share Capital of the company enhanced from Rs. 200,00,00,000/- (Rupees Two Hundred Crores) to Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores only) dividend into 25,00,00,000 (Twenty Five Crores) equity shares of Rs. 10/- (Rupees Ten only) each.

PAID-UP EQUITY SHARE CAPITAL AS ON 31-03-2005 Year Amount Held by 1994-1995 Rs. 52,00,12,500/- Government of Karnataka 1995-1996 Rs. 62,00,12,500/- Government of Karnataka 1996-1997 Rs. 72,50,12,500/- Government of Karnataka 1997-1998 Rs. 72,50,12,500/- Government of Karnataka 1998-1999 Rs. 72,50,12,500/- Government of Karnataka 2000-2001 Rs. 72,50,12,500/- Government of Karnataka 2001-2002 Rs. 72,50,12,500/- Government of Karnataka 2002-2003 Rs. 150,84,88,500/- Government of Karnataka 2003-2004 Rs. 150,84,88,500/- Government of Karnataka 2004-2005 Rs. 190,32,51,500/- Government of Karnataka


KSIIDC

SHAREHOLDING PATTERN The shareholding pattern of the Company as on 31st March 2005 is as follows:

Sl. No. Name of the Shareholder Number of Shares held % Stake in total 1. Governor of Karnataka 190324990 100.00% 2. Nominees of the Government of Karnataka 160 0.00% TOTAL 190325150 100.00%

DETAILS REGARDING SHAREHOLDERS LIST OF TOP 10 SHAREHOLDERS AND THE NUMBER OF SHARES HELD BY THEM (as on 31st March 2005):

Sl. No. Name of the Shareholder Number of Shares Held % Stake in Total 1. Governor of Karnataka & Nominees of Government of Karnataka 190325150 100%

The entire equity share capital of KSIIDC is held by Government of Karnataka and its nominees. The promoters i.e. Government of Karnataka’s holding after the issue would remain at 100%. Further the present issue is a bond issue and therefore the provision of lock-in for equity shares does not apply.

III. TERMS & PARTICULARS OF THE PRESENT ISSUE KSIIDC is seeking offer for subscription of Unsecured Redeemable Non-Convertible Bonds of Rs. 10,00,000/- each for cash at par aggregating Rs. 150 Crores. The Bonds offered are subject to provisions of the Companies Act, 1956, Securities Contract Regulation Act, 1956, Memorandum and Articles of Association of the company, Terms of this Information Memorandum, Instructions contained in the Application Form and other terms and conditions as may be incorporated in the Trustee Agreement. Over and above such terms and conditions, the Bonds shall also be subject to the applicable provisions of the Depositories Act 1996 and the laws as applicable, guidelines, notifications and regulations relating to the allotment & issue of capital and listing of securities issued from time to time by the Government of India (GoI), Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), concerned Stock Exchange(s) or any other authorities and other documents that may be executed in respect of the Bonds. OBJECTS OF THE ISSUE The Object of the present Issue is redemption of the existing bonds and to redeem other Government Guaranteed Bonds and for the Long Term Working Capital requirements of the Corporation etc. INSTRUMENT & ISSUE DETAILS AT A GLANCE Issue Size Rs. 150 Crores Issue Objects To redeem the existing bonds and other Government Guaranteed Bonds and for the Long Term Working

Capital requirements of the Corporation etc. Instrument Unsecured Redeemable Non-Convertible Non-Cumulative Bonds in the nature of Debentures Instrument Form Dematerialised / Physical mode Credit Rating AA- (SO) by CRISIL & LA+(SO) by ICRA Limited Security Unconditional & Irrevocable guarantee by Government of Karnataka for payment of interest and

repayment of principal Face Value/ Issue Price Rs. 10,00,000/- per Bond Minimum Application 1 Bond and in multiples of 1 Bond thereafter Tenure 7 Years Put & Call Option At the end of 5th Year from the Deemed Date of Allotment Redemption/ Maturity At par at the end of 6th & 7th Year in the ratio of 50:50 from the Deemed Date of Allotment Coupon Rate * 7.00% p.a. Interest Payment Annually Listing Proposed on The Stock Exchange, Mumbai (BSE) Trustees Canara Bank Interest on Application Money

At the respective coupon rate (subject to deduction of tax at source, as applicable) from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment

* subject to deduction of tax at source, as applicable. NATURE & STATUS OF THE BONDS The Unsecured Redeemable Non-Convertible Non-Cumulative Bonds to be issued will be in the nature of Debentures. KEY TERMS Face Value & Issue Price Each Bond has a face value of Rs. 10,00,000/- and is issued at par i.e. at Rs. 10,00,000/- per Bond. Minimum Application The application should be for a minimum of 1 Bond (Rs. 10,00,000/-) and in multiples of 1 Bond (Rs. 10,00,000/-) thereafter. Interest on Application Money Interest at the respective coupon rate (subject to deduction of income tax under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof, as applicable) will be paid to all the applicants on the application money for the Bonds. Such interest shall be paid from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment. The interest on application money will be computed on an Actual/ 365 day basis. Such interest would be paid on all the valid applications, including the refunds. Where the entire subscription amount has been refunded, the interest on application money will be paid along with the Refund Orders. Where an applicant is allotted lesser number of bonds than applied for, the excess amount paid on application will be refunded to the applicant alongwith the interest on refunded money.


KSIIDC

The interest cheque(s)/ demand draft(s) for interest on application money (alongwith Refund Orders, in case of refund of application money, if any) shall be dispatched by the company within 15 days from the Deemed Date of Allotment and the relative interest warrant(s) alongwith the Refund Order(s), as the case may be, will be dispatched by registered post to the sole/ first applicant, at the sole risk of the applicant. Interest on the Bonds The Bonds shall carry interest at the respective coupon rate @ 7.00% p.a., (subject to deduction of tax at source at the rates prevailing from time to time under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof for which a certificate will be issued by the company) on the outstanding amount of the principal till redemption. Interest will be paid annually each year throughout the tenure of the Bonds till final redemption. Interest on Bonds will cease on the date of final redemption in all events. (In case the Deemed Date of Allotment is revised (pre-poned/ postponed) then the above interest payment date may also be revised (pre-poned/ postponed) accordingly by the company at its sole & absolute discretion). If any interest payment date falls on a day which is not a Business Day (‘Business Day’ being a day on which Commercial Banks are open for Business in the city Bangalore, Karnataka), then payment of interest will be made on the next day that is a business day but without liability for making payment of interest for the intervening period. Deemed Date of Allotment Interest on the Bonds shall accrue to the Debentureholder(s) from Deemed Date of Allotment. All benefits relating to the Bonds will be available to the investors from the Deemed Date of Allotment. The actual allotment of Bonds may take place on a date other than the Deemed Date of Allotment. The company reserves the right to keep multiple allotment date(s)/ deemed date(s) of allotment at its sole and absolute discretion without any notice. In case, if the issue closing date is changed (pre-poned/ postponed), the Deemed Date of Allotment may also be changed (pre-poned/ postponed) by the company at its sole and absolute discretion. Depository Arrangements The company has appointed Kirloskar Computer Services Limited as Registrars & Transfer Agent for the present bond issue. The company proposes to make necessary depository arrangements with National Securities Depository Limited (NSDL) for issue and holding of Bonds in dematerialised form. In this context the company proposes to sign tripartite agreements between KSIIDC, the Registrar and National Securities Depository Limited (NSDL) for offering depository option to the investors. Investors who hold the bonds in dematerialised form can deal with the same as per the provisions of Depositories Act, 1996 as amended from time to time. Procedure for applying for Demat Facility 1. The applicant must have at least one beneficiary account with any of the Depository Participants (DPs) of NSDL prior to making

the application. 2. The applicant must necessarily fill in the details (including the beneficiary account number and Depository Participant’s ID

appearing in the Application Form under the heading ‘Details for Issue of Bonds in Electronic/ Dematerialised Form’.) 3. Bonds allotted to an applicant will be credited directly to the applicant’s respective Beneficiary Account(s) with the DP. 4. For subscribing the bonds, names in the application form should be identical to those appearing in the account details in the

depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the depository.

5. Non-transferable allotment advice/refund orders will be directly sent to the applicant by the Registrars to the Issue. 6. If incomplete/incorrect details are given under the heading ‘Details for Issue of Bonds in Electronic/ Dematerialised Form’ in the

application form, it will be deemed to be an incomplete application and the same may be held liable for rejection at the sole discretion of the company.

7. For allotment of Bonds, the address, nomination details and other details of the applicant as registered with his/her DP shall be used for all correspondence with the applicant. The Applicant is therefore responsible for the correctness of his/her demographic details given in the application form vis-à-vis those with his/her DP. In case the information is incorrect or insufficient, the Issuer would not be liable for losses, if any.

8. It may be noted that Bonds issued in electronic form, the same can be traded only on the Stock Exchanges having electronic connectivity with NSDL. The Stock Exchange, Mumbai where the Bonds of the company are proposed to be listed has connectivity with NSDL.

9. Interest or other benefits would be paid to those Debentureholders whose names appear on the list of beneficial owners given by the Depositories to the company as on Record Date/ Book Closure Date. In case of those Bonds for which the beneficial owner is not identified by the Depository as on the Record Date/ Book Closure Date, the company would keep in abeyance the payment of interest or other benefits, till such time that the beneficial owner is identified by the Depository and conveyed to the company, whereupon the interest or benefits will be paid to the beneficiaries, as identified, within a period of 15 days.

Market Lot The market lot will be one Bond (“Market Lot”) and in multiple thereof. However the Bonds of the company would be traded through Stock Exchange Mechanism only if market lot is in dematerialised form.

Issue of Letter(s) of Allotment/ Issue of Bond Certificate(s)/ Refund Order(s) Issuance of Bonds either in Physical Form or Dematerialized form will be done purely as per the option opted by the applicant. Letters of Allotment evidencing the title to the bonds in favour of the allottees would be mailed by Registered post/ Courier Service within 30 days from the deemed date of allotment, at the sole risk of the applicant to the sole/first named applicant. The beneficiary account of the investor(s) with National Securities Depository Limited (NSDL)/ Depository Participant will be given credit within 15 days from the Deemed Date of Allotment. The credit in the account will be akin to the Letter of Allotment. On completion of the all-statutory formalities, such credit in the account will be akin to a Bond Certificate. Subject to the completion of all legal formalities within 3 months from the Deemed Date of Allotment, or such extended period as may be approved by the Appropriate Authorities, Letter of Allotment/ the initial credit akin to a Letter of Allotment in the Beneficiary Account of the investor would be replaced with the number of Bonds allotted/Bond Certificates. The Bonds issued in electronic (dematerialized) form, will be governed as per the provisions of The Depository Act, 1996, Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, rules notified by NSDL/ Depository Participant from time to time and other applicable laws and rules notified in respect thereof.


KSIIDC

Investors may note that pursuant to circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 issued by SEBI, the Bonds of the company would be traded through Stock Exchange Mechanism only in dematerialised form and in a market lot of Rs. 10,00,000/- and in multiple thereof. Dispatch of Refund Orders The shall ensure dispatch of Refund Order(s) of value upto Rs. 1,500/- under certificate of posting and Refund Order(s) of value of over Rs. 1,500/- by Registered Post only and adequate funds for the purpose shall be made available to the Registrar to the Issue by the Issuer. Terms of Payment The full face value of the Bonds applied for is to be paid alongwith the Application Form. Investor(s) need to send in the Application Form and the cheque(s)/ demand draft(s) for the full face value of the Bonds applied for. Face Value per Bond Minimum Application for Amount Payable on Application per Bond Rs. 10,00,000/- 1 Bond Rs. 10,00,000/-

Payment of Interest In case of holders of bonds in Dematerialised form, the interest will be payable to the Debentureholder(s) whose names appear in the List of Beneficial Owners given by the Depository to the company on the Record Date. Payment of interest will be made by way of cheque(s)/ interest warrant(s)/ demand draft(s), which will be dispatched to the sole/ first applicant, 7 days before the due date(s) by registered post at the sole risk of the applicant. In case of holders of bonds in Physical form, the interest will be payable to the registered Debentureholders registered in the books on the Issuer and in case of joint-holders, to the one whose name stands first in the Register of Debentureholders as on Record Date. In the event of the issuer not receiving any notice of transfer alongwith the original bond certificate(s) by the Record Date, the transferee(s) for the bonds shall not have any claim against the Issuer in respect of interest so paid to the registered Debentureholder(s). Wherever the signature(s) of such transferor(s) in the intimation sent to the Issuer is/are not in accordance with the specimen signature(s) of such transferor(s) available on the records of the Issuer, all payments of remaining interest on such bond(s) will be kept in abeyance by the Issuer till such time as the Issuer is satisfied in this regard. Tax Deduction at Source (TDS) Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source. For seeking TDS exemption/ lower rate of TDS, relevant certificate(s)/ document(s) must be lodged at least 15 days before the payment of interest becoming due with the Company Secretary of the company or to such other person(s) at such other address(es) as the may specify from time to time through suitable communication. Tax exemption certificate/ declaration of non-deduction of tax at source on interest on application money, should be submitted along with the Application Form. Where any deduction of Income Tax is made at source, the company shall send to the Debentureholder(s) a Certificate of Tax Deduction at Source. Debentureholder(s) should also consult their own tax advisers on the tax implications of the acquisition, ownership and sale of Bonds, and income arising thereon. Put & Call Option The Issuer/ Investors shall have a put/ call option at the end of 5 years from the deemed date of allotment. Debentureholders/ The Issuer will have the option to redeem the bonds at par, at the end of 5 Years. Debentureholders desirous of exercising the put option would be required to submit their request in writing, along with the duly discharged bond certificate(s) at least 60 days prior to the relevant date. The Debentureholders will be entitled to receive the face value of the bonds of exercise of the put option only if the Issuer receives the request within the specified time. The Issuer may exercise its early redemption option by announcing its intention atleast 60 days in advance. For mode of announcement, see section ‘NOTICES’. The bonds shall stand fully discharged on the Debentureholders receiving the face value in respect of the bonds held by them. In any case, interest will cease from the date of early redemption by the Issuer. Redemption The bonds, unless previously redeemed by the Issuer, will be redeemed at par at the end of 6th & 7th year in the ratio of 50:50 from the deemed date of allotment against the surrender of the bonds certificate(s), duly discharged, by the Debentureholder(s). Interest on bonds shall, in any case, cease on redemption. In case if the principal redemption date falls on a day which is not a Business Day (‘Business Day’ being a day on which Commercial Banks are open for Business in the city of Bangalore, Karnataka), then the payment due shall be made on the next Business Day together with additional interest for the intervening period. Payment on Redemption In case of holders of bonds in Dematerialised form, the Payment on redemption will be made by cheque(s)/ warrants(s) in the name of the Debentureholder whose name appears on the List of Beneficial owners given by Depository to the company as on the Record Date. On dispatching the redemption warrants to such Beneficiary(ies) by registered post/ courier, the liability of the company shall stand extinguished. The Bonds shall be taken as discharged on payment of the redemption amount by the on maturity to the list of Beneficial Owners as provided by NSDL/ Depository Participant. Such payment will be a legal discharge of the liability of the company towards the Debentureholders. On such payment being made, the company will inform NSDL/ Depository Participant and accordingly the account of the Debentureholders with NSDL/ Depository Participant will be adjusted. In case of holders of bonds in Physical form, the payment of the redemption amounts of the bonds will be made to the registered Debentureholder(s) recorded in the books of KSIIDC and in the case of joint holders, to the one whose name stands first in the Register of Debentureholders on surrender of bonds duly discharged to KSIIDC at least 30 days before the redemption date in person or by registered post with acknowledgement due at the registered office of the issuer. Payment will be made by crossed account payee cheques/ drafts.


KSIIDC

The Company’s liability to the Debentureholders towards all their rights including for payment or otherwise shall cease and stand extinguished from the due date of redemption in all events. Further the company will not be liable to pay any interest or compensation from the date of redemption. On dispatching the amount as specified above in respect of the Bonds, the liability of the company shall stand extinguished. Record Date The ‘Record Date’ for the Bonds shall be 15 days prior to each interest payment and/ or principal repayment date. Effect of Holidays Should any of dates defined above or elsewhere in the Information Memorandum, excepting the Deemed Date of Allotment, fall on a Saturday, Sunday or a Public Holiday, the next working day shall be considered as the effective date(s). Mode of Transfer of Bonds In case of holders of bonds in dematerialised form, the Bonds shall be transferred subject to and in accordance with the rules/ procedures as prescribed by the NSDL/ Depository Participant of the transferor/ transferee and any other applicable laws and rules notified in respect thereof. The normal procedure followed for transfer of securities held in dematerialized form shall be followed for transfer of these bonds held in electronic form. The seller should give delivery instructions containing details of the buyer’s DP account to his depository participant. In case of holders of bonds in Physical form, the Bonds being in the nature of Debentures, KSIIDC shall register the transfer of the Bonds, only when a proper instrument of transfer (as per Section 108 of the Companies Act, 1956,) duly executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, and wherever necessary the authority to purchase the bonds have been delivered to KSIIDC (or such other persons at such address as may be notified by KSIIDC from time to time) along with the Letters of Allotment(s)/ Bond certificate(s) for registration. Provided that where, on an application made to KSIIDC by the transferee, it is proved to the satisfaction of the Board Members of KSIIDC that the instrument of transfer signed by or on behalf of the transferee has been lost, KSIIDC may register the transfer on such terms as to indemnify as the Board may think fit. Provided further that nothing in this section shall prejudice any power of KSIIDC to register as Debentureholder any person to whom the right to any Bond of KSIIDC has been transmitted by operation of law. The transferee should deliver the bond certificate(s) to KSIIDC for registration of transfer atleast 15 days prior to the immediately succeeding interest payment date or the date of redemption, as the case may be. KSIIDC, on being satisfied, will register the transfer in its Register of Debentureholder(s). Investor/s who is/ are allotted securities in physical form such investors would not be able to trade such securities through the Stock Exchange Mechanism. List of Beneficial Owners The company shall request the Depository to provide a list of Beneficial Owners as at the end of the Record Date. This shall be the list, which shall be considered for payment of interest or repayment of principal amount, as the case may be. Trustees for the Debentureholders Canara Bank will be the Trustees to the Bond Issue. The company and the Trustees will enter into a Trustee Agreement, inter alia, specifying the powers, authorities and obligations of the Trustees and the company. The Debentureholder(s) shall, without further act or deed, be deemed to have irrevocably given their consent to the Trustees or any of their agents or authorized officials to do all such acts, deeds, matters and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deem necessary or require to be done in the interest of the Debentureholder(s). Any payment made by the company to the Trustees on behalf of the Debentureholder(s) shall discharge the pro-tanto to the Debentureholder(s). The Trustees will protect the interest of the Debentureholders in the event of default by the company in regard to timely payment of interest and repayment of principal and they will take necessary action at the cost of the company. No Debentureholder shall be entitled to proceed directly against the company unless the Trustees, having become so bound to proceed, fail to do so. Right to Accept or Reject Applications The Board of Directors/ Committee of Directors reserves its full, unqualified and absolute right to accept or reject any application, in part or in full, without assigning any reason thereof. The rejected applicants will be intimated along with the refund warrant, if applicable, to be sent. Interest on application money will be paid from the date of realisation of the cheque(s)/ demand drafts(s) till one day prior to the date of refund. The Application Forms that are not complete in all respects are liable to be rejected and would not be paid any interest on the application money. How to Apply This Information Memorandum is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public generally to subscribe for or otherwise acquire the Bonds issued by the company. The document is for the exclusive use of the investor(s) to whom it is delivered and it should not be circulated or distributed to third parties. The document would be sent specifically addressed to the institution(s) by the Issuer company and/ or its Arranger. Only eligible investors as given hereinabove may apply for bonds by completing the Application Form in the prescribed format in BLOCK LETTERS in English as per the instructions contained therein. Applications should be for a minimum of 1 Bond and in multiples of 1 Bond thereafter. Applications not completed in the said manner are liable to be rejected. Application Form duly completed in all respects must be submitted with any of the designated branches of the bankers to the Issue. The name of the applicant, type of account and account number must be filled in the Application Form. This is required for the applicant’s own safety and these details will be printed on the refund orders and interest/ redemption warrants. The applicant or in the case of an application in joint names, each of the applicant, should mention his/her Permanent Account Number (PAN) allotted under the Income-tax Act, 1961 or where the same has not been allotted, the GIR No. and the Income tax Circle/Ward/District. As per the provision of Section 139A (5A) of the Income Tax Act, PAN/GIR No. needs to be mentioned on the TDS certificates. Hence, the investor should mention his PAN/GIR No. it the investor does not submit Form 15G/15AA/other evidence, as the case may be for non-deduction of tax at source. In case neither the PAN nor the GIR Number has been allotted, the applicant shall mention “Applied for” and in case the applicant is not assessed to income tax, the applicant shall mention ‘Not Applicable’ (stating reasons for non applicability) in the appropriate box provided for the purpose. Application Forms without this information will be considered incomplete and are liable to be rejected.


KSIIDC

Applications may be made in single or joint names (not exceeding three). In the case of joint applications, all payments will be made out in favour of the first applicant. All communications will be addressed to the first named applicant whose name appears in the Application Form at the address mentioned therein. Unless the Issuer Company specifically agrees in writing with or without such terms or conditions it deems fit, a separate single cheque/ demand draft must accompany each Application Form. Applicants are requested to write their names and application serial number on the reverse of the instruments by which the payments are made. All applicants are requested to tick the relevant column “Category of Investor” in the Application Form. Public/ Private/ Religious/ Charitable Trusts and other investors requiring “approved security” status for making investments. Investors are advised to exercise due caution in selecting the appropriate option for which they wish to apply. Application Form must be accompanied by either demand draft(s) or cheque(s) drawn or made payable in favour of ‘KSIIDC Bond Issue’ and crossed ‘Account Payee Only’. Cheque(s)/ demand draft(s) may be drawn on any Bank including a co-operative Bank, which is a member or a sub-member of the Bankers Clearing House located at Chennai, Bangalore, Hyderabad, Ahmedabad, New Delhi, Mumbai or Kolkata. Investors in centres which do not have any Bank, including a co-operative Bank, which is a member or sub-member of the Banker’s Clearing House located at any of the centres mentioned above, will be required to make payments only through demand drafts payable at any one of the above centres. Cash, outstation cheques, money orders, postal orders and stockinvest shall not be accepted. The company assumes no responsibility for any applications/ cheques/ demand drafts lost in mail. Detailed instructions for filling up the application form and list of collection centres are provided elsewhere in this Information Memorandum. No separate receipts shall be issued for the application money. However, Bankers to the Issue at their Designated Branch(es) receiving the duly completed Application Forms will acknowledge the receipt of the applications by stamping and returning the acknowledgment slip to the applicant. Applications shall be deemed to have been received by the Issuer only when submitted to Bankers to the Issue at their designated branches or on receipt by the Registrar as detailed above and not otherwise. For further instructions, please read Application Form carefully. WHO CAN APPLY Only the persons who are specifically addressed through a communication directly are eligible to apply for the Bonds. No other person may apply. The categories of investors to whom the communication has been directed are: 1. Companies and Bodies Corporate, Financial Institutions and Statutory Corporations. 2. Banks, Financial Institutional Investors and Mutual Funds. 3. Provident Funds, Superannuation funds and Gratuity Funds. 4. Cooperative Banks including Primary Urban Cooperative Banks. 5. Regional Rural Banks (‘RRBs’) 6. Religious and Charitable Trusts. 7. Non-banking Finance Companies and Residuary Non-banking Finance Companies. 8. Insurance Companies & Port trusts. 9. Resident individuals and firms to whom these documents are addressed by name. Application by Companies/ Bodies Corporate/ Financial Institutions/ Statutory Corporations The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Associations / Constitution / Bye-Law(s) (ii) certified true copy of the resolution authorising investment and containing operating instructions (iii) specimen signatures of authorised signatories and (iv) relevant certificate(s) in the prescribed form(s) under Income Tax Rules, 1962, if exemption is sought from deduction of tax at source on interest income. Application by Commercial Banks/ Mutual Funds The Reserve Bank of India (RBI) vide its Circular No. DP.BC.32/21.01.018/98 dated April 29 1998 clarified that investment in Bonds and Debentures where payment of interest and principal is guaranteed by Central/State Govt. shall carry zero risk weightage for the purpose of Capital adequacy. The RBI has, however vide circular No. MPD-BC 181/ 07.01.279/98-99 dated October 30th, 1998 introduced a 2.50% risk weight on Central / State Government Securities and in Securities Guaranteed by them by the year ending March 2000. The applications must be accompanied by certified true copies of (i) Letter of authorization and (ii) specimen signatures of authorised signatories. Under the SEBI (Mutual Funds) Regulations, 1996, mutual funds may invest in debt instruments. In case of applications by Mutual Funds, certified true copies of (i) SEBI registration certificate, (ii) resolution authorising investment and containing all operating instructions must accompany the application and (iii) specimen signatures of authorised signatories. Application by Provident Funds, Superannuation Funds and Gratuity Funds As per Notification Dated 9/7/2003 issued by the Ministry of Labour, Government of India, Non-Government Provident Funds, Superannuation and Gratuity Funds can invest, inter alia, 30% of their investible funds in bonds of KSIIDC (a wholly owned company by Govt. of Karnataka) as defined in Section 2(36A) of the Income Tax Act, 1961. Further, they can invest upto 15% of their investible funds in bonds where both the principal and the interest are Unconditionally and Irrevocably Guaranteed by a State Government. Also, an additional amount of 30% of the corpus of exempted provident funds which were previously required to be invested in the Special Deposit Scheme of the RBI, can be invested at the discretion of the Boards of Trustees in any of the remaining three prescribed categories, of investment for exempted provident funds. The application must be accompanied by certified true copies of (i) Trust Deeds / Bye-Law(s), (ii) resolution authorising investment and containing operating instructions, (iii) specimen signatures of authorised signatories and (iv) Recognition certificate from income Tax Department/ Self-declaration form as per Finance Act, 1999.


KSIIDC

APPLICATION BY CO-OPERATIVE BANKS All cooperative banks including primary urban cooperative banks can invest in these bonds to the extent permissible under applicable Reserve Bank of India notification in force from time to time. The applications must be accompanied by certified true copies of (i) Government Notification/ Certificate of Registration/ Other documents governing constitution (ii) resolution authorising investment and containing operating instructions (iii) specimen signatures of authorised signatories and (iv) Recognition certificate from Income Tax Department. Application by Regional Rural Banks. The Reserve Bank of India has permitted, vide its circular No. RPCD.RRB.BC. 882/03.05.34/ 96-97 dated December 13, 1996, the RRBs to invest their non-SLR surplus resources in bonds of public sector undertakings. The RBI has vide circular no. RPCD (H)/04.03.06/98-99 dated November 02, 1998 clarified that single exposure norms would be applicable in respect of investment in debentures and bonds of public sector undertakings. The application must be accompanied by certified true copies of (i) Government notification/ Certificate of In / Memorandum and Articles of Association/ other documents governing the constitution (ii) resolution authorising investment and containing operating instructions (iii) specimen signatures of authorised signatories (iv) Form 15H for claiming exemption from deduction of tax at source on income from interest on application money and (v) Form 15AA for claiming exemption from deduction of tax at source on the interest income. Application by Charitable/ Religious Trusts. The payment of interest and principal repayments on the bonds being guaranteed by Government of West Bengal, these bonds fall within section 20(a) of the Indian Trust Act, 1882 and hence are considered as eligible investment for Trusts which are registered under the said Act. Other trusts, whose trust deeds provide to Investments in the Bonds may also apply to this issue of Bonds, subject to the approval of the Charity Commissioner or other appropriate authority, as the case may be investments in these bonds will qualify as eligible investments under section 11(5) of the Income Tax Act, 1961. Application by Non-Banking Finance Companies (NBFCs)/ Residuary Non-Banking Finance Companies (‘RNBFC’s) The Reserve Bank of India has vide its circular No. DFC. 121/ED(G)-98 dated January 31, 1998 has specified that NBFCs are required to maintain liquid cash assets of 15.00% on and from April 01, 1999 and investments in Government guaranteed bonds meet such requirements. The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/ Other documents governing the constitution (ii) Power of Attorney (iii) resolution authorising investment and containing operating instructions and (iv) specimen signatures of authorised signatories. Application by Insurance Companies. As per Circular No. 32(1)/INVT/93 Dated September 20, 1994 issued by Insurance Division, Department of Economic Affairs, Ministry of Finance, Government of India, insurance Companies are required to invest upto 10% of their net surplus in State Government Securities or government guaranteed bonds. The application must be accompanied by certified true copies of (i) Memorandum and Articles of association/ other documents governing the constitution (ii) Power of Attorney (iii) resolution authorising investment and containing operating instructions and (iv) specimen signatures of authorised signatories. Applications under Power of Attorney A certified true copy of the power of attorney or the relevant authority as the case may be alongwith the names and specimen signature(s) of all the authorized signatories and the tax exemption certificate/ document, if any, must be lodged alongwith the submission of the completed Application Form. Further modifications/ additions in the power of attorney or authority should be notified to the company or to its Registrars or to such other person(s) at such other address(es) as may be specified by the from time to time through a suitable communication. Application by Mutual Funds In case of applications by Mutual Funds, a separate application must be made in respect of each scheme of an Indian Mutual Fund registered with SEBI and such applications will not be treated as multiple applications, provided that the application made by the Asset Management company/ Trustees/ Custodian clearly indicate their intention as to the scheme for which the application has been made. Future Borrowings The company shall be entitled to borrow/ raise loans or avail of financial assistance in whatever form as also issue Bonds/ Debentures/ Notes/ other securities in any manner with ranking as pari-passu basis or otherwise and to change its capital structure, including issue of shares of any class or redemption or reduction of any class of paid up capital, on such terms and conditions as the may think appropriate, without the consent of, or intimation to, the Debentureholder(s) or the Trustees in this connection. Debentureholder not a Shareholder The Debentureholders will not be entitled to any of the rights and privileges available to the Shareholders. Rights of Debentureholders Other than receipt of interest and payment of principal, the Debentureholders will not be entitled to any other rights and privileges. Right to Re-Purchase and Re-Issue the Bonds The Company will have the power exercisable at its absolute discretion from time to time to repurchase some or all of its Bonds in the secondary markets prior to the specified date of redemption. In the event of the Bonds being bought back, or redeemed before maturity in any circumstances whatsoever, the company shall be deemed to have always had the right to re-issue the Bonds. Succession In the event of winding-up of the holder of the Bond(s), the will recognize the executor or administrator of the concerned Debentureholder(s), or the other legal representative as having title to the Bond(s). The company shall not be bound to recognize such executor or administrator or other legal representative as having title to the Bond(s), unless such executor or administrator obtains probate or letter of administration or other legal representation, as the case may be, from a Court in India having jurisdiction over the matter.


KSIIDC

The company may, in their absolute discretion, where they think fit, dispense with production of probate or letter of administration or other legal representation, in order to recognize such holder as being entitled to the Bond(s) standing in the name of the concerned Debentureholder on production of sufficient documentary proof or indemnity. Notices All notices to the Debentureholder(s) required to be given by the company or the Trustees shall be published in one English and one regional language daily newspaper in Mumbai, New Delhi, Chennai and Kolkata and/ or, will be sent by post/ courier to the sole/ first allottee or sole/ first Beneficial Owner of the Bonds, as the case may be from time to time. All notice(s) to be given by the Debentureholder(s) shall be sent by registered post or by hand delivery to the or to such persons at such address as may be notified by the from time to time through suitable communication. Joint-Holders Where two or more persons are holders of any Bond(s), they shall be deemed to hold the same as joint tenants with benefits of survivorship subject to other provisions contained in the Articles. Sharing of Information The company may, at its option, use on its own, as well as exchange, share or part with any financial or other information about the Debentureholders available with the company, with its subsidiaries and affiliates and other company’ s, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither the or its subsidiaries and affiliates nor their agents shall be liable for use of the aforesaid information. Undertaking by the Issuer The Issuer undertakes that: a) the complaints received in respect of the Issue shall be attended to by the issuer expeditiously and satisfactorily; b) it shall take all steps for completion of formalities for listing and commencement of trading at all the concerned stock

exchange(s) where securities are to be listed and taken within 7 working days of the deemed date of allotment. c) the funds required for despatch of refund orders by registered post shall be made available to the Registrar to the Issue by the

Issuer ; d) no further issue of securities shall be made till the securities offered through this offer document are listed or till the application

moneys are refunded on account of non-listing, under-subscription, etc; e) necessary co-operation to the credit rating agency(ies) shall be extended in providing true and adequate information till the debt

obligations in respect of the instrument are outstanding. SPECIAL TAX BENEFITS To the Issuer There is no additional benefit arising to the Issuer under the Income Tax Act 1961 by issue of Unsecured Redeemable Non Convertible Bonds. To the Debentureholders Under Income Tax Act, 1961 Under the existing provisions of the Income Tax Act, 1961 for the time being in force, the following tax benefits and deductions will be available to the Debentureholders of the Bank subject to the fulfillment of the requirements of the relevant provisions. The tax benefits are given as per the prevailing tax laws and may vary from time to time in accordance with the amendments or enactment thereto. As alternate views are also possible, the Debentureholder(s) are advised to consult their own tax advisers on the tax implications of the acquisition, ownership and sale of Bonds, and income arising thereon.

I. To Resident Debentureholders No Income Tax will be deducted at source from interest payable on Bonds in the following cases: a. In case of payment of interest to a Debentureholder, who is an individual and resident in India, where the interest payment in

the aggregate during the financial year does not exceeds Rs. 2,500/-; b. Tax will be deducted at a lower rate where the Assessing Officer, on an application of any Debentureholder, issues a certificate

for deduction of tax at such lower rate as per provisions of the Section 197(1) of the Income Tax Act. In all other situations, tax would be deducted at source on each payment as per prevailing provisions of the Income Tax Act. Details on deduction of tax at source are given under para ‘Tax Deduction at Source (TDS)’ mentioned elsewhere in this Information Memorandum. No Wealth Tax is payable in respect of investments in Bonds of the Bank. II. To the other Eligible Institutions a. Mutual Funds registered under the SEBI Act or regulations made thereunder or such other mutual fund sets up by public

sector bank or public financial institution or authorised by Reserve Bank of India and notified by the Central Government will, subject to the provisions of Chapter XII-E, be exempted from income tax on all their income, including from investment in Bonds under the provisions of Section 10(23D) of Income Tax Act.

b. Section 10(25) of the Income Tax Act, inter alia, exempts from tax, any income received by the Recognized Provident Funds, approved Superannuation Funds or approved Gratuity Funds.

c. No Wealth Tax is payable in respect of investments in Bonds of the Bank. Notes: The stated benefits will be available only to the sole/ first named holder in case the bonds are held by joint holders.


KSIIDC

IV. COMPANY & MANAGEMENT Incorporation & Status The Karnataka State Industrial Investment & Development Corporation Ltd. (KSIIDC) was set up in 1964 by the Government of Karnataka to act as a catalyst for promoting industrial growth in the State. KSIIDC is wholly owned by Government of Karnataka. KSIIDC qualifies as a Public Sector Undertaking for the purpose of investment in its securities by all eligible categories of investors. Registration with Reserve Bank of India KSIIDC is also registered as Non-Banking Finance Company with the Reserve Bank of India vide RBI letter No. DNBS (BG) 3530 /09.01.04/97-98 dated April 15, 1998. Funds Mobilised KSIIDC has an outstanding amount of Rs. 162.09 Crores (Approx.) raised through private placement of bonds since its incorporation. Besides this, KSIIDC has Rs. 702.65 Crores (approx) through Term Loans. PRIMARY ACTIVITIES The main objects of KSIIDC, inter alia, as contained in its Memorandum of Association are: 1. To promote, improve, establish and execute industries, projects or enterprises for manufacture and production of plant,

machinery, tools, implements, materials or substances of any description whatsoever which in the opinion of the Company are likely to promote or advance the industrial development of Karnataka.

2. To promote, establish and execute industries, projects or enterprises for manufacture of goods, materials, substances or things of any description whatsoever which in the opinion of the company are likely to promote or advance the industrial development of Karnataka.

3. To aid, make loans or advances, assist and finance any industrial undertakings, projects or enterprises, whether owned or run by Government, statutory body, company, firm or individual with capital, credit, means or resources for prosecution of its work and business.

4. To underwrite the issue of stock, shares, bonds or debentures by industrial, trading or other concerns. 5. To retain as part of its investments any stock, shares, bonds or debentures which it may have to take up in fulfillment of its

underwriting liabilities until otherwise determined to dispose of those investments. 6. To guarantee on such terms and conditions as may be agreed upon, of loans raised by industrial, trading or other concerns. 7. To plan, formulate and execute projects for setting up industries or developing lines of production in the State. 8. To promote and operate schemes for Industrial Development of Karnataka and for that purpose to prepare and get or cause to

be prepared reports, blue prints, statistics and other information. 9. To promote other companies, firms, establishments, concerns or undertakings for any purpose calculated to benefit the

company. 10. To promote and establish companies and associations for the prosecution or execution of industrial undertakings, works,

projects and enterprises of any description, whether of a private or public character, which in the opinion of the Company would contribute to the industrial development of Karnataka, and to acquire and dispose of shares and interest in such companies or associations or in any other companies or associations or in the undertakings thereof.

10a. To engage in the business of management of security offering/ issue of corporate bodies including making arrangements for selling or buying or subscribing to or dealing insecurities, preparation of offer documents/ prospectus / letters of offer, tying up with other intermediaries in securities, rendering corporate advisory service, determining financial structure of issuer, to manage portfolio of securities, to handle allotment and refund of securities, to underwrite issues and to undertake all other matters connected with issue/ offering of securities.

10b. To carry on the business of Merchant Banking in all its branches and kind, to act as Managers to the issues, to act as financial consultants, to acquire and hold one or more memberships in stock/security exchanges, trade associations, commodity exchanges, clearing houses or associations or otherwise in India or any part of the world, to act as Brokers, Underwriters, Portfolio Managers, Registrars & Transfer Agents, Issue Agents & Paying Agents, Sponsors, Dealers and Agents in connection with securities.

10c. To buy, acquire, sell dispose of, exchange, convert, subscribe, participate, invest in and hold whether on its own account or on

behalf of any person, body corporate, company, society, firm or association of persons whether incorporated or not, shares, stocks, debentures, debenture-stocks, units, promissory notes, bills of exchange, bonds, warrants, participation certificates or participation units, other money market or capital market instruments, obligations and securities issued or guaranteed by any Government, State, Dominion, Sovereign Body Commission, Public Body or Authority, Supreme, Local or Municipal or Company or Body, whether incorporated or not or by any person or association.

10d. To acquire any such shares, stocks, debentures, debenture-stocks, units, promissory notes, bills of exchange, bonds,

warrants, participation certificates or participation units, other money market or capital market instruments, obligations and securities by original subscription, participation in syndicates, tender, purchase, exchange or otherwise and to subscribe for or acquire the same either conditionally or otherwise and to guarantee the subscription thereof for a commission or otherwise and to exercise and enforce all rights and powers conferred by or incidental to the ownership thereof.

10e. To provide or assist in obtaining directly or indirectly, advice or services in various fields such as management, finance, investment, technology, administration, commerce, law, economics, labour, human resource development, industry, public relations, statistics, science, computers, accountancy, taxation, fund management, foreign exchange dealings, quality control, processing, strategic planning and valuation, prepare projects and feasibility reports for and on behalf of any company, association, society, firm, trust, individual or body corporate.

10f. To give advice on, or to offer, give, take, circulate and / or otherwise organise, accept or implement any takeover bids, mergers, amalgamations, acquisitions, diversification, spinning off, consolidation, rehabilitation or restructuring of any business, concern, undertaking, company, body corporate, partnership firm or any other association of persons whether incorporated or not, by acquisition of shares or assets and / or liabilities and whether as a going concern or as a part of the concern or otherwise as may be deemed fit having regard to business exigencies.


KSIIDC

10g. To perform and undertake activities pertaining to leasing, giving on hire or hire-purchase, asset credit, installment sale and /or deferred sale and providing financial assistance by means of leasing, giving on hire or hire-purchase, lending, selling, reselling or otherwise disposing of all forms of immovable and moveable properties and assets such as buildings, godowns, warehouses and real estate of any kind, nature or user whatsoever and all types of industrial, office and other plant, equipment and machinery, heavy or medium industrial machinery, computers, electronic data processors, tabulators, air-conditioners, medical equipment or any system and any other items of any kind, nature or user whatsoever whether industrial or consumer, and all types of vehicles, ships or aircrafts and any other property of any kind, nature or user whatsoever and whether required for manufacturing, processing, marketing, transporting, trading or any other commercial or service business and for this purpose, purchasing or otherwise acquiring dominion over the same whether new or used.

10h. To establish, maintain, operate and manage whether directly or through other agencies like subsidiaries or other companies, bodies corporate, trusts or persons, Mutual Funds and Venture Capital Funds.

10i. To provide custodial and depository services and to do all such things as may be required for this purpose. 10j. To sponsor such eligible companies as may be thought fit on the Over the Counter Exchange of India or on any other

Exchanges whether in or outside India and to initially place securities, act as market maker and dealer and do all such things as may be necessary, permitted or advisable to do.

10k. Subject to the permission of Reserve Bank of India and other authorities where required, to act as foreign exchange dealer and to buy, sell or otherwise deal in all kinds of foreign currencies, foreign currency options, forward covers, swaps of all kinds and to transact for itself or on behalf of any person, body corporate, company, society, firm or association of persons, whether incorporated or not, all transactions in foreign currencies.

10l. To carry on the activities of bills discounting, re-discounting bills, marketing, factoring, dealing in commercial paper, treasury bills, certificate of deposits and other financial instruments.

10m. To act as trustee of any deed constituting or securing any debentures, debentures-stocks, bonds, promissory notes or any other negotiable or marketable instruments or other securities or obligations and to undertake and execute any other trusts and also to undertake the office of or exercise the powers of executor, administrator, receiver, treasurer, custodian and trust corporation, so however, not to act as an Asset Management Company.

11. To establish, promote, develop, purchase, take on lese or in exchange or under amalgamation, license or concession or otherwise acquire factories, industrial concerns, manufacturing concerns, mines benefication and mineral dressing, concentration and refining plants, chemical and other industrial plants, lands, buildings, workshops, power houses, plants and equipments machinery, sidings, loco works and any rights and privileges or interest therein and to explore, prospect, work, develop, administer, manager or control and to turn to account the same.

12. To acquire by lease, grant, assignment, transfer or otherwise any grants or concessions of any minerals field mines mineral and mine contracts, works and premises from any person, corporation, company, Government or local authority in the State of Karnataka or elsewhere, and to perform and fulfill the conditions thereof.

13. To carry on all kinds of exploration business, and in particular to search for, prospect, examine and explore mines and ground supposed to contain minerals or precious stones and to search for and obtain information in regard to mines, mining claims, mining districts and localities and to purchase or otherwise acquire, and to sell, dispose of, and deal with mines and mining rights, and property supposed to contain minerals or precious stones of all kinds, and undertakings connected therewith and to work, exercise, develop and turn to account mines and mining rights, and any undertakings connected therewith, and to buy, sell, refine, manipulate and deal in minerals of all kinds.

14. To purchase by agreement or to take on lease or under any form of tenancy any land, to erect such buildings and to execute such other works as may be necessary for the purpose of carrying out its duties and functions.

15. To develop land on its own account or for the State Government for the purpose of facilitating the location of industries thereon. 16. To develop industrial areas selected by the State Government for the purpose and make them available for the undertakings to

establish themselves. 17. To manufacture, assemble, acquire, install, work, maintain, repair, alter, prepare for market, store, sell, buy, let or hire, import

or export and otherwise deal in all kinds of articles and things (including all kinds of plant and machinery, engines, equipments, appliances, conveyances, component parts, fittings, tools, implements, accessories rolling stock, apparatus, materials and all articles and things used or capable of being used in connection therewith in any way whatsoever) which may be required for the purpose of any business of the company or are commonly supplied or dealt in by persons engaged in any such business and which may be capable of being profitably dealt with in connection with any of the business of the Company.

18. To employ and remunerate experts to investigate and examine into the condition, prospects, value, character, and circumstances, of any business or industrial concern and undertaking, and generally or any assets, property, or rights.

19. To construct, execute, carry out, equip, improve, work, purchase or otherwise acquire, lease, develop, administer, manage or control in the State of Karnataka or elsewhere works and conveniences of all kinds which expression in the Memorandum includes factories, industrial concerns, manufacturing concerns, mines beneficiations, minerals dressing, concentration and refining plants, quarries, barrages, dams, sluices locks, embankments, moles, break-waters, docks, quarry’s, harbors, piers, wharves, canals, tanks, bridges, aqueducts, reservoirs, irrigations, reclamation improvement, river- works of all kinds, railways, ropeways, tramways, roads, sewage, drainage, sanitary, paving, water, gas, electric light, telephonic, telegraphic, wireless telegraphic, hydro – electric, and power supply works, and hotels and warehouses, markets and buildings, private or public workers quarters and houses, villages, sheds, dwellings, offices, shops and stores, and all other works or conveniences whatsoever.

20. To sink wells and shafts, lay down pipes, construct, maintain and improve any tramways, telegraph and telephone lines, wharves, piers, docks, canals, reservoirs, watercourses, warehouses, sheds and other buildings and works calculated directly or indirectly to advance the interests of the Company and to pay or contribute to the expenses of construction, maintaining and improving any such works.

21. To carry on the business of engineers and manufacturers of agricultural and other machinery, plants, implements, and tools, equipments, apparatuses and accessories, rolling stock and other like goods and the production and working of metals and minerals of all kinds and the production, manufacture and preparation of any other materials which may be usefully or conveniently combined with the engineering or manufacturing business of the Company.

22. Subject to the provisions of Section 293 of the Act, to sell, dispose of or transfer any industrial undertakings, projects or factory to any company or association or concern on such terms and conditions as may be determined by the Company.

23. Subject to the provisions of Section 372 of the Act, to invest the capital of the company in or to deal with shares, stocks, bonds, debentures, obligations and other securities of any company or association formed for establishing, executing or working of any industrial undertaking by the company.

24. To direct the management, control and supervision of any company, association or concern by nominating directors, controllers, supervisors, advisers or otherwise, or collaborate with any company or association or concern formed for carrying on any manufacturing or other business within the objects of the Company.

25. To enter into any partnership or arrangement for joint working in or business, sharing profits, pooling of any industrial undertaking, joint adventure or reciprocal concession or amalgamation, with any other company, firm or person, carrying on or engaged in any manufacture or other business within the objects of this Company or similar thereto.


KSIIDC

26. To establish, promote, subsidize and otherwise assist, any company or companies, syndicate or other concern for the purpose of setting up any industry or running any industrial undertaking, acquiring any property or furthering any of the objects of this Company.

27. Subject to the provision of Section 293 of the Act to sell, dispose of, let on lease or on hire or transfer the business, property, assets and undertakings of the Company, or any part thereof, for cash, stock, or shares of any other Company or for any other consideration which the Company may deem fit to accept.

28. To sell, improve, manage, develop, exchange, lease, mortgage, enfranchise, dispose of, turn to account, or otherwise deal with all or any part of the property, and rights of the Company.

29. To pay for any lands, business, property, assets or rights acquired by the Company, wholly or partially in shares, debentures or other securities or obligations of the Company or belonging to the Company, and whether fully or partly paid, and as part of the terms of any such purchase or otherwise to grant options upon any unissued shares of the Company.

30. To accept stock or shares in, or the debentures, mortgage debentures or other securities of any other Company in payment or part payment for any services rendered or for any sale made to or debt owing from any such Company.

31. Subject to the provisions of Section 370 of the Act, to grant or guarantee loans or advances to any company, association, or concern engaged in any industry or to assist its development or expansion or to enable it to undertake and start a new industry approved by the Company.

32. To carry on any other business (whether manufacturing or otherwise) which may seem to the Company capable of being conveniently carried on in connection with the above or calculated directly or indirectly to enhance the value of or rendered profitable any of the Company’s property or rights.

33. To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company, carrying on any business which the company is authorized to carry on , or possessed of property suitable for the purposes of this Company.

34. To pay all costs, charges, and expenses incurred or sustained in or about the promotion and establishment of the Company, or which the Company shall consider to be in the nature of preliminary expenses including therein the cost of advertising commissions, and brokerage for placing or assisting to place shares or debentures, brokerage, printing and stationery and expenses attended upon the formation of agencies.

35. Upon any issue of shares, debentures or other securities of the Company to employ brokers, commission agents and underwriters and to provide of the Remuneration of such persons for their services by payment in cash, or by the issue of charges, debentures or other securities of the Company, or by the granting of options to take the same, or in any other manner allowed by law.

36. Generally to purchase, take on lease or exchange, hire or otherwise acquire any real or personal property and any rights or privileges which the company may think necessary or convenient for the purposes of its business and in particular any land, building, easements, plants, and stock-in-trade.

37. To construct, maintain, and alter any buildings, or works necessary or convenient for the purpose of the Company. 38. To construct, improve, maintain, develop, work, manage, carry out or control any roadways, tramways, railways, branches or

sidings, bridges, reservoirs, water courses, wharves, manufactories, warehouses, electric works shops, stores and other works and conveniences, which may seem calculated directly or indirectly to advance the company’s interest, and to contribute to, subsidize or otherwise assist take part in the construction, improvement, maintenance, working, management, carrying out or control thereof.

39. To develop and turn to account any land acquired by the Company or in which it is interested, and in particular by laying out and preparing the same for building purposes, constructing, altering, pulling down, decorating, maintaining, fitting up, and improving buildings and by planting, paving, draining (framing, cultivating and letting on buildings lease or building agreement) and by advancing money to and entering into contracts and arrangements of all kinds with builders and others.

40. To apply for and take out, purchase or otherwise acquire any trade mark, patents, patent rights, invention, copy right, designs or secret processes, which may be useful for the Company’s objects, and to grant licenses to use the same, and to work, develop, carry out, exercise and turn to account the same.

41. To enter into any arrangements and Government of Karnataka or any other Government or State, or local authority for the purpose of carrying out the objects of the company or furthering its interests and to obtain from such Government or Authority or person any charters, subsidies, loans, indemnities, grants, contracts, licenses, rights, concessions, privilege or immunities which the Company may think it desirable to obtain and exercise, and comply with any such arrangements, rights, privileges and concessions.

42. To manufacture, buy, sell, import, export, install, work and generally deal in, any plant, machinery, substances, tools, materials, goods or things or any description, which in the opinion of the Company may be conveniently dealt with by the Company in connection with any of its objects.

43. To issue or guarantee the issue of, or the payment of interest on the shares, debentures, debenture stock, or other securities or obligations of any company or association and to pay or provide for brokerage commission and underwriting in respect of any such issue.

44. To draw, make accept endorse, discount, negotiate and execute and to buy, sell and deal in promissory notices, bills of exchange, bills of lading and other negotiable or transferable instruments.

45. To borrow or raise or secure the payment of money by the issue of debentures, debenture – stocks, bonds, obligations, and securities of all kinds and to frame, constitute and secure the same as may seem expedient, with full power to make the same transferable by delivery or by instrument of transfer or otherwise and eight perpetual or terminable and either redeemable or otherwise, and to charge or secure the same by trust deed or otherwise, on the undertaking of the company or upon any specific property and rights, present and future, of the company (including its uncalled capital), or otherwise howsoever, and collaterally or further to secure any securities of the company by a trust deed or other assurance.

46. To receive grants, loans, advances or other moneys or deposit, or otherwise from State or Central Government, Banks, Companies, Trust, or individuals with or without allowance of interest thereon.

47. To lend money to such persons or companies on such terms as may seem expedient and in particular to customers and others having dealings with the Company, and to guarantee the performance of contracts by any such persons or companies, provided that such lending shall not be for the purpose of Banking business.

48. To invest the moneys of the Company, not immediately required, in such manner, other than in the shares of this Company, as from time to time may be determined.

49. To acquire by subscription, purchase or otherwise, and to accept and take hold and sell, shares or stock in any company, society or undertaking, the objects of which shall, either in whole or in part be similar to those of this Company or such as may be likely to directly or indirectly promote or advance the interests of this Company.

50. To establish, maintain, subscribe to or subsidize or become member of training institutions, research laboratories, research institutions and experimental workshop for scientific and technical research and experiments.

51. To install and work, pilot, prototype or semi scale units or full commercial plants to develop a particular invention or inventions.


KSIIDC

52. To carry on the business of carriers by land. 53. To act as agent for Government or other authorities or any manufacturers, merchants, and others and to transact and carry on

agency business of every kind and of any description. 54. To employ or pay experts, foreign consultants etc., in connection with the planning and development of all or any of the

business connected with the Company’s operations. 55. To create and depreciation fund, reserve funds, sinking fund, insurance fund , or any special or other fund whether for

depreciation or for repairing, replacing, improving, extending, or maintaining any of the property of the company or for redemption of debentures or redeemable preference shares or for special dividends or for equalizing dividends or for any other purpose whatsoever, and to transfer any such fund or part thereof to any of the other funds herein mentioned.

56. To use trade marks or trade names or brands for the products and goods of the company and adopt such means of making known the business and products of the Company or of any company in which this company is interested as may seem expedient and in particular by advertising in newspapers, magazines, periodicals by circulars, by purchase and exhibition of works of art or interest by opening stalls and exhibitions, by publication, and distribution of books and periodicals, calendars, almanacs and diaries, by distributing samples and by granting prizes, rewards and donations.

57. To apply the assets of the Company in any way in or towards the establishment maintenance or extension of any association, institutions or fund in any way connected with any particular trade or business or scientific research industry or commerce.

58. To appropriate, use or let out land belonging to the Company for streets, parks, pleasure grounds, allotments and other conveniences and to present any such land so laid out to the public or to any persons or company conditionally or unconditionally as the company thinks fit.

59. To establish, maintain and operate general educational institutions and hostels for the benefit of the children of the employees or ex-employees of the company, their dependents or connections of such persons and others and to make grants and awards and grant scholarships.

60. To establish maintain and operate technical training institutions and hostels for technical staff of all categories, and to make such other arrangements as may be expedient for the training of all categories of officers, workers, clerks, technical and other personnel likely to be useful to or assist any business which the company is authorised to carry on.

61. To acquire or to take over with or without consideration and carry on the business of secretaries and treasurers, agents or managing agents by themselves or in partnership with other company or partnership or concern, whose objects may be similar, in part or in whole, to those of company.

62. To let out on lease or on hire, all or any of the property of the Company either immovable or movable including and all every description of apparatus or appliances.

63. Subject to the provisions of Section 293(1)(e) of the Act, to grant funds, annuities, pensions, allowances, gratuities and bonuses to any employees or ex-employees (including Directors and ex-Directors) of the Company or their relations, connections or dependents of any such persons or its predecessors in business and to establish or support any such persons or its predecessors in business and to establish or support associations, institutions, clubs, schools, hospitals, dispensaries, canteens, hotels, restaurants, houses, dwellings, chawls, funds, schemes and trusts (religious, scientific, educational, provident or otherwise) which may be considered calculated to benefit any such persons or the public or otherwise advance the interests of the Company or of its members and to establish and contribute to any scheme for the purchase by trustee of shares in the company to be held for the benefit of the company’s employees and to lend money to the Company’s employees to enable them to purchase shares of the Company and ot formulate and carry into effect any scheme for sharing the profit of the Company with its employees or any of them and to subscribe or guarantee money for charitable or benevolent objects of funds or objects of the public or useful character or earmark a portion of the profits of the company or create a fund or funds for any such objects or purposes.

64. To establish agencies in India and elsewhere and to regulate and discontinue the same. 65. The Company will have the power to apply for any act of parliament or of the State Legislature either of the State of Karnataka

or any other State in the Indian Union for any purpose, which may seem expedient to the Company. 66. Generally to do all such other matters and things as may appear to be incidental or conducive to the obtainment of the above

objects or any of them or consequential upon the exercise of its powers or discharge of its duties. 67. The above mentioned objects of this Company will extend to the Sate of Karnataka, to every other State in the Indian Union

and also to territories beyond the Indian Union.


KSIIDC

Dates and details of changes in the Memorandum and Articles of Association of the Company Date of Amendment Clause No. of Memorandum &

Articles of Association Description of Amended Clause of memorandum & Articles of

Association 29-09-1993 (29th AGM)


The Authorised Share Capital of the company enhanced from Rs. 50,00,00,000 to Rs. 100,00,00,000 divided into 100,00,000 equity shares of Rs. 100/- each.

Clause-III 10a. To engage in the business of management of security offering/

issue of corporate bodies including making arrangements for selling or buying or subscribing to or dealing in securities, preparation of offer documents/ prospectus/ letters of offer, tying up with other intermediaries in securities rendering corporate advisory services, determining financial structure of issuer, to manage portfolio of securities, to handle allotment and refund of securities, to underwrite issues and to undertake all other matters connected with issue/ offering of securities.

10b. To carry on the business of Merchant Banking in all its branches and kind, to act as Managers to the issues, to act as financial consultants, to acquire and hold one or more membership in exchanges, trade associations, commodity exchanges, clearing houses or associations or otherwise in India or any part of the world to act as Brokers, Underwriters, Portfolio Managers, Registrars & Transfer Agents, Issue Agents & Paying Agents, Sponsors, Dealers and Agents in connection with securities.

10c. To buy, acquire, sell dispose of, exchange, convert, subscribe, participate, invest in and hold whether on its own account or on behalf of any person, body corporate, company, society, firm or association of persons whether incorporated or not, shares, stocks, debentures, debenture-stocks, units, promissory notes, bills of exchange, bonds, warrants, participation certificates or participation units, other money market or capital market instruments, obligations and securities issued or guaranteed by any Government, State, Dominion, Sovereign Body Commission, Public Body or Authority, Supreme, Local or Municipal or Company or Body, whether incorporated or not or by any person or association.

10d. To acquire any such shares, stocks, debentures, debenture-stocks, units, promissory notes, bills of exchange, bonds warrants, participation certificates or participation units, other money market or capital market instruments, obligations and securities by original subscription, participation in syndicates, tender, purchase, exchange or otherwise and to subscribe for or acquire the same either conditionally or otherwise and to guarantee the subscription thereof for a commission or otherwise and to exercise and enforce all rights and powers conferred by or incidental to the ownership thereof.

10e. To provide or assist in obtaining directly or indirectly, advise or services in various fields such as management, finance, investment, technology, administration, commerce, law, economics, labour, human resource development, industry, public relations, statistics, science, computers, accountancy, taxation, fund management, foreign exchange dealings, quality control processing, strategic planning and valuation, prepare projects and feasibility reports for and on behalf of any company, associations, society, firm, trust, individual or body corporate.

30-06-1995 (EGM)

Memorandum of Association

10f. To give advise on or to offer, give, take circulate and/or otherwise organise, accept or implement any take over bids, mergers, amalgamations, acquisitions, diversifications, spinning off, consolidation, rehabilitation or restructuring of any business, concern, undertaking, company, body corporate, partnership firm or any other association of persons whether incorporate or not, by acquisition of shares or assets and/ or liabilities and whether as a going concern or as a part of the concern or otherwise as may be deemed fit having regard to business exigencies.


KSIIDC

10g. The perform and undertake activities pertaining to leasing, giving on hire or hire-purchase, asset credit, installment sale and/ or deferred sale and providing financial assistance by means of leasing, giving on hire or hire-purchase, lending, selling, reselling or otherwise disposing of all forms of immovable and moveable properties and assets such as buildings, godowns, warehouses and real estate of any kind, nature or user whatsoever and all types of industrial, office and other plant, equipment and machinery, heavy or medium industrial machinery, computers, electronic data processors, tabulators, air-conditioners, medical equipment or any system and any other items of any kind, nature or user whatsoever whether industrial or consumer, and all types of vehicles, ships or aircrafts and any other property of any kind, nature or user whatsoever and whether required for manufacturing, processing, marketing, transporting, trading or any other commercial or service business and for this purpose, purchasing or otherwise acquiring dominion over the same whether new or used.

10h. To establish, maintain, operate and manage whether directly or through other agencies like subsidiaries or other companies, bodies corporate, trusts or persons, Mutual Funds and Venture Capital Funds.

10i. To provide custodial and depository services and to do all such things as may be required for this purpose.

10j. To sponsor such eligible companies as may be thought fit on the Over the Counter Exchange of India or on any other Exchanges whether in or outside India and to initially place securities, act as market maker and dealer and do all such things as may be necessary, permitted or advisable to do.

10k. Subject to the permission of Reserve Bank of India and other authorities where required, to act as foreign exchange dealer and to buy, sell or otherwise deal in all kinds of foreign currencies, foreign currency options, forward covers, swaps of all kinds and to transact for itself or on behalf of any person, body corporate, company, society, firm or association of persons, whether incorporated or not, all transactions in foreign currencies.

10l. To carry on the activities of bills discounting, re-discounting bills, marketing, factoring, dealing in commercial paper, treasury bills, certificate of deposits and other financial instruments.

10m. To act as trustee of any deed constituting or securing any debentures, debentures-stocks, bonds, promissory notes or any other negotiable or marketable instruments or other securities or obligations and to undertake and execute any other trusts and also to undertake the office of or exercise the powers of executor, administrator, receiver, treasurer, custodian and trust corporation, so however, not to act as an Asset management Company.

29-03-1997 (EGM)


The Authorised Share Capital of the company enhanced from Rs. 100,00,00,000/- (Rupees One Hundred Crores) to Rs. 130,00,00,000/- (Rupees One Hundred Thirty Crores only) divided into 8,00,00,000 (Eight Crores) equity shares of Rs. 10/- (Rupees Ten Only) each and 5,00,00,000 (Five Crores) Redeemable Preference Shares of Rs. 10/- (Rupees Ten only) each.

27-03-1998 (At the EGM)


The Authorised Share Capital of the company enhanced from Rs. 130,00,00,000/- (Rupees One Hundred Thirty Crores) to Rs. 160,00,00,000/- (Rupees One Hundred Sixty Crores only) dividend into 8,00,00,000 (Eight Crores) equity shares of Rs. 10/- (Rupees Ten only) each and 8,00,00,000 (Five Crores) Redeemable Preference Shares of Rs. 10 (Rupees Ten only) each.

28-03-2002 (EGM)


The Authorised Share Capital of the company enhanced from Rs. 160,00,00,000/- (Rupees One Hundred Sixty Crores) to Rs. 200,00,00,000/- (Rupees Two Hundred Crores only) dividend into 20,00,00,000 (Twenty Crores) equity shares of Rs. 10/- (Rupees Ten only) each.


KSIIDC

80 (4) The Directors for the time being of the company may, with the approval of the Government, be paid a sitting fee not exceeding Rs. 250 per sitting with a daily allowance and travelling allowance at such rates as the Board in consultation with the Government may decide in that behalf. If any director shall be appointed to advise the Board as an expert or be called upon to perform extra services or make special exertions for any of the purposes of the company the Board may, in consultation with the Government and subject to the provisions of Section 314 of the Act, pay to such director such special remuneration may be in the form of either salary, commission or percentage of profits and may be either in addition to or in substitution of the remuneration specified in this Article. “Nothing contained in this Article preclude the Board of Directors form reimbursing any actual expenses incurred by any Director in connection with the business of the company."

28-03-2003 (EGM)

Article 80(4) & 95 Articles of Association

95. The Directors will reserve for the decision of the Government any programme of capital expenditure exceeding Rs. 3 crores (Rupees three crores)

30-09-2004 (At the 40th AGM)


The Authorised Share Capital of the company enhanced from Rs. 200,00,00,000/- (Rupees Two Hundred Crores) to Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores only) dividend into 25,00,00,000 (Twenty Five Crores) equity shares of Rs. 10/- (Rupees Ten only) each.

BUSINESS KSIIDC acts as the designated agency of the Government for specified purposes. It acts as a catalyst for promoting industrial growth in the state specially in the Medium and Large Sector. The main objective of KSIIDC is to act as the State Level Developmental Financial Institution – commenced equity investments from inception and lending operations from 1978. The thrust of KSIIDC’s activities has been in line with the stated objectives in its memorandum of association as aforesaid. KSIIDC proposes to maintain this thrust to all types of Industries in the State in various sectors including agro-processing, granite, acquaculture, floriculture, resorts and textile etc. PROMOTIONAL AND DEVELOPMENTAL ACTIVITIES The major promotional and developmental activities undertaken by the Corporation during the year were as follows: i) Business Promotion: a) Pro-Food Exhibition and Conference: During September 2004, KSIIDC in association with Food Karnataka Limited organized the Pro-Food exhibition and the

Conference on Agro Food Processing in Bangalore. b) Pravasi Bharatiya Divas: The Government had appointed KSIIDC as the Nodal Agency to organize the State Pavilion and also the State Business

Promotion meet at the Pravasi Bharatiya Divas held on the 7th to 9th January 2005 at Mumbai. Over 300 NRI delegates from overseas visited the State Pavilion and the State Business promotion meet was attended by about 100 NRI delegates across the globe.

c) Business Delegation: The Corporation co-ordinated the visit of two business delegations from the global Organization of People of Indian Origin

(GOPIO), Malaysia to Karnataka. d) Food Karnataka Limited: KSIIDC was actively involved in the administration of Food Karnataka Limited, a Special Purpose Vehicle promoted by the

State Government Agencies for the development and implementation of Agro Food Parks in various locations of the State viz., malur, Hiriyur, Bagalkot, Maddur, Jewargi and Belgaum in the Joint venture through Public-Private Partnership.

The Joint Venture agreement in respect of all the Agro Food Parks was concluded during August 2004. Implementation work in respect of Hiriyur Agro Food Parks has recently commenced. Work in respect of Malur and Bagalkot Agro Food Park is expected to commence during August 2005. After resolving the issue fixation of land price, the work is expected to commence in respect of the other Parks.

BANGALORE INTERNATIONAL AIRPORT (BIA) The new international airport project, which is the country’s first evergreen field airport developed as a Public Private Partnership, has achieved some of the major milestones during this year, as detailed below: The Concession Agreement between BIAL & GoI was finally signed on 05.07.2004, thus paving the way for concluding other important agreements. Private lands to the extent of 2469 acres 1.5 guntas, which were acquired by KIADB, were transferred by KIADB to KSIIDC through a Sale Deed on 08.10.2004. With this, major task of assembling 4266 acres 27.5 guntas of land by KSIIDC for the airport project was completed (taking into account the government lands of 403 acres 06 guntas of land transferred to KSIIDC by mutation and Forestlands of 1394 acres 20 guntas on a perennial lease basis). Of this, KSIIDC transferred 3884 acres 25 guntas of land to BIAL on 30.04.2005 through a registered Lease Deed, as per the directions of GoK.


KSIIDC

The other major agreements viz, State Support Agreement between GoK and BIAL extending State Financial Support of Rs. 350 crores was signed on 20.01.2005. This was followed by signing of following other agreements: EPC Agreement with the Contractors was executed on 11.03.2005/CNS/ATM Agreement was executed on 06.04.2005. Operation & Management Agreement with Unique Zurich was executed on 08.04.2005. The project cost was firmed up at Rs. 1411.70 crores. Based on this, ICICI Bank, (the financial arranger) sanctioned a debt of Rs. 735.09 crores. Execution of financing agreements with ICICI Bank was completed in April 2005. GoK had requested KSIIDC to procure Bank Guarantee from State Bank of India on its behalf, as required in the State Support Agreement, in favour of BIAL as security for timely release of State Financial Support (SFS) of Rs. 350 crores. Similar guarantee was also envisaged for the undisbursed equity commitment of Rs. 34.67 crores. The guarantee documents were signed in June 2005 and SBI issued guarantee to BIAL for the SFS of Rs. 350 crores on 22.06.2005 and for the undisbursed equity support of Rs. 35.67 crores on 25.06.2005. Duly taking into account the development taken place since signing of the Share Holders Agreement in January 2002, an Amended and Restated Shareholders Agreement was executed on June 10, 2005 by all the promoters. BIAL has achieved the Financial Close on 23.06.2005 and the first draw down of SFS of Rs. 45.71 crores, as committed by GoK, was released to BIAL on 07.07.2005. The construction activities have already begun at the site and the Airport opening Date is now scheduled for March 2008. As brought out, in the previous year’s report, the BIAP Cell constituted in KSIIDC continues to provide all the required back up services to the Project and to the Government of Karnataka on an on-going basis in a pro-active manner. URBAN INFRASTRUCTURE PROJECTS Notable progress has been achieved in the implementation of the Information Technology/ Bio-Technology Part at KSIIDC Industrial Area, Rajajinagar, Bangalore, After negotiations with the contractors, the escalation in the cost of construction has been firmed up. The contractors have since recommenced the construction activities and the work is in full swing. As per the revised implementation schedule, the construction is expected to be completed by May 2006. State Bank of India/ State Bank of Travancore have sanctioned a total Term Loan of Rs. 26 crores for the project and the documentation is in progress. Further, reputed marketing agencies like Knight Frank (India) Pvt. Ltd., DTZ; Equis (India) Real Estate Pvt. Ltd., Bearys Group etc. have evinced interest in marketing the space in the proposed park. MANAGEMENT The management of the affairs of KSIIDC vests in its Board of Directors. As empowered under the registered Articles of Association, the state government has appointed the directors in the following manner: Particulars of Directors on the Board of the Corporation as on August 29, 2005:

Sl. No.

Name Date of Appointment

Age Positions held in other Boards

01 Shri Nataraj Gokulram, I.A.S. Chairman

10-08-2005 55 CHAIRMANKarnataka Industrial Areas Development Board Government Tool Room & Training Centre Technical Consultancy Services Organisation of Karnataka Centre for Entrepreneurship Development of Karnataka DIRECTORThe Mysore paper Mills Limited Mysore Sales International Limited Mangalore Chemicals & Fertilizers Limited Jindal Vijayanagar Steel Limited Karnataka Trade Promotion Organisation Karnataka Soaps & Detergents Limited Karnataka Asset Management Co. Pvt. Limited Karnataka Trustee Co. Pvt. Limited Hassan Mangalore Rail Development Co. Limited Bangalore International Airport Limited

02 Shri Iravalli Mallegowda Vittala Murthy, I.A.S. Managing Director

08-11-2004 54 CHAIRMANKarnataka Asset management Co. Pvt. Limited Karnataka Trustee Co. Pvt. Limited Vijayanagar Steel Limited Food Karnataka Limited DIRECTORMysore Sales International Limited Karnataka Antibiotics & Pharmaceuticals Limited J. K. Industries Limited Murudeshwar Ceramics Limited Jindal Vijayanagar Steel Limited Mangalore Chemicals & Fertilizers Limited NGEF (Hubli) Limited


KSIIDC

03 Shri Sudhakar Rao, I.A.S. 12-01-2005 56 CHAIRMANKarnataka State Financial Corporation Karnataka State Beverages Corporation Limited DIRECTORKarnataka State Road Transport Corporation Karnataka Neeravari Nigam Limited Karnataka Power Corporation Limited Krishna Bhagya Jala Nigam Limited Mysore Sales International Limited Karnataka Power Transmission Corporation Ltd. Infrastructure Development Corporation Limited (Karnataka) Cauvery Neeravari Nigam Limited

04 Shri Barse Ramraje Jayaramaraje Urs, I.A.S.

12-01-2005 54 MANAGING DIRECTORKarnataka State Financial Corporation DIRECTORKarnataka State Small Industries Development Corporation Karnataka Asset Management Co. Pvt. Limited Karnataka Trustee Co. Pvt. Limited

05 Shri V. Masilamani Manogaran 19-05-2005 52 DIRECTORVishu Fabrics Limited BPL Soft Energy Systems Limited

06 Shri Daljit Mirchandani 29-06-2005 50 Nil

DETAILS OF SOURCES OF FUNDS (BORROWINGS) A summary of KSIIDC outstanding debt is given below: Bonds on Private Placement Basis as on 31st March, 2005

Sl. No.

Description KSIIDC Bond Series

Outstanding Amount (Rs. In crores)

Deemed Date of Allotment

Date of Put/ Call Option

Date of Maturity

1. 11.45% Bond 2006 50.00 01-12-2001 01/11/2006 01/12/2008 2. 11.50% 2008 Series No. 16 2.55 27-09-1988 Nil 27-09-2008 3. 11.50% 2009 Series No. 17 2.75 14-09-1989 Nil 14-09-2009 4. 11.50% 2010 Series No. 18 2.20 04-09-1990 Nil 04-09-2010 5. 12.00% 2011 Series No. 19 2.20 10-12-1991 Nil 10-12-2011 6. 13.00% 2007 Series No. 20 2.17 16-12-1993 Nil 14-12-2007 7. 12.55% Bonds 2005-2006 53.68 16-11-2000 16/10/2005 16/11/2007 8. 12.55% Bonds 2005-2006 15.58 10-01-2000 10/12/2005 10/01/2008 9. 13.00% Bonds 2006 30.96 15-03-2001 15/02/2006 15/03/2008 10. 13.00% Bonds 2006 0.22 15-03-2001 15/02/2006 15/03/2008 Total 162.09

Non-Bonds (Term Loans) Sl. No. Description Outstanding Amount as on 31st March 2005 1 Loans & Advances from Scheduled Banks

Syndicate Bank (WCTL) Rs. 99,061/- Vijaya Bank (TL) Rs. 32,296/- Rs. 1,31,357/-

2. HDFC Term Loan Rs. 25,00,00,000/-3. IDBI Rs. 399,98,91,889/-4. SIDBI Rs. 153,85,07,661/-5. Seed Capital Rs. 7,50,98,500/-6. Government of India Rs. 1,72,38,750/-7. Government of Karnataka Rs. 15,00,000/-5. HUDCO – (International Airport) Rs. 114,41,86,000/-TOTAL Rs. 702,64,22,800/-

1. The working Capital term loan/ Demand Loan, Term Loan and Overdraft / Cash Credit facility from Syndicate Bank is secured by way of floating charge on receivables, book debts and loans and advances of the Corporation.

2. Loan from Vijaya Bank is secured by hypothecation of book debts arising out of loan disbursed by the Corporation. 3. Repayment on the funds raised through Bonds has been Guaranteed by Government of Karnataka. 4. HDFC Term Loan repayment has been Guaranteed by Government of Karnataka. 5. HUDCO – (International Airport) – Repayment has been guaranteed by Government of Karnataka. 6. There has been no Inter Corporate Deposits in the year 2004-05 7. KSIIDC has obtained approval of negotiated settlement of dues payable to IDBI & SIDBI, the major creditors. 8. KSIIDC has a consistent record of paying principal and interest on bonds on due dates so there has been no delay in servicing

of Bonds. DETAILS OF DEPLOYMENT OF FUNDS SANCTIONS & DISBURSEMENT OF FINANCIAL ASSISTANCE (Rs. in crores)

SANCTIONS YEAR INVESTMENT TERM LOAN OTHERS TOTAL

2004-05 - - - - 2003-04 0.01 11.00 - 11.01 2002-03 - 23.57 - 23.57


KSIIDC

DISBURSEMENTS 2004-05 - 10.88 - 10.88 2003-04 6.89 18.71 2.16 27.76 2002-03 1.90 82.40 3.85 88.15

DEMAND AND RECOVERY (Rs. in crores) DEMAND

YEAR PRINCIPAL DEMAND INTEREST DEMAND TOTAL DEMAND 2004-05 161.52 900.39 1061.91 2003-04 215.95 710.21 926.16 2002-03 203.03 508.18 711.21

RECOVERIES YEAR PRINCIPAL RECOVERY INTEREST RECOVERY TOTAL RECOVERY

2004-05 70.92 41.33 112.25 2003-04 114.21 31.29 145.50 2002-03 95.10 55.17 150.27

There has been no fresh sanctions and consequent reduction in disbursements. The interest recovery was higher as compared to the previous year. The recovery has to be stepped up, for which, suitable strategies have been formulated. CAPITAL: (in %age)

PARTICULARS 2004-05 2003-04 a) CRAR -11.43 -23.69

Core CRAR -33.92 -23.71 Supplementary CRAR 22.49 0.02

b) Subordinated debt raised and outstanding as Tier II Capital – Rs. 15 lakhs c) Risk Weighted Assets:

PARTICULARS 2004-05 2003-04 i) On Balance sheet items 84829.22 93838.50 ii) Off Balance sheet items 5919.86 4915.54

CLASSIFICATION OF CREDIT EXPOSURE (Rs. in crores) Particulars 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Standard Assets 458.52 429.64 366.20 191.04 135.23Sub-Standard Assets 166.89 204.93 222.45 203.77 71.81Doubt Full Assets 297.43 189.59 214.30 266.17 336.94Loss Assets 108.00 Nil Nil 0.28 0.28

V. SIGNIFICANT REGULATORY MATTERS RELATED TO THE CORPORATION REGULATORY FRAMEWORK KSIIDC is a Company registered under Companies Act 1956. KSIIDC is a Non-Banking Finance Company (NBFC) registered with RBI and is regulated by applicable laws, rules and regulations provided in relation thereto in the Companies Act, 1964. VI. ORGANISATION STRUCTURE & MANAGEMENT KEY MANAGERIAL PERSONNEL (as on 31st March, 2005)

Name Age (Years)

Date of appointment

Designation Qualification Work Experience

Shri R. N. Chawhan 57 20/12/1991 Executive Director B. Com – Gold Medallist M. Com

Worked in KSFC for 21 years experience in various key posts

Shri G. L. Jere 52 18/09/1978 General Manager B.E. (Mech.) Worked in Kirloskar Tractors Limited for about 4 years

Shri R. Shivaram 58 11/05/1983 DGM B. E. (Electronics) Worked in HAL from 1972 to 1983

Shri S. Ravishankar 50 01/06/1984 DGM B. E. (Mech.) MD (Associateship in Documentation and Information Science)

Worked in TATA Energy Research Institute for 4 years

Shri R. Sajjan Rao 55 11/04/1980 DGM B. E. (Mech.) D.I.I.T., IIT Worked in HAL from 1975 to 1980 as Aeronautical Engineer

Shri R. Raghu 54 03/01/1983 DGM B. E. (Mech.) Worked for on year in KIMCO & Indian Institute of Science

Shri R. Ramachandraiah 53 19/01/1983 DGM M. Sc., MBA (Marketing) Worked as Senior Chemist in NGEF


KSIIDC

CHANGES IN KEY MANAGERIAL PERSONNEL IN LAST 1 YEAR

Sl. No. Name of Personnel Designation Date of Reporting

Date of Relieving

Reason for Change

1. Shri P. Basavaraj Ex-MLA Chairman 10/03/2004 01/07/2005 As per Government Directions 2. Shri K. Jairaj, IAS Managing

Director 10/06/2004 11/10/2004 As per Government Directions

3. Shri Arun K. Manay DGM 02/02/1983 28/02/2005 Taken VRS 4. Shri G. Ranganathan DGM 01/02/1979 31/01/2005 Taken VRS

COMMITTEES OF THE BOARD OF DIRECTORS Audit Committee An Audit Committee of the Board has been constituted and has met three times during the year. Its Members are: 1. Shri Sudhakar Rao, IAS [then Principal Secretary (Finance) Govt. of Karnataka] 2. Shri B. R. Jayaramaraje Urs, IAS (Managing Director, KSFC) 3. Shri V. M. Manogaran (General Manager- IDBI) 4. Shri Daljit Mirchandani (Nominee-CII) Information Technology The technology absorption in the company is done at Head Office. All the major activities have been computerized: VII. STOCK MARKET DATA OF THE EQUITY SHARES OF THE CORPORATION Equity shares of the company are not listed on any Stock Exchange. PROMISE V/s. PERFORMANCE As the company has not approached the Capital Markets, with either its equity or debt public issue, the comparison of the company’s performance vis-à-vis projections cannot be furnished. VIII. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL PERFORMANCE Financial Highlights of the company for the last three financial years as per the audited balance sheets of the company are as given in the following table:

(Rs. In Crores) Year ended / Particulars March 31, 2003 March 31, 2004 March 31, 2005 % age change

from2003 to2004%age change from 2004 to

2005 Operation Income 62.97 42.12 56.99 (-) 33.11 35.30Other Income 6.61 5.03 6.08 (-) 23.90 20.87Total Income 69.57 47.15 63.07 (-) 32.22 33.76Financial Expenses 121.72 125.11 89.53 2.78 (-) 28.44Establishment Expenses 3.79 4.09 4.02 7.92 (-) 1.71Administrative Expenses 2.84 2.92 3.19 2.82 9.25Total Expenditure 128.35 132.12 96.74 2.93 (-) 26.78Profit/ (Loss) before Depreciation & Provisions (58.77) (84.97) (33.76) 44.58 (-) 60.27

Significant items of income and expenditure during 2004-05 (comparison of financials for the year ended March 2005 with March 2004) Net Loss: Net Loss of the Company reduced from Rs. 84.97 crores in the year ended March 31, 2004 to Rs 33.76 crores in the year ended March 31, 2005 showing a reduction of 60.27%. Operational Income: Operational Income of the Company increased from Rs. 42.12 crores in the year ended March 31, 2004 to Rs 56.99 crores in the year ended March 31, 2005 showing a growth of 35.30%. Other Income: Other Income of the Company increased from Rs. 5.03 crores in the year ended March 31, 2004 to Rs 6.08 crores in the year ended March 31, 2005 showing a growth of 20.87%. Total Income: Total income of the Company went up by Rs. 15.92 crores from Rs. 47.15 crores in year ended March 31, 2004 to Rs. 63.07 crores in year ended March 31, 2005. Financial Expenses: Financial Expenses decreased from Rs. 125.11 crores in year ended March 31, 2004 to Rs. 89.53 crores in year ended March 31, 2005. Total Expenditure: While the total income of the Company went up by Rs. 15.92 crores, the total expenditure of the Company decreased by Rs. 35.38 crores showing a reduction of 26.78%. Significant items of income and expenditure during 2003-04 (comparison of financials for the year ended March 2004 with March 2003) Net Loss: Net Loss of the Company increased from Rs. 58.77 crores in the year ended March 31, 2003 to Rs 84.97 crores in the year ended March 31, 2004 showing an increase of 44.58%. Operational Income: Operational Income of the Company decreased from Rs. 62.97 crores in the year ended March 31, 2003 to Rs 42.12 crores in the year ended March 31, 2004 showing a decline of 33.11%. Other Income: Other Income of the Company decreased from Rs. 6.61 crores in the year ended March 31, 2003 to Rs 5.03 crores in the year ended March 31, 2004 showing a decline of 23.90%. Total Income: Total income of the Company reduced by Rs. 22.42 crores from Rs. 69.57 crores in year ended March 31, 2003 to Rs. 47.15 crores in year ended March 31, 2004. Financial Expenses: Financial Expenses increased from Rs. 121.72 crores in year ended March 31, 2003 to Rs. 125.11 crores in year ended March 31, 2004.


KSIIDC

Total Expenditure: While the total income of the Company reduced by Rs. 22.42 crores, the total expenditure of the Company increased by Rs. 3.77 crores showing a growth of 2.93%. Corporate Governance The SEBI guidelines in respect of corporate governance, in line with the regulatory framework for public sector undertakings, shall be applicable to KSIIDC only after listing of its Bonds on BSE. KSIIDC undertakes that it shall take the necessary steps to comply with all the requirements of the guidelines on corporate governance as would be applicable to it upon listing of its bonds as well as any requirements of the stock exchanges with regard to corporate governance before grant of listing permission by the stock exchanges. KSIIDC also confirms that it shall comply with the requirements of the stock exchanges to their satisfaction. In this regard, KSIIDC shall take necessary steps to further broad-base it’s Board of Directors and also set up the necessary committees as per the requirements of the guidelines as in force from time to time. Material Developments: In the opinion of the Directors of the company, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the operations or profitability of the Company or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum. Particulars Regarding Listed Companies There is no listed company under the same management. IX. BASIS FOR ISSUE PRICE This issue being a debt issue and having a credit rating of AA- (SO)’ by CRISIL and LA+(SO) by ICRA Limited, the price has been determined taking market rates into consideration. X. OUTSTANDING LITIGATIONS 1. Misc. Petitions under Section –31 of the State Financial Corporation’s Act, 1951 filed by KSIIDC against the borrower Company

and its Guarantors/ Sureties.

120 cases are pending before the City Civil Judge Court at Bangalore. Amount involved is Rs. 2374566806.60.

The KSIIDC has filed the said Misc. Petitions, invoking personal guarantees of the promoter directors to recover its dues under the provisions of State Financial Corporation’s Act, 1951. These petitions are pending before the City Civil Judge Court at Bangalore for various reasons.

2. Orders/ Decrees obtained in Misc. Petitions under Section-31 of the SFCs Act, 1951 by the KSIIDC against the borrower Company/ Guarantors/ Sureties-43 cases. Amount involved is Rs. 133,59,54,938/-.

The KSIIDC obtained orders/ decrees in Misc. Petitions against borrower Company/ promoter directors. In this regard, KSIIDC filed Execution Petitions before the various jurisdictions of the Court in Karnataka for recover the decreed amount from the borrower Company/ Guarantors.

3. Cases filed under Section-138 of the Negotiable Instrument Act, by KSIIDC against the borrower Company/ guarantors. 35 cases are pending. Amount involved is Rs. 5,14,00,000/-.

The Cheques issued by the borrower Company were dishonored for insufficient of funds in the borrower Company’s A/c’s. In this regard, KSIIDC filed Criminal Cases against the borrower Company and its promoter directors before the Magistrate Courts, Bangalore for recovery of its dues.

4. Motor Accident Claims by the KSIIDC against the accused – 06 Nos.

KSIIDC claimed certain amounts from the Insurance Department. 5. Special Leave Petition before Supreme Court of India – 2 Cases are pending.

The Hon’ble High Court of Karnataka allowed the appeal filed by the borrower Company/ Guarantors against KSIIDC. In this regard, the KSIIDC filed Special Leave Petition before the Hon’ble Supreme Court of India. These petitions are pending.

6. Arbitration Suits – 3 Nos. Arbitration Suits filed by the borrower/ Firm against the KSIIDC for award of the surplus amount of Rs. 55.00 lakhs available with KSIIDC in sale of assets of the Firm. These Suits are pending before the City Civil Judge Court at Bangalore.

7. Original Suits – 39 Nos filed by the borrower companies against KSIIDC. Mortgaged Property disputes. 8. Writ Petitions – 36 filed by the borrower companies/ sureties against KSIIDC. These Writ Petition were filed by the Borrowers/

companies/ sureties against KSIIDC are challenging the orders passed by KSIIDC under Section –29 of the State Financial Corporation’s Act, 1951.

9. Labour Cases – 2 Cases : These cases are against assisted unit, making KSIIDC a formal party in view of the take over of the unit under Section – 29 of the SFCs Act by KSIIDC.

Claims against the Corporation not acknowledged as Debt

Sl. No. Name of the Company Guarantee in Favour Amount (Rs.) 8. Hedge & Gole SBI 20,00,000 9. Thungabhdra Fibres Ltd. IDBI 34,00,838 10. Thungabhdra Fibres Ltd. ICICI 4,68,773 11. Gangavathi Sugars Corporation Bank 116,00,000 12. Scotie India Ltd. SBI 9,99,434 13. Mysore Tools Ltd. SBM 12,66,404 14. ESI 3,58,461

TOTAL 2,00,93,910


KSIIDC

Disputed Tax Liability: This amount has been included into contingent liability; claims against company not acknowledged as debt. Except as mentioned above, no proceedings have been launched against the company for any of the offences under any enactment, irrespective of whether specified in Paragraph 1 of Part I of Schedule XIII to the Companies Act. No such litigation or disputes are pending as on today and there are no defaults or outstanding statutory dues. The company has not defaulted in meeting any statutory dues, Institutional dues and has made all payments/ refunds on debentures/ fixed deposits. It has not defaulted on dues to holders of other debt instruments and preference shareholders. The company has not defaulted in meeting dues towards payment of interest or principal on due dates to holders of Bonds and Fixed Deposits. Other than the above there are no disputes/ litigations towards tax liabilities or any civil or criminal prosecutions against the company, its Directors for any offense, economic or otherwise. There are no pending proceedings initiated for economic offences. No penalties have been imposed on the company by RBI or any other regulatory authority. No proceedings are known to be contemplated by Governmental authorities except those relating to income tax disputes as given above. No disciplinary action/ investigation has been taken by the Securities and Exchange Board of India/ Stock Exchange against the company and its Directors. Other than stated above, there are no disputes/litigations towards tax liabilities or any criminal or civil prosecutions against the company for any offence – economic or otherwise. No criminal proceedings have been launched against the company under any of the enactment irrespective of whether specified in paragraph 1 of part I of Schedule XIII of the Companies Act. Interest of Directors of the Company The Directors of the company are interested to the extent of shares held by them and/or by their friends and relatives or which may be subscribed by them and/or allotted to them by the company. The Directors of the company are interested to the extent of fees, if any, payable to them for attending meetings of the Board or Committee and reimbursement of traveling and other incidental expenses, if any, for such attendance as per the Articles of Association of the Company. The Directors of the company are not interested in the appointment of or acting as Underwriters, Registrars and Bankers to the Issue or any such intermediary registered with SEBI. The Directors of the company are not interested in any property acquired by the company within two years of the date of Information Memorandum or proposed to be acquired by it. Save as stated above, no amount or benefit has been paid or given to the companies ’s Directors or Officers since its in nor is intended to be paid or given to any Directors or Officers of the company except the normal remuneration and/or disbursement for services as Directors, Officers or Employees of the . XI. INVESTOR GRIEVANCE & REDRESSAL SYSTEM The company has appointed Kirloskar Computer Services Limited as Registrars. As per the arrangement with the Registrars, all complaints related to the issue will be handled by the Registrars to the Issue within 30 days of the receipt of the complaint. The Registrars are required to redress the complaints of the Debentureholder(s) in respect of � Transfer of Bonds, � Transmission of Bonds, � Non-credit of demat account on account of letter(s) of allotment, � Non-credit of demat account on account of bond certificate(s), � Dematerialisation and rematerialisation of bonds, � Non-receipt of refund warrant(s) and/ or interest on application money, � Non-receipt of interest warrant(s), � Non-receipt of redemption warrant(s). As on March 31, 2005 there are no complaints pending against the company with respect to its Debentureholders. The details of the Compliance Officer of the company are as follows: Mr. B. Premkumar, Company Secretary Karnataka State Industrial Investment & Development Corporation Ltd. Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001. Tel.: (080) 22258131-33 Fax: (080) 22255740. E-mail: [email protected] The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. The investors can also contact the Registrars to the Issue, Kirloskar Computer Services Limited in case of queries/ complaints, if any, regarding this issue.


KSIIDC

PART II

I. GENERAL INFORMATION Consents Consents in writing from the Directors, Registrars, Bankers to the Issue and Trustees to the Issue, Compliance Officer & Company Secretary, Arrangers to act in their respective capacities have been obtained by the Issuer and such consents have not been withdrawn upto the date of opening of the Issue. M/s. M N S & Co., Chartered Accountants have given their written consent to the inclusion of their Report in the form and context in which they appear in the Information Memorandum. Such consents and reports have not been withdrawn upto the date of opening of the issue. Expert Opinion Save as stated elsewhere in this Information Memorandum, the company has not obtained any other expert opinion. Changes in Directors during last three years The changes that took place in the Board of Directors during last 3 Years & upto August 29, 2005.

Sl. No. Name Status in KSIIDC Date of Appointment

Date of Cessation

Reason for Change

1. Shri M. Shankar Reddy, MLA Chairman 03/01/2002 10/03/2004 As decided by GoK 2. Shri C. K. Neelakanta Raj, IAS Managing Director 25/10/1999 30/04/2002 Attained Superannuation

from Government Servicer 3. Shri S. Swatantra Rao, IAS Managing Director 30/04/2002 30/09/2002 Attained Superannuation

from Government Servicer 4. Shri Chiranjiv Singh, IAS Director 27/11/2001 30/10/2002 As decided by GoK 5. Shri V. Umesh, IAS Director 15/01/2002 12/01/2005 As decided by GoK 6. Shri M. Lakshminarayanan Director 30/05/2002 30/06/2003 As decided by GoK 7. Shri K.K. Mishra, IAS Director 10/07/2002 29/08/2003 As decided by GoK 8. Shri B.S.Patil, IAS Director 05/11/1999 10/07/2002 As decided by GoK 9. Shri P. Kotilingangoud, IAS Managing Director 25/10/2002 21/10/2003 As decided by GoK 10. Shri P. Kotilingangoud, IAS Managing Director 22/10/2003 10/05/2004 As decided by GoK 11. Shri B K Das, IAS Director 30/10/2002 10/08/2004 As decided by GoK 12. Shri K.M. Shivakumar, IAS Director 21/12/2002 24/03/2003 As decided by GoK 13. Shri G. Gurucharan, IAS Director 29/09/2000 21/12/2002 As decided by GoK 14. Shri B. Srinivasarao Director 14/08/2002 19/05/2002 As decided by GoK 15. Shri B. Ravidranath Director 03/06/1997 14/08/2002 As decided by GoK 16. Shri T. Sudhakar Pai Director 29/05/2001 30/05/2002 As decided by GoK 17. Shri Vishwanath Pattamakki Director 24/03/2003 01/07/2005 As decided by GoK 18. Shri Vinay L. Deshpande Director 30/06/2003 11/06/2004 As decided by GoK 19. Shri L. N. Murthy Director 24/03/2003 01/07/2005 As decided by GoK 20. Shri Subir Hari Singh, IAS Director 29/08/2003 10/08/2004 As decided by GoK 21. Shri Subir Hari Singh, IAS Managing Director

(Additional Charge) 10/05/2004 10/06/2004 As decided by GoK

22. Shri P. Basavaraj Chairman 10/03/2004 01/07/2005 As decided by GoK 23. Shri K. P. Pandey, IAS Director 10/08/2004 12/01/2005 As decided by GoK 24. Shri N. Gokulram, IAS Director 10/08/2004 10/08/2005 As decided by GoK 25. Shri K.K. Swamy Director 11/06/2004 29/06/2005 As decided by GoK 26. Shri Sudhakar Rao, IAS Director 12/01/2005 Still Continuing As decided by GoK 27. Shri B.R. Jayaramraje Urs, IAS Director 12/01/2005 Still Continuing As decided by GoK 28. Shri V.M.Manogaran Director 19/05/2005 Still Continuing As decided by GoK 29. Shri K. Jairaj, IAS Managing Director 10/06/2004 11/10/2004 As decided by GoK 30. Shri I. M. Vittala Murthy, IAS Managing Director 08/11/2004 Still Continuing As decided by GoK 31. Shri Daljit Mirchandani Director 29/06/2005 Still Continuing As decided by GoK 32. Shri N. Gokulram, IAS Chairman 10/08/2005 Still Continuing As decided by GoK

Changes in Auditors during last three years M/s. M. S N & Co., (formerly known as M/s. M. Sreenivasulu & Co.), Chartered Accountants, Bangalore have been the Statutory Auditors of the company for the past 3 years. Hence there has been no change in Statutory Auditors of the company during last 3 years. Authority for the Present Issue This present issue of Bonds is being made pursuant to the Resolutions passed in the meeting of Board of Directors held on August 22, 2005 Disposal of Applications and Application Money The Board of Directors/ Managing Director of the company reserves its full unqualified and absolute discretion without giving any reason, the right to accept or reject any application in whole or in part. If any application is rejected in full, the whole of the application money received, and if the application is rejected in part, the excess application money, after adjustment of allotment money if any, will be refunded to the applicants by registered post only (refund order(s) of value upto Rs. 1,500/- will be sent under certificate of posting). Adequate funds for the purpose shall be made available by the company to the Registrar to the Issue.


KSIIDC

No receipt will be issued by the company. However, the nominated branches of the Bankers to the Issue receiving the application will acknowledge the receipt of the application by stamping and returning the detachable acknowledgement slip appended to each application form. Refund (if any) will be made by cheque/ demand draft drawn on the company at Kolkata and payable at par at all the places where applications are accepted. Procedure and Time Schedule for Allotment/ Refund The beneficiary account of the investor(s) with National Securities Depository Limited (NSDL)/ Depository Participant will be given initial credit within 15 days from the Deemed Date of Allotment. The initial credit in the account will be akin to the Letter of Allotment. On completion of all the statutory formalities, such credit in the account will be akin to a Bond Certificate. Letter(s) of Regret alongwith Refund Order(s), as the case may be, will be despatched by Registered Post or as per extant postal rules at the sole risk of the applicant to the sole/ first applicant within 15 days of closer of the Issue. In accordance with the extant postal rules the company will ensure dispatch of refund orders of value upto Rs. 1500/- under Certificate of Posting and refund orders of value above Rs. 1500/- by Registered Post only. The company will provide adequate funds to the Registrars to the Issue, for the purpose of despatch of Letter(s) of Regret/ Refund Order(s). Subject to the completion of all legal formalities within 3 months from the Deemed Date of Allotment, or such extended period as may be approved by the Appropriate Authorities, the initial credit akin to a Letter of Allotment in the Beneficiary Account of the investor would be replaced with the number of Bonds allotted which will be akin to a Bond Certificate. In case of joint applications, refund/ pay orders, if any, will be made out in the first name and all communications will be addressed to the person whose name appears first in the application form. Oversubscription and Basis of Allotment The Board of Directors/ Committee of Directors reserves its full, unqualified and absolute right to accept or reject any application, in part or in full, without assigning any reason thereof. The rejected applicants will be intimated along with the refund warrant, if applicable, to be sent. Interest on application money will be paid from the date of realisation of the cheque(s)/ demand drafts(s) till one day prior to the date of refund. The Application Forms that are not complete in all respects are liable to be rejected and would not be paid any interest on the application money. Application would be liable to be rejected on one or more technical grounds, including but not restricted to: a. Number of bonds applied for is less than the minimum application size; b. Applications exceeding the issue size; c. Account details not given; d. Details for issue of bonds in electronic/ dematerialised form not given; e. PAN/GIR and IT Circle/Ward/District not given; f. In case of applications under Power of Attorney by limited companies, corporate bodies, trusts, etc. relevant documents not

submitted; g. In the event, if any Bond(s) applied for is/ are not allotted in full, the excess application monies of such Bonds will be refunded,

as may be permitted. In the event of issue being oversubscribed, the company reserves its full, unqualified and absolute right of allotment/ rejection in full or prorata at its discretion without assigning any reason thereof. Interest on Application Money Interest at the coupon rate (i.e. @ 7.00% p.a.) (subject to deduction of income tax under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof, as applicable) will be paid to all the applicants on the application money for the Bonds. Such interest shall be paid from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment. The interest on application money will be computed on an Actual/ 365 day basis. Such interest would be paid on all the valid applications, including the refunds. Where the entire subscription amount has been refunded, the interest on application money will be paid alongwith the Refund Orders. Where an applicant is allotted lesser number of bonds than applied for, the excess amount paid on application will be refunded to the applicant alongwith the interest on refunded money. The interest cheque(s)/ demand draft(s) for interest on application money (alongwith Refund Orders, in case of refund of application money, if any) shall be dispatched by the within 15 days from the Deemed Date of Allotment and the relative interest warrant(s) alongwith the Refund Order(s), as the case may be, will be dispatched by registered post to the sole/ first applicant, at the sole risk of the applicant. STATUTORY AUDITORS M/s M N S & Co. Chartered Accountants 163, 2nd Floor, R. V. Road Minerva Circle, Bangalore – 560 004. Phone : (080) 26572290, 26573319, 26566868 Telefax : (080) 51312509 E-Mail : [email protected]

DEBENTURE TRUSTEES Canara Bank Executor, Trustee and Taxation Section BSE Towers, 51, 1st Cross, J.C. Road, Bangalore – 560 027. Tel No. 080-22239186, 22223170. Fax No. 080-22233849. E-mail: [email protected]

mailto:[email protected]


KSIIDC

BANKERS TO THE ISSUE HDFC BANK LIMITED ICICI BANK LIMITED COMPLIANCE OFFICER AND COMPANY SECRETARY Mr. B. Premkumar, Company Secretary Karnataka State Industrial Investment & Development Corporation Ltd. Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001. Tel.: (080) 22258131-33 Fax: (080) 22255740. E-mail: [email protected] BROKERS TO THE ISSUE Apart from Arrangers to the Issue appointed by the company, there is/are no other broker(s) appointed by the Issuer for the purpose of marketing the Issue. Therefore no person/ firm/company other the Arrangers to the Issue, whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue. CREDIT RATING AGENCY Credit Rating Information Services of India Limited (CRISIL) W-101, 1st Floor, Sunrise Chambers, Ulsoor Road, Bangalore – 560 042. Tel.: (080) 25580899, 25594802 Fax: (080) 25594801. E-mail: [email protected] ICRA Limited (ICRA) 2nd Floor, Vayudooth Chambers, Trinity Circle, 15-16, M. G. Road, Bangalore-560001. Tel:(080) 2559 7401/4049, 2532 7803 Fax:(080) 2559 4065


KSIIDC

II. FINANCIAL INFORMATION

AUDITOR’S REPORT (LIMITED REVIEW)

M N S & C O., (Formerly M. Sreenivasulu & Co.,) Chartered Accountants

To The Board of Directors Karnataka State Industrial Investment & Development Corporation Limited Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001.

Dear Sirs, We have made a limited review of the accompanying statement of unaudited financial results of M/s Karanataka State Industrial Investment & Development Corporation Limited for the quarter ended 30th June 2005. This statement is the responsibility of the Company’s Management. A review of interim financial information is limited primarily to inquiries of Company personnel responsible for financial and accounting matters and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. We have not performed an audit and, accordingly, we do not express an opinion. Based on our review conducted as above, nothing has come to our notice that causes us to believe that accompanying statement of unaudited financial results are not presented fairly in all material respects or has not disclosed the information required except as stated in the financial results attached.

Place : Bangalore Date : 18-10-2005 For M N S & Co Chartered Accountants

sd/- Partner

163, 2nd Floor, R. V. Road Minerva Circle, Bangalore – 560 004. Ph : 26572290, 26573319, 26566868 Telefax : 51312509 E-Mail : [email protected]


KSIIDC

KARNATAKA STATE INDUSTRIAL INVESTMENT AND DEVELOPMENT CORPORATION LIMITED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30TH JUNE 2005

(Rs. in lakhs) (UN-AUDITED) (AUDITED) PARTICULARS

30-06-2005 31-03-2005 INCOME:

Operation Income 839.92 5,698.97 Others Income 76.79 608.84

TOTAL 916.71 6.307.81 EXPENDITURE:

Financial Expenses 1,236.05 8,953.62 Establishment Expenses 88.02 401.85 Administrative Expenses 84.37 319.18

TOTAL 1,408.44 9,674.65 PROFIT/ (LOSS) BEFORE DEPRECIATION & PROVISIONS (491.73) 3,366.84)

Add: Depreciation - 233.94 Add: Bad debts written off 160.31 62.50

PROFIT/ (LOSS) BEFORE PROVISIONS & TAXATIONS (652.04) (3,653.28) Add: Provision for bad and Doubtful debts - 3,700.30

PROFIT/ (LOSS) BEFORE TAXATION (652.04) (7,353.58) Add: Provision for Taxation - -

PROFIT/ (LOSS) FOR THE YEAR AFTER TAXATION (652.04) (7,353.58) Add: Profit/ (Loss) as per last Balance Sheet 53,291.73 45,538.51 Add: Prior year adjustment - 399.64

PROFIT/ (LOSS) CARRIED TO BALANCE SHEET (53,943.77) (53,291.73) NOTES TO ACCOUNTS: a) No Depreciation has been provided for in the books b) Previous year figures are not comparable with the current year figures as the financial statements have been

prepared for 3 months ending 30th June 2005. c) No Provision has been made for Income Tax, Bad & doubtful debts, and for non-performing assets as required

under RBI guidelines for the period under review.

sd/- Sd/- sd/- (R. N. CHAWHAN)

EXECUTIVE DIRECTOR (R. SAJJAN RAO)

DY. GENERAL MANAGER (V. RAMESH)

ASST. GENERAL MANAGER (F&A)

sd/- (B. PREMKUMAR)

COMPANY SECRETARY


KSIIDC

AUDITOR’S REPORT

M N S & C O .(Formerly M. Sreenivasulu & Co.,) C H A R T E R E D A C C O U N T A N T S

To The Board of Directors Karnataka State Industrial Investment & Development Corporation Limited Khanija Bhavan, 4th Floor, East Wing, No. 49, Race Course Road, Bangalore – 560 001. Dear Sirs, We have examined the annexed statement of assets and liabilities (annexure I) of M/s Karnataka State Industrial Investment and Development Corporation Limited (the Company) as at 31st March 2001, 2002, 2003, 2004 and 2005 (being the last date upto which the accounts of the Company have been made up and audited by the statutory auditors of the Company for those respective years) and the statement of profit and loss (Annexure II) annexed thereto for the year ended on that respective dates, extracted from the financial statements of the Company audited by the statutory auditors for the relevant years. The following are the qualifications reported by the Statutory Auditors for the year 2004-05. 1. The Corporation has securitised the future rent receivable from Khanija Bhavan building during an earlier year

which is not in accordance with the accrual system of accounting prescribed under Sec 209(3) (b) of the Companies Act, 1956 resulting in: a) Understanding the other income to the extent of Rs. 789.70 lakhs resulting in overstatement of loss by the

same amount for the year ended 31.3.2005. b) Understatement of current liabilities and cumulative loss to he extent of Rs. 74.84 lakhs, being the net

present value of a portion of rent receivable pertaining to the period beyond 31.03.2005. 2. The company has not made provision in respect of certain “Other Debits” though the respective loan accounts

have been treated as Non Performing Assets, which is not in accordance with the prudential norms on income recognition and asset Classification issued by the Reserve Bank of India/ Industrial Development Bank of India, in the absence of details, the impact of the same on the financial statements is not ascertainable.

3. The Income Tax assessments of the Company for earlier years have been reopened in respect of claim of depreciation in respect of Lease Assets costing Rs. 1,209.08 lakhs. The matter has been contested in appeals. Pending completion of the proceedings and in view of the issued involved, we are unable to express any opinion on the said transactions undertaken in the earlier years and also its impact on the financial statements.

4. In Note No. 13(v) under notes forming part of accounts for the year ended 31.03.2005, in respect of non-performing assets (loans & advances) where the value of the security for the loans and advances have not been assessed and for erosion in value of securities if any, are not provided in the accounts. In the absence of assessments in this regard, the impact on financial result for the corporation for the year cannot be quantified.

5. The accounting of service charges on building on lease hold land in earlier years amounting to Rs. 331.91 lakhs (net of depreciation) which is not in accordance with AS-10 issued by the ICAI resulting in overstatement of Fixed Assets and understatement of cumulative Loss to that extent. Further the losses for the year is overstated to the extent of Rs. 15.26 lakhs due to depreciation charged for the year in this regard.

6. Reference in invited to the following in Schedule O (Notes forming part of accounts for the year ended 31.03.2005) a) Note No. 13 (l) regarding amount due form KIADB, which is contingent upon acceptance by their Board. b) Note No. 13 (q) (l) regarding interest recoverable, which is contingent upon acceptance by the Government.

We also state that there has been no significant change in the accounting policies adopted by the Company.

163, 2nd Floor, R. V. Road Minerva Circle, Bangalore – 560 004. Phone : 26572290, 26573319, 26566868Telefax : 51312509 E-Mail : [email protected]


KSIIDC

We have further examined the annexed statement of the financial figures (Annexure III) of Mysore Sales International Limited which is a wholly owned subsidiary of the Company and indirect subsidiary i.e. Marketing consultants & Agencies Limited. These figures are extracted from the audited financial statements of these respective subsidiaries. We further report that the other two wholly owned subsidiaries i.e. Karnataka Tungsten Moly Limited & Mysore Cosmetics Limited, are under liquidation and financial figures are not available. We further state that the Company has not declared any dividend on its equity capital during the periods under report. We also state that we have examined the following statements attached herewith. (i) Summary of accounting ratios as set out in Annexure IV (ii) Significant Accounting Policies and notes forming part of accounts for the year ended 31-03-2005 as given in

Annexure No. V. Further to our comments referred above, we state that we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our examination. In our opinion and to the best of our information and according to the explanations given to us, the financial statement of the Company referred to in this report, read with the significant accounting policies and notes forming part of the accounts of the Company for each of the respective years mentioned therein, have been correctly complied from the relevant statements. This report is intended solely for your information and for inclusion in the offer document in connection with the private placement of Unsecured Redeemable Non-Convertible Bonds and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for M N S & Co., Chartered Accountants

sd/- (M. Srinivas)

Partner Date: 15-09-2005 Place: Bangalore


KSIIDC

ANNEXURE I – STATEMENTS OF ASSETS AND LIABILITIES (Rs. in Crore)

Particulars As at 31.3.2001 (Audited)

As at 31.3.2002 (Audited)




SOURCES OF FUNDS

Shareholders Funds

Share Capital 72.50 72.50 150.85 150.85 190.32

Share Application Money 77.60 110.62 68.48 103.03 263.95

Reserves and Surplus 3.25 3.25 3.25 3.25 3.25

LOAN FUNDS

Secured Loans 195.00 188.46 133.32 72.46 0.01

Unsecured Loans 696.39 901.28 1002.18 1045.59 864.73

Total 1044.74 1276.11 1358.08 1375.18 1322.26

APPLICATION OF FUNDS

Fixed Assets

a) Gross Block 88.38 89.25 86.70 87.42 269.21

Less: Accumulated Depreciation 35.72 38.87 31.23 33.33 35.57

Net Block 52.66 50.37 55.47 54.09 233.64

Investments 141.77 143.26 153.17 149.27 134.81

Current Assets, Loans & Advances

Cash & Bank Balances 31.86 4.47 5.00 8.07 11.58

Sundry Debtors 0.03 0.02 - - -

Loans & Advances 737.30 893.20 882.24 771.58 513.33

Less: Current Liabilities & Provisions 35.95 48.83 56.49 63.39 104.34

Net Current Assets 733.24 848.86 830.75 716.26 420.57

Miscellaneous Expenditure (to the extent not written off/adjusted) 2.83 1.33 0.56 0.18 0.32

Profit & Loss Account Balance 114.24 232.29 318.13 455.38 532.92

TOTAL 1044.74 1276.11 1358.08 1375.18 1322.26


KSIIDC

ANNEXURE II – STATEMENT OF PROFIT AND LOSS (Rs. in Crores)

For the Year ended March 31, 2001

(Audited)

March 31, 2002

(Audited)

March 31, 2003

(Audited)

March 31, 2004

(Audited)

March 31, 2005

(Audited)

1. INCOME

i. Operation Income 92.18 71.63 62.97 42.12 56.99

ii. Other Income 35.44 9.55 6.60 5.03 6.08

TOTAL INCOME (i+ii) 127.62 81.18 69.57 47.15 63.07

2. EXPENDITURE

i. Financial Expenses 108.33 117.35 121.72 125.11 89.53

ii. Establishment Expenses 3.27 3.70 3.79 4.09 4.02

Iii. Administration Expenses 1.99 2.86 2.84 2.92 3.19

Iv. Interest Tax 0.01 - - - -

TOTAL EXPENDITURE (i+ii+iii) 113.60 123.91 128.35 132.12 96.74

Profit/ (Loss) before Depreciation and Provisions

14.01 (42.73) (58.77) (84.97) (33.67)

Add: Depreciation 9.75 3.62 2.21 2.21 2.24

Add: Bad Debts written off 4.18 0.18 - 0.42 0.62

Profit/ (Loss) before Provisions and Taxations 0.08 (46.53) (60.98) 87.60 (36.53)

Add: Provision for Bad & Doubtful Debts (43.49) 56.49 24.53 46.05 37.00

Profit/ (Loss) before Taxation (43.41) (103.02) (85.51) (133.65) (73.53)

Add: Provision for Taxation - - - - -

Profit/ (Loss) for year after Taxation (43.41) (103.02) (85.51) (133.65) (73.53)

Add: Profit/ (Loss) as per last balance sheet (71.18) (114.24) (232.29) (318.13) (455.38)

Add: Income Tax Provision of earlier years (0.18) - - (0.05) -

Add: Prior year adjustment (0.53) (15.03) (0.33) (3.55) (3.99)

Profit/ (Loss) carried to Balance Sheet (114.24) (232.29) (318.13) (455.38) (532.92)


KSIIDC

ANNEXURE II – STATEMENT OF PROFIT AND LOSS – CONTINUED (Rs. in Crores)

For the year ended As at 31.3.2001 (Audited)





Profit/ (Loss) carried to Balance Sheet (114.24) (232.29) (318.13) (455.38) (532.92)

Adjustments/ Rectifications as per Statutory Auditors qualifications

Add: Qualification of Auditors

Accounting of Securitised future lease rental as income 25.01 17.53 11.22 5.74 0.75

Qualification of Auditors for accounting of cheques on hand which have been dishonored subsequently but not reversed in books

13.89 0.00 0.00 0.00 0.00

Qualification of Auditors for accounting the service charges on a project promoted by own

0.00 0.00 1.08 0.00 0.00

Qualification of Auditors on accounting of interest on a project

1.39 0.00 0.00 0.00 0.00

Qualification of Auditors on accounting of service charges on a leasehold building of own

3.93 3.77 3.62 3.47 3.31

Qualification of Auditors on accounting of EL encashment on actual basis

0.28 0.14 0.00 0.00 0.00

Net cumulative loss after adjustments for qualifications by statutory auditors

(158.74) (253.73) (334.05) (464.59) (536.98)

Note: Adjustments have been made only in respect of qualifications, which have been quantified.


KSIIDC

ANNEXURE III STATEMENT OF FINANCIALS OF SUBSIDIARIES

I. Mysore Sales International Limited The Company holds 100% of its paid up share capital (Rs. in Crores)

Particulars 31.3.2001 31.3.2002 31.3.2003 31.3.2004 31.3.2005 Equity Share Capital 3.66 3.66 3.66 3.66 NA Reserves (Excluding revaluation reserves) 59.68 71.28 65.23 76.56 NA Sales 243.03 321.04 316.85 1324.69 NA Profit after Tax 10.60 12.50 4.63 11.98 NA Total Income 284.42 355.64 354.46 1358.58 NA Total Expenditure 273.87 343.38 350.02 1346.63 NA Current Assets 141.76 147.77 157.67 201.45 NA Current Liabilities 66.96 59.16 68.23 108.99 NA EPS (Rs.) 288.12 334.78 121.28 326.42 NA NAV (Rs.) 1924.13 2497.20 2535.93 3845.39 NA Dividend (%) 15% 15% 15% 15% NA

Note: “NA” indicates Not Available

II. Mysore Cosmetics Limited The Company holds 100% of its paid up share capital (Rs. in Crores)

Particulars 31.3.2001 31.3.2002 31.3.2003 31.3.2004 31.3.2005 Equity Share Capital NA NA NA NA NA Reserves (Excluding revaluation reserves) NA NA NA NA NA Sales NA NA NA NA NA Profit after Tax NA NA NA NA NA Total Income NA NA NA NA NA Total Expenditure NA NA NA NA NA Current Assets NA NA NA NA NA Current Liabilities NA NA NA NA NA EPS (Rs.) NA NA NA NA NA NAV (Rs.) NA NA NA NA NA Dividend (%) NA NA NA NA NA


III. Karnataka Tungsten Moly Limited The Company holds 100% of its paid up share capital (Rs. in Crores)

Particulars 31.3.2001 31.3.2002 31.3.2003 31.3.2004 31.3.2005 Equity Share Capital NA NA NA NA NA Reserves (Excluding revaluation reserves) NA NA NA NA NA Sales NA NA NA NA NA Profit after Tax NA NA NA NA NA Total Income NA NA NA NA NA Total Expenditure NA NA NA NA NA Current Assets NA NA NA NA NA Current Liabilities NA NA NA NA NA EPS (Rs.) NA NA NA NA NA NAV (Rs.) NA NA NA NA NA Dividend (%) NA NA NA NA NA


IV. Marketing Consultants and Agencies Limited The Subsidiary Company of the Company i.e. MSIL holds 100% of its paid up share capital (Rs. in Crores)

Particulars 31.3.2001 31.3.2002 31.3.2003 31.3.2004 31.3.2005 Equity Share Capital 3.16 3.38 3.57 3.57 NA Reserves (Excluding revaluation reserves) 2.22 4.11 5.70 6.50 NA Sales 3.97 4.25 4.46 3.21 NA Profit after Tax 0.21 0.58 0.59 0.62 NA Total Income 4.46 5.29 5.76 8.90 NA Total Expenditure 4.45 4.71 5.17 8.06 NA Current Assets 8.85 12.12 12.45 15.22 NA Current Liabilities 2.27 3.76 4.15 5.15 NA EPS (Rs.) 6.66 17.20 16.55 22.89 NA NAV (Rs.) 219.30 260.55 302.37 378.73 NA Dividend (%) 50% 50% 50% 50% NA



KSIIDC

ANNEXURE V Significant Accounting Policies and notes forming part of accounts for the year ended 31.03.2005 SIGNIFICANT ACCOUNTING POLICIES: 1. Accounting Convention: Accounts are prepared in accordance with Generally Accepted Accounting Principles in India, the accounting standards issued

by the institute of Chartered Accountants of India, The Companies Act, 1956 and are in conformity with the statutory provisions and practices prevailing in the industry, wherever applicable.

2. Fixed Assets: All fixed assets are capitalized at cost inclusive of expenses incurred till the asset is put to use and disclosed at cost less

depreciation. 3. Depreciation Depreciation on Fixed Assets has been provided pro-rata on straight-line method at the rates prescribed in Schedule XIV to the

Companies Act, 1956. Depreciation on building constructed on Leasehold land is provided over remaining period of the lease commencing from the data it was put to use.

4. Investments: a) Investments made in Non-convertible debentures (NCDs) are treated as loan/s and provisions made accordingly. b) All investments are classified as Long-term investments and are stated at cost. Full provision is made if the assisted

company is (i) under liquidation or (ii) if the assets of the assisted company are held under receivership or taken over by the corporation.

c) Where the loan is disbursed by the Corporation to a company which is identified as a non-performing asset and the corporation also has an investment in such a company, appropriate provisioning, as made for the loan asset, has been made for the investment.

5. Staff Retirement Benefits: a) Gratuity: The Corporation has constituted a Gratuity Trust which has taken under the Life Insurance Corporation of India’s Group

Gratuity (cash accumulation) Cum Life Assurance Scheme and the contribution to the said Scheme is charged to the Profit & Loss Account for the year.

b) Leave Encashment: The liability arising out of encashment of unavailed earned leave is provided based on actuarial valuation. 6. Project Development Expenses: Expenditure incurred towards projects, which are in the initial stages of development, is charged off as expenses in the

respective year. Where project are identifiable, all expenses incurred on such projects, interest accrued on funding such project expenditure

and service charges agreed upon on annual incremental expenditure are charged to respective project accounts. 7. Provision for doubtful debts and write off of bad debts: Debts considered fully irrecoverable are written off. Where debts are considered partially irrecoverable, provision is made as

per guidelines of IDBI/ RBI. Sums recovered against debts written off and cases where provisions are no longer considered necessary in the context of the present status of the borrower, are written back.

8. Revenue Recognition: a) Interest and other dues are accounted on accrual basis except in respect of Non Performing Assets (NPA), income

against which is recognized on cash basis. b) In case of One Time Settlement and appropriations of sale proceeds of assets taken over u/s 29 of the State Financial

Corporations (SFCs) Act, the allocation of recoveries is first adjusted towards other debits, thereafter towards principal and balance towards interest.

c) Appraisal and scrutiny fee are accounted as an income on receipt basis, any excess amount collected and refunded is accounted as and when paid.

d) Dividends from companies are accounted on receipt basis. 9. Others: Expenditure for which payment has been made or a liability incurred, the benefit of which is expected to cover a subsequent

period/s is treated as deferred revenue expenditure and amortized over the period/s during which the benefit is estimated to arise.

NOTE FORMING PART OF ACCOUNTS: 10. RELATED PARTY DISCLOSURES (to the extent applicable and under Accounting Standards 18 issued by the institute of

chartered Accountants of India)

(A) (i) Joint Venture Companies: As on 31st March 2005 (a) Karnataka Asset Management Company Private Limited (b) Karnataka Trustee Company Private Limited (c) Karnataka Antibiotics and Pharmaceuticals Limited (d) Karnataka Oswal Palm Oil Limited

(e) Sourabh Cold Storage (Kar) Limited (f) Bangalore International Airport Limited

(ii) Subsidiaries and fellow subsidiaries: As on 31st March 2005 (a) Mysore Sales International Limited (b) Marketing Consultants and Agencies Limited (c) Mysore Cosmetics Limited (d) Karnataka Tungsten Moly Limited


KSIIDC

(B) Other related parties with whom the company had transactions: (a) Key Management Personnel:

Shri K. Jairaj, IAS Managing Director Shri I. M. Vittala Murthy, IAS Managing Director Shri N. Gokulram, IAS Director Shri B. K. Das, IAS Director Shri K. P. Pandey, IAS Director Shri V. Umesh, IAS Director Shri Jayaramaraje Urs, IAS Director Shri Subhir Hari Singh, IAS Director Shri Sudhakar Rao, IAS Director Shri B. Srinivasa Rao Director Shri Vinay L. Deshpande Director Shri. K. K. Swamy Director Shri V. N. Manogaran Director

(b) Employee’s Benefit Plans where there is significant influence: KSIIDC Employees Provident Fund Trust (c) Disclosure of the Transactions between the Company and Related Parties and the status of outstanding balances as

on 31st March 2005. Sl. No.

Particulars Enterprises where control exists (Rs.)

Key Management Personnel &

Relatives (Rs.)

Employees Trust (Rs.)

1. Remuneration of Managing Director – 5,65,798 (6,07,588)

–

2. Contribution to Employees Benefit Plans

– – 24,95,798 (26,01,851)

3. Balance as on 31.03.2005 Investment in Shares (at cost) Loans Given

23,18,28,350 (2,88,61,510)

51,20,550 (49,82,656)

–

–

–

–Note: Figures shown in brackets pertain to previous year.

11. The Corporation is carrying on the business of investment and lending of funds for Small, Medium Scale and Large Industries in the Sate of Karnataka. As the revenue from carrying on the business of investment and lending is over 90% of total revenue, Segmental Reporting required under Accounting Standard (AS-17) issued by the Institute of Chartered Accountants of India, is not applicable.

12. Additional information required vide Industrial Development Bank of India’s Circular Reg:HO:IFD:NO.460/(SIDC’s PRO.) dated 4th September 2001.

A. Capital (in %age) Particulars 2004-05 2003-04 a) CRAR:

Core CRAR: Supplementary CRAR:

-11.43 -33.92 22.49

-23.69 -23.71

0.02 b) Subordinated debt raised and outstanding as Tier II Capital : Rs. 15 Lakhs

(Rs. in Lakhs) c) Risk weighted Assets: 2004-05 2003-04

i) On Balance Sheet items 84829.22 938.8.50 ii) Off Balance Sheet items 5919.86 4915.54

d) Share holding pattern Sl. No.

Category Total Shares % of Holding

1. Governor of Karnataka 190324990 100.00 2. Nominees of the Government of Karnataka 160 0.00

Total 190324990 100.00 Note: There has been no change in the shareholding pattern compared to the previous year.

B. Asset quality and credit concentration: 2004-05 2003-04 a) Percentage of net NPAs to net loans and advances 75.15 71.14 b) Amount and Percentage of net NPAs under the prescribed asset classification categories:

(Rs. in Lakhs) 2004-05 2003-04 Particulars

Amount %age Amount %age Sub-standard assets 7181.13 13.19 20377.23 30.83 Doubtful Assets 33722.69 61.96 26645.59 40.31 Total 40903.82 75.15 47022.82 71.14 c) Amount of provisions made during the year towards standard assets, NPAs, investments (other than those in the

nature of an advance) and Income Tax. (Rs. in Lakhs)

Particulars 2004-05 2003-04 Standard Assets (13.92) (43.97) NPAs 3347.87 4489.52 Investments (other than those in the nature of advance) 366.35 160.28 Income Tax 0.00 * 5.07 Total 3700.30 4610.90

* Pertains to short provisions made in earlier years.


KSIIDC

d) Movement of net NPAs (Rs. in Lakhs) Particulars 2004-05 2003-04 Opening Balance as at 01.04.2004 47022.82 43675.54 Add: Additions during the year (2689.54) 5468.69 Less: Recovery during the year 3429.46 2121.41 Closing balance as at 31.03.2005 40903.82 47022.82 Note: The percentage of net NPA & prescribed asset classification, movement of NPAs for the year 2004-05 are not in comparison with the figures shown in the year 2003-04, consequent to implementation of revised norms of 12 months waiting a doubtful asset, vide RBI circular No: RBI/04-05/528/ DBS/FID/No:c-8/01.2.00/04-05 dt 11/1/04 with effect from 31/3/05. Consequent to above, a sum of Rs. 3.89 crores being 1/4th of the additional provision of Rs. 15.58 crores has been provided during the year, and the Balance amount of Rs. 11.69 crores, has been phased over the next three subsequent financial years. e) Credit exposure as a percentage to capital funds and as percentage to total assets in respect of:

%age to Capital Funds

%age to Total Assets

Particulars

2004-05 2003-04 2004-05 2003-04

i) Largest single borrower 6.80 -7.07 0.91 1.34 ii) The largest Borrower Group 9.25 -8.89 1.23 1.68 iii) 10 largest single borrower 42.20 -40.07 5.63 7.59 iv) 10 Largest borrower group 40.30 -41.86 5.38 7.93

Note: Figures of the previous year pertaining to % to capital funds are not comparable with the current year figures, since in the previous year the base factor has been taken as % to net owned funds, as against % of the capital funds (i.e. Equity + free reserves, if any) in the current year.

C. Liquidity Items Less than or

equal to 1 year More than 1 year

up to 3 years More than 3 year

up to 5 years More than

5 year Total

Rupee assets 7537.29 1074.28 4847.87 71469.89 84929.33 Foreign Currency Assets Nil Nil Nil Nil Nil Total Assets 7537.29 1074.28 4847.87 71469.89 84929.33 Rupee Liabilities 29122.84 55094.46 4554.61 53680.17 142452.08 Foreign Currency Liabilities Nil Nil Nil Nil Nil Total Liabilities 29122.84 55094.46 4554.61 53680.17 142452.08 TOTAL (NET) (21585.55) (54020.18) 293.26 17789.72 (57522.75)

D. Operating Results: Particulars 2004-05 2003-04 i) Interest income as a %age to average working funds 4.40 2.78 ii) Non- Interest income as a %age to average working funds 2.32 1.93 iii) Operating Profit as a %age to average working funds (3.59) (8.13) iv) Return on average assets (4.01) (8.72) v) Net Profit per employee (Rs. in lakhs) (54.47) (92.18)

E. Restructured Accounts: (Rs. in lakhs)

Particulars 2004-05 2003-04 a) Total amount of loan assets 69101.46 74631.83 b) Sub-standard assets subjected to Restructuring 776.58 2838.40

13. a) Previous figures have been regrouped/ reclassified/ recast wherever necessary in conformity with current year presentation.

c) In view of accumulated losses, sinking fund for the redemption of bonds has not been created. However, the corporation has redeemed bonds as and when they have become due.

c) The State Government vide Government Order No. CI 184 MGS 90 (part), Bangalore dated 06.05.1995 has transferred 3.02 acres of land at Race Course Road, Bangalore on lease in favour of the Corporation for a consideration of Rs. 1000/- per acre per annum over a period of 30 years commencing from 10.01.1997 for construction of Office Complex (‘Khanija Bhavan”). In terms of the lease agreement 8000 square meters of built-up area has been handed over to the Government free of cost in lieu of land provided by the Government. The total expenditure incurred on construction has been disclosed under Schedule E (Fixed Assets) to be written off in terms of accounting policy no. 3.

d) The Corporation has securitised 51 months present value of future lease rent receivables amounting to Rs. 25.01 crores and accounted the same as income during the financial year 2000-01. The un-securitised portion of lease rent amounting to Rs. 355.80 lakhs for the year (previous year Rs. 208.19 lakhs) received is shown under the head Rental Income in Schedule j(ii).

e) Contingent Liabilities i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 3174.76 lakhs.

(Previous year – Rs. 2636.72 Lakhs) ii) Guarantees issued – Rs. 1812.55 lakhs (Previous year – Rs. 1812.55 lakhs)


KSIIDC

iii) Claims against the corporation not acknowledged as debts Rs. 200.94 lakhs (Previous year Rs. 200.94 lakhs) Sl. No.

Name of the Company Guarantee in Favour Amount (Rs.)

15. Hedge & Gole SBI 20,00,000 16. Thungabhdra Fibres Ltd. IDBI 34,00,838 17. Thungabhdra Fibres Ltd. ICICI 4,68,773 18. Gangavathi Sugars Corporation Bank 116,00,000 19. Scotie India Ltd. SBI 9,99,434 20. Mysore Tools Ltd. SBM 12,66,404 21. ESI 3,58,461 TOTAL 2,00,93,910

iv) Income tax Demands pending against the Corporation amounting to Rs. 731.61 lakhs, (Previous year Rs. 731.61 lakhs) on account of reopening of Income Tax assessments, are being contested at various levels by filing necessary appeals and the same are shown under contingent liabilities.

f) Loan & Advances to Staff include Rs. 2.71 lakhs (Previous year Rs. 3.06 lakhs) due from an Officer of the Company. Maximum amount outstanding at any time during the year Rs. 2.86 lakhs. (Previous year Rs. 3.70 lakhs)

g) Income Tax: i) The provision for Income and Advance Tax paid for in earlier years is pending reconciliation and is to be set-off. ii) No provision for Income Tax is made for the year as there is no taxable income. iii) As per accounting standards-22 issued by the Institute of Chartered Accountants of India, the effect of deferred tax is

as under: iv) Deferred Tax Asset:

Particulars 2004-05 (in rupees)

2003-04 (in rupees)

On Fiscal allowances on Fixed Assets 3,73,86,491 1,95,58,492On Unabsorbed Losses 84,56,86,668 64,62,68,889On Timing Differences of Tax deductions 29,00,46,660 43,54,26,053Deferred Tax Asset 1,17,31,19,820 1,10,12,53,434

Note: As a measure of prudence deferred tax asset has not been recognised in the books. h) Financial Reporting of Interest in Joint ventures: (as per AS27 issued by the institute of Chartered Accountants of

India) A joint venture relates to an enterprise in which the company has significant influence, but not control over the financial and

operating policies. i) Investments in Joint ventures as on 31st March 2005 (unlisted capital contributions, at cost)

Name of the Joint Venture % of Ownership Balance Sheet Value 2004-05

Balance Sheet Value 2003-04

1. Karnataka Asset Management Company (P) Limited 33.33 16,49,900 49,900 2. Karnataka Trustee Company (P) Limited 50.00 49,900 49,900 3. Karnataka Antibiotics and Pharmaceuticals Limited 40.82 61,81,750 61,81,750 4. Sourab Cold Storage (Kar) Limited 39.82 29,80,000 29,80,000 5. Karnataka Oswal Palm Oil Limited 49.00 1,95,99,960 1,95,99,960

Note: In addition to the above, a sum of Rs. 100/- is invested in Karnataka Asset Management Company Private Limited and Rs. 100 in Karnataka Trustee Company Private Limited and Rs. 7,74,99,940 (Previous year Rs. 5,04,99,940) in Bangalore International Airport Limited (13% ownership), Rs. 20,000 in Sourab Cold Storage (Kar) Limited and Rs. 40/- in Karnataka Oswal Oil Palm Limited, pending allotment of shares, and is shown under share application money under the head “Investments”.i) Aggregate Share of Asset & Liability and income and expenditure in Joint Venture as on 31st March, 2004 is nil.

ii) The confirmation of balances in respect of some loans & advances to industrial concerns are awaited. The confirmation of balances have not been obtained in respect of industrial concerns taken over under Sec. 29 of SFCs Act.

j) Documentation/ hypothecation formalities are pending in respect of some of staff advances. k) Current Liabilities include Rs. 232.43 lakhs (Previous year Rs. 1164.50 lakhs) being the amount recovered on sale of

assets taken over under Sec. 29 under SFCs Act pending final appropriation with other financial institutions. l) Amount recoverable form projects (Schedule-H) include dues from KIADB towards development cost of “Raichur Growth

Centre” amounting to Rs. 1239.49 lakhs (Previous year Rs. 1127.83 lakhs) which is pending confirmation. m) Remuneration to Chairman and Managing Director:

(Amount in Rs.) Particular 2004-05 2003-04 Chairman – Salary & allowances 3,61,009 6,35,108 Total 3,61,009 6,35,108

(Amount in Rs.) Particular 2004-05 2003-04 Managing Director – Salary & allowances 4,35,832 4,81,410 Leave salary & pension contribution 1,10,756 1,06,598 Medical Reimbursement 19,210 19,580 Total 5,65,798 6,07,588

n) Expenditure in Foreign Currency: (Amount in Rs.)

(A) Travelling Expenses 2004-05 2003-04 i) Managing Director Nil Nil ii) Officers Nil 91,722 iii) Officials of the Government Nil 64,403


KSIIDC

o) Expenditure incurred on employees who were in receipt of remuneration for the year which in aggregate was not less than Rs. 24,00,000/- per annum (Previous year Rs. 24,00,000) or remuneration for the part of the year at a rate not less than Rs. 2,00,000/- per mensum (Previous year Rs. 2,00,000 per mensum) is nil.

p) Voluntary Retirement Scheme: The total expenditure for VRS 2004, during the year ended 31st March, 2005 was Rs. 43,26,004/-. The expenditure

incurred is being amortized in three equal yearly installments. During the year Salaries and allowances includes payment of compensation under Voluntary retirement Scheme to employees amounting to Rs. 14,42,002/- (previous year nil), being 1/3rd share in the expenses charged off to the Profit and Loss account during the year.

q) Income form operations include: i) Interest recoverable for the year amounting to Rs. 605.71 lakhs (Previous year Rs. 509.17 lakhs) from Government of

Karnataka in respect of investment made in one of the companies out of borrowed funds which is subject to confirmation from Government of Karnataka.

ii) Interest recoverable on project development expenses amounting to Rs. 111.66 lakhs (previous year Rs. 194.61 lakhs).

r) Other income includes service charges accounted on project development amounting to Rs. 54.49 lakhs (Previous year Rs. 65.63 lakhs)

s) The amount disbursed by way of seed capital assistance to the companies and the assistance received and payable to IDBI, are shown separately in the books and are pending reconciliation.

t) The corporation has entered into a negotiated settlement of dues with IDBI and SIDBI, vide letter No: IDBI(BL)4481/KSIIDC dated 7th January 2005 and letter No. SIDBI/9291/DFID/SIDC/KSIIDC dated 24th March 2005 respectively. As per the terms and conditions of which, the Interest accrued and due as on 30-09-2004 along with the Funded Interest on that date aggregating to Rs. 148.45 crores and Rs. 42.18 crores respectively, is to be converted into Cumulative Redeemable Preference Shares (CRPS). Pending increase in the Authorized Share Capital of the Corporation, the amount has been kept under the respective share application pending allotment as on Balance Sheet date.

u) The cost of land acquired for Bangalore International Airport project, includes the interest on Borrowings made from HUDCO till 30th September 2004. The Borrowings and interest payable to HUDCO are guaranteed by the Government of Karnataka. Consequence to capitalization of land by KSIIDC limited, interest paid on such loans borrowed from HUDCO after 1.10.2004 amounting to Rs. 487.56 lacs and the amount so received from the government of Karnataka, towards the same has been shown separately under the head ‘Financial Expenses’ in Schedule-K. A letter to this effect for approval and confirmation has been written to Government of Karnataka.

v) In respect of non-performing assets, the valuation of the assets secured for the loans availed is based on valuation reports and in the absence of such reports on the available financial statements of the borrower.

w) A sum of Rs. 124.50 crores has been paid to KIADB for acquisition of land and other related expenses incurred in connection therewith KIADB has made a claim amounting to Rs. 125.76 crores. Out of the above, an amount of Rs. 120.86 crores being the capitalisable value of 2469 acres & 1½ guntas of private land acquired by KSIIDC Ltd., from KIADB has been capitalized in the books during the financial year. The Balance amount of Rs. 4.90 crores would be accounted after due reconciliation and approval.

for M N S & Co., Chartered Accountants

sd/- (M. Srinivas)

Partner Date: 15-09-2005 Place: Bangalore


KSIIDC

III. STATUTORY AND OTHER INFORMATION Minimum Subscription As the Issue of Bonds is being made on private placement basis, the requirement of minimum subscription shall not be applicable. Expenses of the Issue The expenses of the Issue payable by the company such as fees to the arranger, fees, reimbursement of expenses and payments to the Registrars to the Issue, printing expenses, listing fees, fees of the Trustees for the Debentureholders, stamp duty and other expenses will be met out of the proceeds of the Issue. Fees Payable to the Intermediaries The fees payable and the terms of appointment of intermediaries such as arrangers to the issue, legal advisors to the issue, tax consultants, registrars to the issue, trustees for the Debentureholders, credit rating agency(ies) etc are set out in the relevant appointment letters, copies of which are kept open for inspection at the Head Office of the company. Underwriting and Procurement Commission/ Brokerage The issue is not underwritten and hence no underwriting commission is payable. As the company shall not be appointing any Broker other than the arranger to the issue, no procurement commission/ brokerage shall be payable to any other broker in addition. Previous Issues by the Company The company has not gone for seeking public subscription for either its equity shares/ bonds/ debentures/ preference shares etc through Prospectus and thus the company is a unlisted company within the meaning of SEBI Disclosure & Investor Protection Guidelines 2000. The shares of the company are therefore not listed on any Stock Exchange. Except as stated elsewhere in the Information Memorandum, the company has not issued any shares/ debentures/ bonds or agreed to issue any shares/ debentures/ bonds for cash or otherwise within the two years preceding the date of this Information Memorandum. Offer Otherwise than for Cash There have not been any issues for consideration other than cash, save as except stated elsewhere in this Information Memorandum. Option to Subscribe Save as otherwise stated in the Information Memorandum, the company has not given any person nor does it propose to give any person any option to subscribe to the shares/ debentures/ bonds of the company. Undertaking regarding purchase of property There is no property which the company has purchased or acquired or proposes to purchase or acquire, which is to be paid for, wholly or partly, out of the proceeds of the present Issue or the purchase or acquisition of which has not been completed on the date of issue of this Information Memorandum, other than the property as given hereunder: a. the contracts for the purchase or acquisition whereof were entered into, or may be entered into, in the ordinary course of the

company’s business, such contracts not being made in contemplation of the Issue or in consequence of the contract; or b. in respect of which the amount of the purchase consideration is not material. The company has not purchased any property in which any of its directors had or have any direct or indirect interest or in respect of any payment thereof. The company has no plans, at present, to acquire any running business out of the proceeds of the Issue. Terms of Appointment of Chairman Appointed by the Govt. of Karnataka, in addition to his normal duties as Principal Secretary, Commerce & Industry Department, Government of Karnataka. Only sitting fees of Rs. 250/- paid per Meeting attended.

(Amount in Rs.) Particular 2004-05 2003-04 Chairman – Salary & allowances 3,61,009 6,35,108 Total 3,61,009 6,35,108

Terms of Appointment of Managing Director (Amount in Rs.)

Particular 2004-05 2003-04 Managing Director – Salary & allowances 4,35,832 4,81,410 Leave salary & pension contribution 1,10,756 1,06,598 Medical Reimbursement 19,210 19,580 Total 5,65,798 6,07,588

Nature and Interest of Directors No Director of the company is interested in the appointment of any of the intermediaries to the issue such as arrangers, registrars, bankers, trustees, rating agency(ies) etc. No Director of the company is interested in any property acquired by the company within two years of the date of the Information Memorandum or proposed to be acquired by it. The Directors are not interested in any loan or advance given by the company to any person(s)/ Company(ies) nor is any beneficiary of such loan or advance related to any of the Directors of the Company. Capitalisation of Reserves or Profits The company has not capitalised its Reserves during the last 5 years. Revaluation of Assets There has been no revaluation of assets of KSIIDC during the last 5 years.


KSIIDC

IV. OTHER DETAILS Rights of Debentureholders Debentureholders do not carry any rights regarding voting, dividend, lien on shares. Other than receipt of interest & payment of principal mentioned in this Information Memorandum, the Debentureholders will not be entitled to any other Rights & Privileges.

Modifications of Rights The rights, privileges, terms and conditions attached to all Bonds may be varied, modified or abrogated with the consent, in writing, of those holders of the Bonds who hold at least three- fourths of the outstanding amount of Bonds or with the sanction accorded pursuant to a resolution passed at a meeting of the Debentureholders, carried by a majority consisting of not less than three-fourths of the persons voting there upon a show of hands or, if a poll is demanded by a majority representing not less than three-fourths in value of the votes cast on such poll, provided that nothing in such consent or resolution shall be operative against the Issuer if the same are not accepted in writing by the Issuer. Restrictions, if any, on Transfer and Transmission of Bonds and on their Consolidation The Issuer will not register any transfers of the Bonds to any NRIs (except on non- repatriation basis), OCBs, FIIs, or any persons not resident in India, unless appropriate regulatory approvals are obtained. The Issuer shall not be duty bound to take interest or trust in or over the Bonds. The title to the Bonds shall pass by execution of duly stamped transfer deed(s) accompanied by the Bond certificate (s) / Letter of allotments (s) together with necessary supporting documents. The transferee(s) should deliver the Bond certificates to the Issuer for registration of transfer in the Register of Debentureholders at the Registered Office. The Issuer on being satisfied will register the transfer of such Bonds in its Register of Debentureholders. The person whose name is recorded in the Register of Debentureholders shall be deemed to be the owner of the Bonds. Request for registration of transfer, along with the necessary documents, and all other communications, requests, queries and clarifications with respect to the Bonds should be addressed to and sent to the Registered Office. No correspondence shall be entertained in this regard at any other Branches or any of the offices of the Bank. Transfer of bonds in dematerialised form would be in accordance to the rules /procedures as prescribed by NSDL /Depository Participant.

Consolidation and Splitting of Bonds The request from Registered Debentureholder(s) for splitting/ consolidation of certificates will be accepted by the Issuer only if the original bond certificate(s) is / are enclosed along with an acceptable letter of request. No requests for splits below the Market Lot will be entertained. Transmission In the event of demise of a Registered Debentureholder or the first holder in the case of joint holders, the Issuer will recognize the executor or administrator of the demised bond holder or the holder of succession certificate or other legal representative of the demised Debentureholder as the Registered bond holder of such Registered Holder’s of bonds if such a person obtains probate or letter of administration or is the holder of succession certificate or other legal representation, as the case may be, from a Court of India having jurisdiction over the matter and delivers a copy of the same to the Issuer. The Issuer may in its absolute discretion, where it thinks fit, dispense with the production of the probate or letter of administration or succession certificate or other legal representation, in order to recognize such holder as being entitled to the bonds standing in the name of the demised bond holder on production of sufficient documentary proof or indemnity. IMPORTANT PROVISIONS OF THE ARTICLES Article No. 15 Calls on Shares The Directors may from time to time make such calls as they think fit upon the members in respect of all moneys

unpaid on the shares held by them respectively and not by the conditions of allotment thereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the persons and at the time and places appointed by the Directors. A call may be made payable by installments:

Extension of time Provided, however, that the Directors may from time to time at their discretion extend the time fixed for the

payment of any call. Article No. 16 Call money defaulted to bear interest If the sum payable in respect of any call be not paid on or before the day appointed for payment thereof the

holder for the time being or allottee of the share in respect of which a call shall have been made shall pay interest on the same at such rate not exceeding 6 per cent annum as the Directors shall fix, from the day appointed for the payment thereof to the time of actual payment but the Directors may waive payment of such interest wholly or in part.

Article No. 17 Liability of joint holders of shares The joint-holders of a share shall be jointly and severally liable to pay all calls in respect thereof. Article No. 18 Date of call revocation and postponement A call shall be deemed to have been made at the time when the resolution of the Directors authorizing the call

was passed. A call may be revoked or postponed at the discretion of the Directors. Article No. 19 Dues on Shares to be deemed call money Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on

account of the nominal value of the share or by way of premium, shall for the purposes of these regulations, be deemed to be a call duly made and payable on the date on which by terms of issue such sum becomes payable.


KSIIDC

Article No. 20 Payment in advance by share holders The Directors may, if they think fit, receive from any member willing to advance the same, all or any part of the

moneys due upon the shares held by him beyond the sums actually called for, and upon the moneys so paid in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the Company may pay interest at such rate (not exceeding without the sanction of the Company in general meeting, 6 percent per annum) as the members paying such sum in advance and the Directors agree upon, and the Directors may at any time repay the amount so advanced upon giving to such member three months notice in writing.

Article No. 21 Company’s lien on shares and dividends The Company shall have first and paramount lien on every share (not being a fully paid share) for all money

(whether presently payable or not) called or payable at a fixed time in respect of that share, and the Company shall also have lien on all shares (other than fully paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the Company, but the Directors may at any time, declare any share to be wholly or in part exempt from the provisions of this Article. The Company’s lien, if any, on a share shall extend to all dividends payable thereon.

Article No. 22 Sale of shares on which the company has a lien The Company may sell, in such manner as the Directors think fit, any shares on which the Company has a lien,

but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice, in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share of the person entitled by reason of his death or insolvency to the share.

Article No. 23 Application of proceeds of such sales and rights of the purchaser The proceeds of the sale be applied on payment of such part of the amount in respect of which the lien exists as

is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares, at the date of the sale the purchaser shall be registered as the holder of the shares and he shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

Article No. 24 Notice to defaulting share holders (i) If a member fails to pay any call, or installment of a call, on the day appointed for payment thereof, the

Directors may, at any time thereafter during such time as any part of the call or installment remains unpaid serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest which may be accrued.

(ii) Contents of notice

(a) name a further day (not being earlier than the expiry of fourteen days from the date of service of notice) on or before which the payment required by the notice is to be made ; and

(b) state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited.

Forfeiture on non-compliance with notice (iii) if the requirements of any such notice as aforesaid are not complied with, any share in respect of which the

notice has been given may, at any time thereafter, before the payment required by the notice has been made be forfeited by a resolution of the Directors to that effect.

Disposal of forfeited share (iv) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Directors

think fit. Cancellation of forfeiture

(v) At any time before a sale or disposal as aforesaid, the Directors may cancel the forfeiture on such terms as they think fit.

Article No. 25 Liability of forfeiting share holders (I) A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares,

but shall notwithstanding the forfeiture, remain liable to pay to the Company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of shares.

(II) The liability of such person shall cease if and when the Company shall have received payment in full and all such moneys in respect of the shares.

Article No. 26 Evidence of forfeiture of share (i) A duly verified declaration in writing that the declarant is a Director, the Manager or the Secretary of the

Company and that a share in the company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share,

Disposal and transfer of forfeited share (ii) The Company may receive the consideration, if any, given for the share on any sale or disposal and may

execute a transfer of the share in favour of persons to whom the share is sold or disposed of. (iii) The transferred shall thereupon the registered as the holder of the share. Transferee’s right and title (iv) The transferee shall not be bound to see to the application of the purchase money, if any, nor shall his title

to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share.

Article No. 27 Provisions regarding forfeiture to apply in cases of any non-payment The provisions of these articles as to forfeiture shall apply in the case of non-payment of any sum which, by the

terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.


KSIIDC

Transfer and Transmission of Shares Article No. 28 Transfer of Shares (a) Any share in the company may be transferred by an instrument of transfer which shall be executed both by

the transferor and the transferee. (b) An application for the registration of transfer of shares may be made either by the transferor or the

transferee. Board’s Powers to refuse to recognise transfers (c) Notwithstanding anything contained in these presents the Board subject to the right of appeal conferred by

section 111 of the Act may, at any time in their absolute discretion and without specifying any grounds, decline to register the transfer of any shares whether fully paid up or not and whether the transferee (by transfer or transmission) is already a member of the company or not.

Article No. 29 Notice on refusal to transfer shares If the Directors refuse to register the transfer of any shares they shall, within two months, send to the transferee

and the transferor notice of the refusal. Article No. 30 Holder of shares recognized as absolute owner Save as herein otherwise provided, the Directors shall be entitled to treat the person whose name appears on the

register of members as the holder of any share as the absolute owner thereof and accordingly shall not (except as ordered by a Court of competent jurisdiction or as by law required) be bound to recognise any benami trust or equity or equitable contingent or other claim to or interest in such share on the part of any person whether or not it shall have express or implied notice thereof.

Article No. 31 Instrument of transfer The instrument of transfer of share in the Company shall be executed both by the transferor and transferee, the

transferor shall be deemed to remain holder of the share and until the name of the transferee is entered in the register of members in respect thereof.

Article No. 32 Form of instrument of transfer Shares in the Company shall be transferred in the following form, or in any usual or common form which the

Directors shall approve “The instrument of transfer shall be in the form prescribed under the Securities Contracts Regulation Act, 1956

from time to time and shall be registered in the manner mentioned in Section 108 of the Act”. Article No. 33 Transfer by operation of law Nothing contained in Article 28 shall prejudice any power of the company to register as share holder any person to

whom the right to any shares in the company has been transmitted by operation of law. Article No. 34 Instrument of transfer to be left at the office Every instrument of transfer shall be left at the office for registration, accompanied by the certificate of share to be

transferred and such evidence as the company may require to prove the title of the transferor, or his right to transfer the shares.

Article No. 35 Retention of Instrument of Transfer All instruments of transfer shall be retained by the company but any instrument of transfer which the Directors may

decline to register shall on demand be returned to the person depositing the same. Article No. 36 Free for Transfer A free not exceeding two rupees may be charged for each transfer and shall, if required by the Directors be paid

before the registration thereof. Article No. 37 Closure of Transfer books and register of members The transfer books and register of members may be closed for any time or times not exceeding in the whole 45

days in each year but not exceeding 30 days at a time after giving not less than 7 days notice in terms of Section 154 of the Act.

Article No. 38 Board’s powers to refuse to recognise transmission of shares Subject to the provisions of Section 111 of the Act, the Directors shall have the same right to refuse to register a

person entitled by transmission to any shares or his nominee, as if he were the transferee named in an ordinary transfer presented for registration.

Borrowing Powers Article No. 44 Borrowings Subject to the provisions of section 292 and 293 of the Act, the Directors may from time to time borrow or secure

the payment of any sum or sums of money for the purposes of the Company. Article No. 45 Security and conditions of repayment The directors may secure the repayment of such moneys in such manner and upon such terms and conditions in

all respects as they think fit and in particular, by the issue of bonds perpetual or redeemable debentures or debenture-stock, or any mortgage, charge or other security on the undertaking of the whole or any part of the property of Company (both present and future) including its uncalled capital for the time being.

Article No. 46 Securities assignable Debentures, debenture stock, bonds or other securities may be made assignable free from any equities between

the company and the person to whom the same may be issued.


KSIIDC

Article No. 47 Issue of Securities Subject to the provisions of section 76 of the Act, any bonds, debentures, debenture – stock or other securities

may be issued at a discount, premium or otherwise and with any special privileges as to redemption, surrender, drawings, allotment of shares, appointment of Directors and otherwise.

Article No. 48 Priority of charge on uncalled capital Whenever any uncalled capital of the company is charged all persons taking any subsequent charge thereon shall

take the same subject to such prior charge and shall not be entitled, by notice to the shareholders or otherwise, to obtain priority over such prior change.

Article No. 49 Indemnity of Directors If the Directors or any of them or any other person shall become personally liable for the payment of any sum

primarily due from the company, the Directors may execute or cause to be executed any mortgage, charge or security over or affecting the whole or any part of the assets of the company by way of indemnity to secure the Directors or persons so becoming liable as aforesaid from any laws in respect of such liability.

Votes of Members Article No. 67 Voting Upon a show of hands, every member present in person shall have one vote and upon a poll every member

present in person or by proxy or by duly authorized representative shall have his voting right in proportion of his share in the paid up capital of the company.

Article No. 68 Vote of member company Any member who is a company present by a representative duly authorized by a resolution of the Directors of such

company in accordance with the provisions of Section 187 of the Act may vote on a show of hands as if he was a member of the company. The production at the meeting of a copy of such resolution duly signed by one Director of such company and certified by him as being a true copy of the resolution shall at the meeting be accepted by the company as sufficient evidence of the validity of his appointment.

Article No. 69 Vote of Transferee Member Any person entitled under the transmission clause (Article 33 hereof) to the transfer of shares may vote at a

meeting in respect thereof as if he was the registered holder of such shares provided that at least 72 hours before the time of holding the meeting or adjourned meeting as the case may be at which he proposes to vote he shall satisfy the Directors of his right to the transfer of such shares unless the Directors shall have previously admitted right to vote at such meeting in respect thereof.

Article No. 70 Vote of Joint Shareholders Where there are joint registered holders of any share, anyone of such persons may vote at any meeting, either

personally or by proxy in respect of such shares as if he were solely entitled thereto and if more than one of such jointholders be present at any meeting personally or by proxy, that one of the said person present whose name stands first on the register in respect of such shares shall alone be entitled to vote in respect thereof. Several executors or administrators of a deseased member in whose name any share stands shall for the purposes of this clause be deemed joint holders thereof.

Article No. 71 Guardian of Unsound mind may vote A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in

lunacy, may vote, whether on a show of hands or on poll by his committee or other legal guardian and any such committee or guardian may, on a poll, vote by proxy.

Article No. 72 Vote by Proxy A member entitled to attend and vote at a meeting may appoint another person (whether a member or not) as his

proxy to attend a meeting and vote on a poll. The instrument appointing a proxy shall be in writing or if the appointer is a body corporate be under its seal or be signed by an officer or an attorney duly authorized by it.

Article No. 73 Appointment of Proxy The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a

notarially certified copy thereof shall be deposited at the office of the Company not less than 48 hours before the time for holding the meeting at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of 12 months from the date of its execution except in the case of adjournment of any meeting first held provisionally to the expiration of such time. An attorney shall not be entitled to vote unless the power of attorney or other instrument appointing him or a notarially certified copy thereof has either been registered in the records of the company at any time not less than 48 hours before the time for holding the meeting at which the attorney proposes to vote or is deposited at the office of the company not less than 48 hours before the time fixed for such meeting as aforesaid. Notwithstanding that a power of attorney or other authority has been registered in the records of the company, the company may by notice in writing addressed to the members or the attorney required him to produce the original power of attorney or authority and unless the same is thereupon deposited with the company the attorney shall not be entitle to vote at such meeting unless the directors in their absolute discretion excuse such non production and deposit.

Article No. 74 Custody of Instrument of Proxy If any such instrument of appointment be confined to the subject of appointing proxy or substitute for voting at

meetings of the company it shall permanently or for such time as the directors may determine be in the custody of the company and if embracing other object a copy thereof, examined with the original, shall be delivered to the company to remain in the custody of the company.


KSIIDC

Article No. 76 Validity of Vote of Proxy A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous

death or insanity of the principal, or the revocation of the proxy or of the authority under which the proxy was executed or the transfer of the shares in respect of which the proxy is given, provided that no intimation in writing of such death, insanity, revocation or transfer or transmission shall have been received at the office of the company before the commencement of the meeting or adjourned meeting at which the proxy is used.

Article No. 77 Dues on shares disqualifies a member No member shall be entitled to be present, or to vote on any question either personally or by proxy or as proxy

for another member, at any meeting or upon a poll, or be reckoned in quorum whilst any call or other sum shall be due and payable to the company in respect of the shares of such member.

Article No. 78 Objections on validity of votes No objection shall be made to the validity of any vote except at the meeting or poll at which such vote shall be

tendered, and every vote whether given personally or by proxy, not disallowed at such meeting or poll, shall be deemed valid for all purposes of such meeting or poll whatsoever.

Any such objection made in due time shall be referred to the Chairman of the meeting, whose decision shall be final and conclusive.

Directors

Article No. 79 Number of Directors and their qualification The Company shall have not less than three and not more than nine Directors. The Directors shall not be

required to hold any qualification shares.

The First Directors of the company shall be: (1) Sri Mohamed Rahamatualla, I.A.S., Secretary to Government of Mysore, Commerce and Industries

Department. (2) Shri M. Veeraraj Urs, I.A.S., Secretary to Government of Mysore, Finance Department.

(3) Shri T. Shamanna, I.A.S., Director, Department of Industries & Commerce, Government of Mysore. Article No. 80 Appointment of Directors by the Government

(1) The Government shall be entitled to appoint one-third of the members of the Board (or three directors, whichever is less) and from time to time to remove all or any such appointees from the office of the directors of the Company and to appoint any other individual or individuals in place or places so becoming vacant. If any such appointee resigns or dies, the place as becoming vacant may also be filled up by the Government by appointing thereto another individual. Such nominee shall not be liable to retire by rotation. Provided that the Government shall be entitled to exercise the right conferred by this Article only so long as he holds not less than ten percent of the total paid – up capital of the company or only so long as the Company is indebted to the Government to the extent of not less than Rupees two lakhs or only so long as the Government is or continues to be interested in any fiduciary capacity. Provided also that the right conferred by this Article shall not be exercised so as to prejudicially affect any right of any party referred to in clause (2) below to nominate directors under that clause.

Appointment of Directors by Others or any State Government (2) Incase the Union Government (other than Mysore State for which provision is made above) or an Industrial

Finance Corporation sponsored or financed by any of the aforesaid Government grants loans to or accepts participation in the capital and direction of the Company such Government or Corporation shall, during such time as they hold shares in the Company or the loans granted by them remain unpaid, be entitled to nominate and from time to time substitute in place of such nominees, one or more directors to protect the interests of each Government or Corporation on the Board of Directors of the Company; and while holding such office, they shall not be liable to retire by rotation. Provided that the total number of Directors nominated under this Article No. 80 (1) and (2) shall not exceed one – third of the total number of directors, of the Company and such nominated directors who are in excess of one third of the total number of directors shall be liable for retirement by rotation.

(2-A) :Notwithstanding anything to the contrary contained in these Articles, IDBI shall, pursuant to an agreement between it and the company, have a right to appoint one Director on the Board of Directors of the Company (such Director is hereinafter referred to as ‘as the Special Director’). The Special Director shall not be required to hold qualification shares and shall not be liable to retire by rotation. IDBI may at anytime from time to time remove the special director appointed by it and may in the event of such removal and also in case of death or resignation of the Special Director, appoint another in his place and also fill any vacancy which may occur as a result of the Special Director ceasing to hold office for any reason whatsoever. Such appointment or removal shall be made in writing by IDBI and shall be delivered to the company at its registered office. The Board of Directors of the Company shall have no power to remove the Special Directors from office. Such Special Directors shall be entitled to attend all general meetings, board meetings and meetings of the committee of which he is a member, and he and IDBI shall also be entitled to receive notices of all such meetings. The Special Director shall be paid normal fees and expenses to which other directors are entitled, PROVIDED THAT if the Special Director is an officer of the IDBI, unless IDBI otherwise directs, no sitting fees shall be payable to him but the company shall reimburse IDBI the amounts paid or payable under its rules to such Special Director on account of travelling and halting allowances and any other expenses for attending any general meeting or any meeting of the Board or Committee.

Retirement of Directors 3. At the first annual general meeting of the Company and at every subsequent annual general meeting one-

third of such of the directors for the time being as are liable to retire by rotation or if their number is not three or a multiple of three number nearest to one-third shall retire from office. The directors so to retire the rotation shall be those who have longest been in office since their last appointment but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, the determined by lot. When a director retires, the company may fill up the Vacancy by re-appointing the retiring Director or some other person thereto.


KSIIDC

Remuneration of Directors 4. The Directors for the time being of the Company may, with the approval of the Government, be paid a

sitting fee not exceeding Rs. 250 per sitting with a daily allowance and travelling allowance at such rates as the Board in consultation with the Government may decide in that behalf. If any director shall be appointed to advise the Board as an expert or be called upon the perform extra services or make special exertions for any of the purposes of the company the Board may, in consultation with the Government and subject to the provisions of Section 314 of the Act, pay to such director shall Special remunerations as they may think fit, which remuneration may be in the form of either salary, commission or percentage of profits and may be either in addition to or in substitution of the remuneration specified in the Article. “Nothing contained in this Article preclude the Board of Directors from reimbursing any actual expenses incurred by any Director in connection with the business of the Company”.

Article No. 81 Directors to manage the Company Subject to the provisions of the Act, the business of the company shall be managed by the Directors who may

pay all expenses incurred in getting up and registering the Company and who may exercise all such powers and do all such acts and things as the Company is authorised to exercise and do. Provided that the Director shall not exercise any power or do any act or thing which is directed or required, whether by the Companies Act, 1956 or any other Act o by the Memorandum or Articles of the Company to be exercised or done by the Company in general meeting.

Exercise of powers to be subject to Act, Articles and other Rules

Provided further that in exercising any such power or doing any such act or thing, the Directors shall be subject to the provisions contained in that behalf in the Companies Act, or nay other Act, or in the Memorandum or Articles of the Company or in any regulations made by the Company in general meeting. No regulation made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made.

Article No. 82 Alternate Director The Directors shall have power with the previous approval of the Government to appoint additional and alternate

Directors in the manner provided in Section 260 and 313 of the Act. Article No .83 Office of Director to be vacated The Office of the Director shall become vacant if: (a) he is found to be unsound mind by a Court of Competent Jurisdiction; (b) he applies to be adjudicated as insolvent; (c) he is adjudged as insolvent; (d) he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect thereof to

imprisonment for not less than six months; (e) he absents himself from three consecutive meetings of the Directors or from all meetings of the Directors

for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board;

(f) he acts in contravention of Section 295 read with Section 283 (1) (h) of the act: (g) he fails to disclose the nature of his concern or interest in any contract or arrangements or proposed

contract or arrangements entered into by or on behalf of the Company as required under Section 299 of the Act;

(h) he is removed in pursuance of section 284 of the Act; (i) he becomes disqualified in an order of the Court under Section 203 of the Act; (j) he is concerned or participates in the profits of any contract with the Company; (k) he fails to pay any call in respect of shares of the Company held by him whether alone or jointly with

others within six months from the last date fixed for the payment of the call, unless the Central Government has by notification in the Official Gazette, removed the disqualification incurred by such failure;

(l) having been appointed a director by virtue of his holding any office or other employment in the company, he ceases to hold such office or other employment in the company.

Article No. 84 Postponement of disqualification The disqualification referred in sub-clause (c), (d) and (g) of Article 83 above shall not take effect : - (a) for thirty days from the date of adjudication, sentence or order; (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication,

sentence or conviction resulting in the sentence or order until the expiry of seven days from the date of which such appeal or petition is disposed of; or

(c) where within the seven days aforesaid any further appeal or petition is preferred in respect of the adjudication, sentence, conviction or order, and the appeal or petition if allowed would result in the removal of the disqualification, until such further appeal or petition is disposed of.

Article No. 85 Directors may become Directors of other Companies also A Director of this Company may be or become a Director of any Company promoted by this Company or in

which it may be interested as a vendor, member or otherwise. Any Director including the Managing Director of this Company shall in no way be accountable to this Company

in respect of any remuneration or other benefits received by them from other companies in consideration of services rendered to those Companies.


KSIIDC

Article No. 86 Meeting of the Directors The Directors may meet for the despatch of business, adjourn and otherwise regulate their meetings as they

think it, provided that the Directors shall hold a meeting at least once in every three months in accordance with section 285 of the Act. A Director may, and the Secretary on the requisition of any Director shall at any time, convene a meeting of the Directors. Unless otherwise expressly provided in the Act, questions arising at any meeting shall be decided by a majority of votes and the Chairman shall have a second or casting vote in case of equality of votes.

The Quorum necessary for the transaction of the business of the Directors shall be one-third of the total strength or 2 directors whichever is higher as provided in section 287 of the act.

Article No. 87 Continuing Directors The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number

is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of summoning a general meeting of the company, but for no other purpose.

Article No. 88 Meeting of the Directors Competent to exercise all powers conferred A meeting of the Directors for the time being at which a quorum is present shall be competent to exercise all/or

any of the authorities, powers and discretion by or under the Article of the company for the time being vested in or exercisable by the Directors generally.

Article No. 89 Resolutions of Directors or Committee of Directors Save as otherwise expressly provided in the Act, a resolution in writing signed by all the Directors or of the

members of a Committee of Directors or by a majority of such of them as are entitled to vote on the resolution shall be as valid as if it had been passed at a meeting of the Directors or the Committee of Directors duly called and constituted provided that such resolution shall be signed by at least 2 Directors nominated by the Governor.

Article No. 90 Chairman at a meeting of the Directors If no Chairman is appointed by the Governor or Board or if at any meeting the Chairman is not present within 5

minutes after the time for holding the same, Directors present may in the absence of the Vice-Chairman, if any, choose one of their member to be Chairman of the meeting.

Article No. 91 Delegation of powers of the Directors The Directors may, subject to the provisions of Section 292 and 293 of the Act, delegate any of the powers to a

committee consisting of such member or members of their body as they think fit, any committee so formed shall, in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors.

Article No. 92 Chairman at a meeting of a Committee A Committee may elect a Chairman of its meetings; if no such Chairman is elected or if at any meeting the

Chairman is not present within ten minutes after the time appointed for holding the same, the members present may choose one of their number to be Chairman of the meeting.

Article No. 93 Meeting of Committee A Committee may meet and adjourn as it may think proper. Questions arising at any meeting shall be

determined by a majority of votes of the members present and in case of any equality of votes, the Chairman shall have a second or casting vote.

Article No. 94 Acts done at meetings of Directors or Committee not vitiated All acts done by any meeting of the Directors or of a committee of Directors or by any person acting as a

Director shall notwithstanding that it be afterwards discovered that there was some defect in the appointment of such directors or person acting as aforesaid, or that they or any of them were disqualified be as valid as if every such person had been duly appointed and was qualified to be a Director provided that nothing in this article shall be deemed to give validity to acts done by a Director after his appointment has been shown to the Company to be invalid or to have terminated.

Article No. 95 Capital expenditure over Rs. 3 Crores The Directors will reserve for the decision of the Government any programme of capital expenditure exceeding

Rs. 3 crores (Rupees three crores). Article No. 96 Powers of Directors Without prejudice to the general powers conferred by the articles hereinbefore and hereinafter, it is hereby

expressly declared that the Directors shall subject to the provision of those articles and of the Companies Act, have the following powers; that its to say powers:-

(i) To pay costs, charges and expenses preliminary and incidental to the promotion, formation establishment and registration of the Company.

(ii) To purchase or otherwise acquire for the company any property, rights, or privileges, which the Company is authorised to acquire, at such price and generally on such terms and conditions as they think fit.

(iii) At their discretion, to pay for any property rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares, bonds, debentures or other securities of the Company, and any such shares may be issued either as fully paid up or with such amount credited as paid up thereon as may be agreed upon; and any such bonds, debentures or other securities may be either specifically charged upon all or any part of the property of the Company and its uncalled capital, or not so charged.

(iv) To secure fulfillment of any contracts or agreements entered into by the Company by mortgage or charge of all or any of the property of the Company and its uncalled capital for the time being or in such other manner as they may think fit.

(v) To appoint, and at their discretion, remove or suspend such managers, secretary, officers, clerks, agents and servants for permanent, temporary, or special services, as they may from time to time think fit, and to determine their powers and duties and fix their salaries or emoluments, and to require security in such instances and for such amounts as they think fit.


KSIIDC

(vi) To appoint any person or persons, whether incorporated or not, to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, or any other purposes, and to execute and do all such deeds and things as may be requisite in relation to any such trust and to provide for the remuneration of such trusts or trustees.

(vii) To institute, conduct, defend compound or abandon any legal proceedings by or against the Company or its officer or otherwise concerning the affairs of the Company and also to compound and allow time for payment or satisfaction of any debt due and of any claims or demands by or against the Company.

(viii) To refer any claims or demands by or against the Company to arbitration and perform the award. (ix) To make and give receipts, release and other discharges for money payable to the Company, and for the

claims and demands of the Company. (x) To determine who shall be entitled to sign on the Company’s behalf bills, notes, receipts, acceptances,

endorsements, cheques, releases, contracts, and other documents. (xi) From time to time provide for the management of the affairs of the Company abroad in such manner as

they deem fit, and in particular to appoint any persons to be the attorneys or agents of the Company with such powers including power to sub-delegate and upon such terms as may be thought fit.

(xii) To invest and deal with any of the money of the Company not immediately required for the purposes of the Company upon such securities not being shares in this Company in such manner as they may think fit, and from time to time vary or realize such investments.

(xiii) To execute in the name and on behalf of the Company in favour of any Director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company’s property present and future with such convenience and provisions as shall be agreed upon or otherwise indemnify by paying him from the funds of the Company or by sale to him of the assets of the Company.

(xiv) From time to time to make, vary and repeal bye laws or the regulations of the business of the Company, its officers and servants.

(xv) To enter into all such negotiations and contracts and rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they may consider expedient for or in relation to any of the matters aforesaid, or otherwise for the purpose of the company.

Article No. 97 Directors Executive Director or Resident Director The Board may, in consultation with the Government, appoint from time to time, one of the Directors of the

Company as the Chairman of the Board of Directors or as the Managing Director of the company or as the Chairman and Managing Director of the Company or as the Executive Director or the Resident Director of the Company on such terms and conditions and on such remuneration in the form of salary, perquisites and benefits or otherwise as the Board may think fit. The Board may in consultation with the Government, remove or dismiss at any time any such Director from that office and appoint another Director in his place. Any such Director so appointed shall ipso facto vacate his office as the Chairman/ Managing Director/ Chairman and Managing Director/ Executive Director / Resident Director as the case may be, if he ceases to be a Director of the Company for any reason whatsoever.

Article No. 98 Appointment and powers of officers The Directors may by a resolution passed at a meeting appoint General Managers, or Financial Advisor and

Chief Accounts Officer and other officers of the Company for such terms and at such remuneration as they may think fit and may from time to time remove them from office and appoint others in their place. The Directors may from time to time entrust to and confer upon a General Manager or Financial Adviser and Chief Accounts Officer for the time being or any other officer such of the powers of the Directors as they may think fit and may confer such powers permissible under sub-sections (2), (3) and (4) of Section 292 of the Act for such time and to be exercised for such objects and purposes on such terms and with such restrictions as they may think expedient, and from to time revoke, withdraw, alter or vary all or any of such powers.

Article No. 99 Conferment of powers on Chairman, Managing Director, etc. The Director may by a resolution passed at a meeting from time to time entrust and confer upon the Chairman,

the Managing Director, Executive Director or Resident Director for the time being such of their powers which could be delegated in accordance with sub-sections (2), (3) and (4) of Section 292 of the Act as they may think fit.

Article No.100 Minutes The Directors shall in accordance with the Provisions of Section 193 of the Act cause minutes to be entered in

books provided for the purpose:- (a) of all appointments of officers made at the meeting of the Directors or of any Committee of Directors; (b) of all names of the Directors present at each meeting of the Directors and of any Committee of Directors; (c) of all resolutions and proceedings at all meetings of the Company and of the Directors and of any

Committee of Directors; (d) in the case of each resolution passed at such meeting the name of the Director, if any dissenting from or

not consenting in the resolution; and (e) every Director shall sign his name in a book to be kept for the purpose. Article No.101 Decisions by Circulation Subject to restrictions placed under section 292 of the Act and to the provisions of section 289 thereof and

subject to the provisions of the Articles, resolutions of the Directors can be passed by circulation and they shall be as valid and effectual as if they had been passed at a meeting of the Directors duly called and constituted.

Article No.102 Seal of the Company

The seal of the Company shall not be affixed to any instrument except by the authority of a resolution of the Directors, and in the presence of atleast one Director or of such other person or persons as the Directors may appoint for the purpose and any such Director or other authorised person or persons as aforesaid shall sign every instrument to which the seal of the company is so affixed in his presence, provided that the official seal of the Company may be used by the person authorised to use it in accordance with the provisions of Section 50 in relation to the business and transactions of the Company outside India.


KSIIDC

Article No. 103 Reserve Fund The Directors may, before recommending any dividend, set aside out of the profits of the company such sums

as they think proper as reserve fund to meet contingencies or for equalizing dividend or for special dividends or for improvements to any of the property of the Company, and for such other purposes as the Directors shall in their absolute discretion think conducive to the interest of the Company; and may divide the reserve funds into such special funds as they think fit and employ the reserve funds or any part thereof in the business of the Company, and that without being bound to keep the same separate from the other assets. The Board may also carry forward any profits which it may think prudent not to divide without setting them aside as a reserve.

Article No. 104 Investment of Funds The Directors may invest in the Reserve Bank of India or in such securities as may be approved by the

Governor and deal with any of the moneys of the Company upon such investments authorised by the Memorandum of Association of the Company (not being shares in this Company) and in such manner as they think fit, and from time to time vary or realise such investments.

Article No. 105 Dividend to members The profits of the Company available for payment of dividend subject to any special rights relating thereto,

created or authorised to be created by these presents and subject to the provision of these presents as to the reserve fund may with the approval of the Governor be divisible among the members in proportion to the amount of capital paid or credited as paid on shares. Provided always that (subject as aforesaid) any capital paid up on a share during the period in respect of which a dividend is declared shall only entitle the holder of such share to an apportioned amount of such dividend as from the date of payment. If and so long as nothing is paid upon any of the shares in the Company, dividends may be declared and paid according to the amounts of the shares.

Article No. 106 Profits on Capital paid in advance Where capital is paid on any hares in advance of calls upon the footing that the same shall carry interest such

capital, shall not whilst carrying interest. Confer a right to participate in profits. Article No. 107 Dividend to be in proportion to capital paid The company may pay dividends in proportion to the amount paid up or credited as paid up on each share,

where a larger amount is paid up or credited as paid up on some shares than on others. Article No. 108 Declaration of dividend The company in general meeting may declare the dividend to be paid up to the members according to their

rights and interest in the profits and may fix the time for payment, but no dividend shall exceed the amount recommended by the Directors.

Article No. 109 Dividend only out of profit No dividend shall be payable otherwise than out of the profits of the year or other period or any other

undistributed profits of the Company and no dividend shall carry interest as against the Company. The declaration of the Directors as to the amount of profits of the Company shall be conclusive. The Directors shall comply with Section 205 of the Act.

Article No. 110 Interim Dividends The Directors may, from time to time, pay to the members such interim dividends as in their judgement the

position of the Company justifies. Article No. 111 Appropriation of dividend on shares with a lien in favour of the Company The Directors may retain any dividends on which the Company has a lien, and may apply the same in or

towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists including the arrears of call amounts.

Article No. 112 Retention of Dividend pending transfer of shares The Directors may retain the dividends payable upon clause (Article 33) entitled to become a member, or which

any person under that clause is entitled to transfer, until such person shall become a member in respect of such shares or shall duly transfer the same.

Article No. 113 Rights to dividend only after registration of transfer A transfer of shares shall not pass the right to any dividend declared thereon after such transfer and before the

registration of the transfer. Article No. 114 Receipt of Joint shareholders Any one of the several persons, who are registered as the joint holders of any share, may give effectual receipts

for all dividends and payment on account of dividends in respect of such share. Article No. 115 Adjustment of dividend towards dues to the Company Subject to the provisions of the Act no member shall be entitled to receive payment of any interest or dividend in

respect of his share or shares, whilst any money may be due or be owing from him to the Company in respect of such share or shares otherwise howsoever either alone or jointly with any other person or persons; and the Directors may deduct from the interest or dividends payable to any member all sums of money so due from him to the Company.

Article No. 116 Set off of dividend against call Any general meeting declaring a dividend may make a call on the members for such amount as the meeting

fixes, but so that call on each member shall not exceed the dividend payable to him and so that the call be made payable at the same time as the dividend, and the dividend may, if so arranged between, the Company and the members, be set off against the calls.


KSIIDC

Article No. 117 Dividend need to be in cash Any general meeting declaring a dividend may resolve that such dividend be paid wholly or in part by the

distribution of specific assets, and in particular of paid-up shares, debentures, or debenture stocks of any other Company or paid-up shares, debentures, or debenture stocks of any other Company or in any one or more of such ways, any general meeting may resolve that any moneys, investments, or other assets forming part of the undivided profits of the Company standing to the credit of the reserve fund, or in the hands of the Company, and available for dividend or representing premia received on the issue of shares and standing to the credit of the share premium accounts be capitalized and distributed amongst the shareholders in accordance with their rights on the footing that they become entitled thereto as capital and that all or any part of such capitalized fund be applied on behalf of the shareholders in paying up in full any unissued shares of the company and that such unissued shares of the company and that such unissued shares so fully paid be distributed accordingly amongst the shareholders in the proportion in which they are entitled to receive dividends, and shall be accepted by them in full satisfaction of their interest in the said capitalized sum. For the purpose of giving effect to any resolution

under this Article the Directors may settle any difficulty which may arise in regard to the distribution as they think expedient and in particulars may issue fractional certificates and may fix the value for distribution of any specific assets and may determine that cash payments shall be made to any members upon the footing of the value so fixed or that fractions of less than one rupee may be disregarded in order to adjust the right of all parties, and may vest any such cases of specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalised funds as may seen expedient to the Directors. Where requisite, a proper contract shall be filled in accordance with section 75 of the Act, and the Directors may appoint any person to sign such contract on behalf of the person entitled to the dividend or capitalised fund, and such appointment shall be effective.

Article No. 118 Payment of dividend Unless otherwise directed any dividend may be paid by cheque or warrant sent through the post to the

registered address of the members or person entitled, or in the case of joint holders to the registered address of that one who name stand first on the registered in respect of the joint holding; and every cheque or warrant so sent shall be made payable to the order of the person to whom it is sent.

Article No. 119 Notice on dividend Notice of the declaration of any dividend whether interim or otherwise, shall be given to the holders of registered

shares in the manner hereinafter provided. Article No. 120 Unclaimed dividend All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by

the Directors for benefits of the Company until claimed, and all dividends unclaimed for three years after having been declared may be forfeited by the Directors for the benefit of the Company, and, if the Directors think fit they may be applied in augmentation of the reserve fund. Provided, however, the Directors may at any time annual such forfeiture and pay any such dividends.

Winding Up Article No.142 Rights and Liabilities of members on the winding up of the Company If the Company shall be wound up and the assets available for distribution among the members as such shall be

insufficient to repay the whole of the paid up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the member in proportion to the capital paid up or which ought to have been paid up at the commencement of the winding up on the shares held by them respectively. And if in a winding up, the assets available for distribution among the members shall be more than sufficient to repay the whole or the capital paid up, the excess shall be distributed amongst the members in proportion to the capital paid up or which ought to have been paid up the shares held by them respectively. But this clause is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions.

General Article No.143 Directions and Instructions of the Governor

Notwithstanding anything contained in any of these Articles, the Governor may from time to time, issue such directions or instructions as he may consider necessary in regard to the affairs or the conduct of business of the Company or Directors thereof and in like manner may vary and annual any such direction or instructions. The Directors shall duly comply with and give immediate effect to directions or instructions so issued.

Article No.144 Protection to Directors and Officers (i) Subject to the provisions of Section 201 of the Act, every Director, Manager, Secretary and other Officer

or employee of the Company shall be indemnified by the Company against, and it shall be the duty of the Directors to pay out of the funds of the Company all costs, losses and expenses (including travelling expenses) which any such Director, Manager, Officer or employee may incur or become liable to by reason of any contract entered into or act or deed don by him or them as such Director, General Manager, Officer or servant or in any other way in the discharge of his duties and the amount for which such indemnity is provided shall immediately attach as a lien on the property of Company and have priority on the property over the claims of the members.

Directors and Officers to be indemnified

(ii) Subject as aforesaid, every Director, Manager, Officer or (with the consent of Directors) Auditor, of the company shall be indemnified against any liability incurred by him or them in defending any proceedings whether civil or criminal in relation to any action by the above mentioned officers acting in the discharge of their duties and on behalf of the Company, in which judgement is given in his or their favour or in which he or they have been acquired or in connection with any application under Section 633 or the Act in which relief is given to him or them by the Court.


KSIIDC

Article No.145 Liability of Directors and Officers Subject to provisions of Section 201 of the Act no Director, Manager or Officer or employee of the Company

shall be liable for the acts, receipts, neglects or defaults of any other Director, Manager or Officer or employee for joining in any receipt or other act of conformity or for any loss or expenses happening to the Company through insufficiency or deficiency of title to any property acquired by order of the Directors for of on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy, insolvency, or tortuous act of any person or company, with whom any moneys, securities or effects shall be entrusted or deposited or for any loss occasioned by an error of judgement or oversight on his or their part, or for any other loss or damage or misfortune whatever which shall happen in the execution of the duties of his or their office or in relation thereto unless the same happens through his own dishonesty, negligence, default, misfeasance, breach of duty or breach of trust.


KSIIDC

V. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The contracts referred to in Para (A) below (not being contracts entered into in the ordinary course of the business carried on by the company or entered into more than 2 years before the date of the Information Memorandum) which are or may be deemed to be material have been entered into by the company. Copies of these contracts together with the copies of documents referred to in Para (B) below have been attached to the copy of the Information Memorandum and the same may be inspected at the Registered Office of the company between 10:00 am to 12:00 noon on any working day until the closing of the subscription list. A. Material Contracts 1. Copy of letters appointing Arrangers to the issue. 2. Copy of agreement appointing as Registrar and Transfer Agents. 3. Copy of Agreement with NSDL. B. Documents 1. Memorandum and Articles of Association of the company. 2. Copies of Rating done for current issue. 3. Copy of the Resolution of Board of Directors authorising the current issue of Bonds. 4. Auditors Report referred to in the Information Memorandum and their consent to include the same in the Information

Memorandum. 5. Consent from the Legal Advisors, Directors, Auditors, Chartered Accountants, Trustees to the Debentureholders, Bankers to

the Issue, Arranger to the Issue, Registrars to the Issue referred to in this Information Memorandum to act in their respective capacities.

6. Copies of the initial listing application made to The Stock Exchange, Mumbai. 7. Letter received from The Stock Exchange, Mumbai conveying the in-principle approval for listing of the Bonds.


KSIIDC

PART III DECLARATION All the relevant provisions of the Companies Act, 1956, Securities and Exchange Board of India, the guidelines issued by the Government and any other competent authority have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the Companies Act, 1956 and rules framed thereunder. All the legal requirements applicable till the date of this Information Memorandum have been complied with. Further it is certified that, all disclosures made in this Information Memorandum are true and correct. The Company accepts no responsibility for the statements made otherwise than in this Information Memorandum or any other material issued by or at the instance of the issuer and that anyone placing reliance on any other source of information would be doing so at his own risk. Signed by Mr. R. N. Chawhan, Executive Director of the company pursuant to the authority granted by the Board of Directors of the company at their meeting held on August 22, 2005.

Sd/- (R. N. Chawhan) Executive Director Dated: October 20, 2005 Place: Bangalore


KSIIDC


KSIIDC


KSIIDC


KSIIDC


KSIIDC


KSIIDC


KSIIDC


KSIIDC


KSIIDC

ADDRESSES OF THE ARRANGERS TO THE ISSUE

A. K. CAPITAL SERVICES LIMITED Centre Address Contact Person STD Code Telephone No. Fax No. Mumbai

135/136, Free Press House, 13th Floor, Free Press Journal Marg, Nariman Point, Mumbai – 400 021.

Indraneel Basu/ Rita/ Pallavi

022 56349300 (10 lines) 56360977

New Delhi Flat No. N, Sagar Apartments, 6, Tilak Marg, New Delhi - 110 001

Neetan Singh/ Ajit Singh Chauhan

011 23385704, 23382380, 23388235

23385189

Bangalore 509/510, 5th Floor, Brigade Tower, No. - 135, Brigade Road, Bangalore – 560 026.

Mahesh Chopra/ Chandan/ Santosh

080 22292770, 22241931, 22270715

22292770

Ahmedabad 211, Shail Complex, 2nd Floor, Opp. Madusudan House, Shilp Char Rasta, C. G. Road, Navrangpura, Ahmedabad – 380 009.

Jinesh Shah 079 30910590 26400652

Chennai No. 17-A, 1st Floor, Wellington Estate, Ethiraj Salai, Egmore, Chennai - 600 006

Madhavan Sriniwas/ A. George

044 52147213, 52145404 52145405

Kolkata Oswal Chambers, 5th Floor, 2, Church Lane, Kolkata – 700 001.

Premanshu Sharma/ Vikramjit Sarkar

033 22428023, 22428024 22428023, 22428024

Hyderabad

5-9-93/1, Shakti Sai Complex, 2/7, 2nd Floor, Chapel Road, Hyderabad – 500 001.

Neetu Rai 040 55638862 55638862

Pune Office No. 705, 7th Floor, Sohrab Hall, 21, Sasoon Road, Pune – 411 001.

Sanjeev Kumar 020 56214292, 56214293 56214292, 56214293

ALLIANZ SECURITIES LIMITED Centre Address Contact Person STD

Code Telephone No. Fax No.

Mumbai 33, 6th Floor, Vaswani Mansion, Dinsha Vachha Road, Churchgate, Mumbai – 400 020

Sameer Apte/ Bijal Shah

022 22870595, 22870596, 22040908

22870581

New Delhi 2nd Floor, 3, Scindia House, Janpath, New Delhi – 110 001

Manoj Arora/ Rajni Dasgupta/ Nupur Bagchi

011 51514670, 51514671, 51514662

51514665

Bangalore S-416, 4th Floor, South Block, Manipal Centre, Dickenson Road, Bangalore – 560 042

Jayshree G.D./ Prasoon Thampi

080 25092153, 25092154, 25092155

25092155

Chennai 12-A, Eldam Square, New No.12 (Old 167), Eldams Road, Alwarpet, Chennai – 600 018

Venkateswaran 044 24315001, 24315002 24315002

Kolkata B/201, Prasad Chamber, 10-A Shakespeare Sarani, Kolkata – 700 017

Arindam Biswas/ Subha Sen Roy

033 22824582, 22824583, 22824587

22824563

Ahmedabad 308, 3rd Floor, Samedh Building, Nr. Associated Petrol Pump, C.G. Road, Panchvati, Ahmedabad – 380 006

Vaishali Seth 079 26403057, 26402945 26403282

Hyderabad “Manideep”, 8-2-696/1/K/A, Plot No: 172, Road No.12, Banjara Hills, Hyderabad – 500 034

Srikanth K 040 55254457, 09391045160

55254457

Pune Office No.9, Tirupti Business Centre, 32, Karve Road, Pune – 411 004

Kamlesh Naik 020 25458435, 25443162, 25443454

25432076

Jaipur M3B, Mezzanine Floor, Sangam Tower, Church Road, Jaipur – 302 001

Sanjay Sharma 0141 5116189 5116189

Baroda 134, Siddarth Complex, R. C. Dutt Road, Baroda – 390 007

Nitin Sahni 0265 25581699 25581699

Lucknow 1st Floor, Shukla Palace, B-1 Sapru Marg,Lucknow – 226 001

Gopal Sharma 0522 3944306

Noida 302, Ocean Plaza, P-5, Sector 18, Noida U.C. Chopra 0120 2515897 2515848