SU-RAJ DIAMONDS AND JEWELLERY LIMITED

SU-RAJ DIAMONDS AND JEWELLERY LIMITED

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NOTICENotice is hereby given that the Eighteenth Annual General Meeting of the Members ofSu-Raj Diamonds and Jewellery Limited will be held on Tuesday, 31st August,2004, atMahida Bhawan, Icchanath, Opp. S. V. R. Engineering College, Dumas Road, Surat 395007 at 11.30 a.m., to transact the following business:AS ORDINARY BUSINESS:1) To consider and adopt the Balance Sheet as at 31st March, 2004, the Profit and

Loss Account for year ended on that date along with the Schedules and the Reportsof the Directors and Auditors thereon.

2) To declare dividend on the Equity Shares.3) To appoint a Director in place of Mr. K. N. Bhandari, who retires by rotation and

being eligible, offers himself for re-appointment.4) To appoint a Director in place of Mr. Mohan M. Jayakar, who retires by rotation and

being eligible, offers himself for re-appointment.5) To re-appoint Auditors and fix their remuneration.

AS SPECIAL BUSINESS:

6) To consider and if thought fit, to pass with or without modifications, the followingresolution as an Ordinary Resolution:“RESOLVED THAT Dr. Dhrmendra Bhandari be and is hereby appointed as aDirector of the Company, liable to retire by rotation”.

By Order of the Board of DirectorsPlace : Mumbai Anil CherianDate : 10th July, 2004 Company Secretary

NOTES:1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED

TO APPOINT ONE OR MORE PROXIES TO ATTEND AND VOTE ON A POLLONLY INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER.

2) The instrument appointing a proxy must be deposited with the Company at itsRegistered Office not less than 48 hours before the commencement of the meeting.

3) Explanatory Statement with respect to Item No.6 is annexed and forms part of theNotice.

4) Members/Proxies should bring the Attendance Slip duly filled in for attending themeeting.

5) The Register of Members and Share Transfer Books of the Company will remainclosed from 16th August, 2004 to 31st August, 2004 (both days inclusive).

6) The Dividend on Equity Shares as recommended by the Board of Directors, ifdeclared at the meeting, will be payable to those shareholders whose names appearin the Register of Members as on 31st August,2004 and in respect of shares held inElectronic form the dividend will be paid on the basis of beneficial ownership as perdetails furnished by the Depositories for this purpose.

7) Shareholders seeking any information with regard to Accounts are requested towrite to the Company at an early date to enable the management to keep theinformation ready.

8) Members are requested to bring their copy of Annual Report to the meeting.9) The Equity Shares of the Company are compulsorily traded in demat form with

effect from 28th August, 2000. The share holders who have not yet dematerialisedtheir shares are requested to dematerialise their shares by opening DP Accountwith nearest Depository Participants at the earliest to avail the benefits ofdematerialisation.

10) Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, dividendsfor the financial year ended as on 30th September, 1997 and thereafter, which remainunclaimed in the unpaid dividend account for a period of seven years from the dateof transfer of the same, will be transferred to the Investor Education and ProtectionFund (IEPF) established by the Central Government, pursuant to Section 205C ofthe Companies Act, 1956.

Information in respect of such unclaimed dividend when due for transfer to the saidFund is given below:

Financial Year Date of Last Date for Due date forEnded declaration Claiming transfer to IEP

of Dividend Dividend Fund

30.09.1997 30.03.1998 16.05.2005 16.06.2005(1.4.96 – 30.9.97)30.09.1998 30.03.1999 16.05.2006 16.06.2006(1.10.97 – 30.9.98)30.09.1999 30.03.2000 16.05.2007 16.06.2007(1.10.98 – 30.9.99)31.03.2001 29.09.2001 04.11.2008 04.12.2008(1.10.99 – 31.3.01)31.03.2002 30.09.2002 05.11.2009 05.12.2009(1.4.01 – 31.3.02)31.03.2003 27.09.2003 02.11.2010 02.12.2010(1.4.02 – 31.3.03)

According to the provisions of the Act, Shareholders are requested to note that noclaims shall lie against the Company or said Fund in respect of any amounts whichwere unclaimed and unpaid for a period of seven years from the date that they firstbecame due for payment and no payment shall be made in respect of any such claims.11) In order to provide protection against fraudulent encashment of the warrants,

Members holding Share Certificates in physical form are requested to notify anychange in their addresses or bank mandates immediately, in any event not laterthan 16th August, 2004 to the Company’s Registrar and Transfer Agent, MCS Limited,Sri Venkatesh Bhavan, Plot No.27, Road No.11, M.I.D.C., Andheri (East), Mumbai400 093, Maharashtra .

12) Shareholders holding shares in electronic form may kindly note that their BankAccount details as furnished by their Depositories to the Company will be printedon their Dividend Warrants as per the applicable regulations of the Depositoriesand the Company will not entertain any direct request from such shareholders fordeletion of/change in such Bank details. Further, instructions, if any, already givenby them in respect of shares held in physical form will not be automatically applicableto shares held in electronic mode. Shareholders who wish to change such BankAccount details are therefore requested to advise their Depository Participantsabout such change, with complete details of Bank Account and not to the Company.

13) Non-Resident Indian Shareholders are requested to inform immediately MCSLimited, Sri Venkatesh Bhavan, Plot No.27, Road No.11, M.I.D.C., Andheri (East),Mumbai 400 093, Maharashtra: a) The change in the Residential status on return to India for permanent settlement. b) The particulars of the Bank Account maintained in India with complete name,

branch, account type, account number and address of the Bank, if not furnishedearlier.

14) Corporate Members intending to send their authorised representatives are requestedto send a duly certified copy of the Board Resolution authorising their representativesto attend and vote at the Annual General Meeting.

15) Consequent upon the introduction of Section 109A of the Companies Act, 1956,shareholders are entitled to make nomination in respect of shares held by them inphysical form. Shareholders desirous of making nominations are requested to sendtheir requests in Form 2B (which will be made available on request) to the Registrarand Transfer Agents, MCS Limited, Sri Venkatesh Bhavan, Plot No.27, RoadNo.11, M.I.D.C., Andheri (East), Mumbai 400 093, Maharashtra.

16) All documents referred to in the accompanying Notice are open for inspection atthe Registered Office of the Company during the office hours on all working daysbetween 11.00 a.m. and 1.00 p.m.

17) Information required under Clause 49 of the Listing Agreement on DirectorsRe- appointment/ Appointment

Mr. K.N.BhandariMr.K.N.Bhandari was appointed on the Board with effect from 20th August, 2002.He was the Chairman cum Managing Director of New India Assurance Co. Ltd.,and United India Insurance Co. Ltd. He is having vast experience in GeneralInsurance and held various positions in the Insurance industry.Other directorships held by Mr.K.N.Bhandari as on 31.03.2004 are:1) Andhra Cements Ltd.2) Hindalco Industries Ltd.3) Agriculture Ins. Co. of India Ltd.4) Srei Venture Capital Ltd. and5) Kenbee Consultants Ltd.Mr. Mohan M. JayakarMr.Mohan M. Jayakar was appointed on the Board with effect from 10th September,1985. He is a leading Solicitor and proprietor of M/s.Khaitan & Jayakar, Mumbai.Other directorships held by Mr.Mohan M. Jayakar as on 31.03.2004 are:1) Photoquip India Ltd.2) Chirag Travels Pvt. Ltd. and3) Ezcomm Trade Technologies Ltd.He is a member of the Audit Committee of the Company.Dr. Dharmendra BhandariDr. Dharmendra Bhandari was appointed as an Additional Director of the Companyby the Board of Directors with effect from 30th June, 2004. Dr. Dharmendra Bhandariis a Chartered Accountant and has specialized in the areas of Finance and Banking.He has extensive experience in advising clients across a range of Industries.Other directorships held by Dr. Dharmendra Bhandari are as follows:1) Birla Corporation2) Punjab Alkalies & Chemicals Limited3) Lakshmi Precision Screws Limited4) Indfund Management Limited

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THECOMPANIES ACT, 1956Item No.6

Dr.Dharmendra Bhandari is a Chartered Accountant and has specialized in theareas of Finance and Banking. He has extensive experience in advising clientsacross a range of Industries. The other Directorship held by Dr.DharmendraBhandari are as follows:1) Birla Corporation2) Punjab Alkalies & Chemicals Limited3) Indfund Management Limited4) Lakshmi Precision Screws Ltd.Dr.Dharmendra Bhandari was appointed as an Additional Director of the Companyby the Board of Directors with effect from 30th June, 2004 and he holds office as aDirector upto the date of the ensuing Annual General Meeting. The Company hasreceived a Notice in writing under Section 257 of the Companies Act, 1956 from amember signifying his intention to propose the candidature of Dr.DharmendraBhandari for the Office of the Director.In the beneficial interest of the Company, your Directors recommend the resolutionfor your approval.None of the Directors of the Company other than Dr.Dharmendra Bhandari is, inany way, concerned or interested in the said resolution.

By Order of the Board of DirectorsPlace : Mumbai Anil CherianDate : 10th July, 2004 Company Secretary

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ANNUAL REPORT 2003-2004

ToThe MembersSu-Raj Diamonds and Jewellery LimitedThe Directors have pleasure in presenting the Eighteenth AnnualReport together with the Audited Accounts for the financial yearended 31st March, 2004.

FINANCIAL RESULTS(Rs. in Crores)

Financial Year Financial YearEnded Ended

31st March, 2004 31st March, 2003

Total Income 724.30 583.60Profit before Interest and 34.21 29.60

DepreciationLess: Interest 9.02 13.75

Depreciation 1.75 1.51Profit before tax 23.43 14.34Provision for tax 1.54 2.23Profit after tax 21.89 12.11Add: Balance in Profit and Loss

Account brought forward 43.50 34.51Add: Excess /short provision for

Expenses / Income - Tax forearlier years (1.08) 1.52

Profit available for appropriation 64.31 48.13AppropriationsProposed Dividend 4.02 3.22Corporate Tax on Proposed Dividend 0.52 0.41Transfer to General Reserve 1.00 1.00Transfer to General Reserve-Foreign 1.00 -Exchange FluctuationsBalance Carried Forward 57.77 43.50

Total 64.31 48.13

DIVIDENDThe Directors are pleased to recommend a payment of dividend,subject to the approval of the members, at the rate of 10% i.e.,Re.1.00 per fully paid-up Equity Share of Rs.10/- each of theCompany for the financial year ended 31st March, 2004. Theproposed dividend will absorb Rs. 4.02 Crores. To guard againstthe foreign exchange fluctuations, Rs. 1 Crore has been transferredto General Reserve - Foreign Exchange Fluctuations.

OPERATIONSThe total income from operations during the year under review wasRs.724.30 Crores as compared to Rs.583.60 Crores for the previousyear. The net profit of the Company for the year was Rs.21.89 Croresas compared to Rs.12.11 Crores for the previous year.

PROSPECTSDiamond sales continue to remain constant with major thrustinto Jewellery. The Jewellery demand book has been constantlyincreasing and the Company expects to be able to grow inmultiples in Jewellery. The factory at Bangalore though being astate of art unit is further modernised in sectors which will helpincrease productivity. The new factory at Goa was set up toincrease the productivity further so as to meet the growingJewellery demand. Policies relating to Jewellery exports arestreamlined by the Government and we are now on the same‘level playing field’ as any of our competitors world wide. TheGovernment is aware of the potential in Jewellery exports andare giving every support as required by the industry to increasetheir share in world trade.

SUBSIDIARY COMPANYAs required under Section 212 of the Companies Act, 1956 theaudited statements of accounts, along with respective Report ofthe Board of Directors and the respective Auditors’ Report thereonof the Subsidiary Company Koradiam N.V for the year ended 31st

December, 2003 is annexed.

DIRECTORSMr. K.N. Bhandari and Mr.Mohan M.Jayakar retire by rotation andbeing eligible, offer themselves for re-appointment. The Directorsrecommend their re-appointment.Mr. Jaikumar Begani resigned from the Board of Directors witheffect from 21st March, 2004. The Board places on the record itsappreciation for the valuable services rendered by him during histenure in the office.

FIXED DEPOSITSThe Company has not accepted any deposit, within the meaning ofSection 58-A of the Companies Act, 1956 read with the Companies(Acceptance of Deposits) Rules, 1975 made there under.

PERSONNELNone of the employees of the Company were in receipt ofremuneration in excess of the limits as prescribed under Section217(2A) of the Companies Act, 1956, read with Companies(Par ticulars of Employees) Rules, 1975 and Companies(Amendment) Act, 1988.

DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to Section 217(2AA) of the Companies Act, 1956, theDirectors state :(i) that in the preparation of the Annual Accounts, the applicable

accounting standards have been followed;(ii) that the Directors have selected such accounting policies and

applied them consistently and made judgements and estimatesthat are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of thefinancial year ended 31st March, 2004 and of the profit of theCompany for that financial year;

(iii) that the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordancewith the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventingand detecting fraud and other irregularities;

(iv) that the Directors have prepared the Annual Accounts on agoing concern basis.

CONSOLIDATED FINANCIAL STATEMENTS;In accordance with Accounting Standard 21 relating toConsolidated Financial Statements, your Directors have pleasurein attaching the said consolidated financial Statements, which formpart of this Report and Accounts. These statements have beenprepared on the basis of audited financial statements receivedfrom the Subsidiary Company as approved by the respective Board.

AUDITORSM/s. R.C. Reshamwala & Co., Auditors of the Company, hold officeuntil the conclusion of the ensuing Annual General Meeting. TheCompany has received letter from them to the effect that theirappointment, if made, would be within the prescribed limits underSection 224 (1-B) of the Companies Act, 1956. Your Directorsrecommend their re-appointment.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGEInformation in accordance with the provisions of Section 217 (1)(e)of the Companies Act, 1956, read with the Companies (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988regarding conservation of energy, technology absorption and

DIRECTORS’ REPORT


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foreign exchange earnings and outgo is given in the Annexureforming part of this report.

LISTINGThe securities of the Company are listed at The Stock Exchange,Mumbai, National Stock Exchange of India Limited, Mumbai andThe Stock Exchange, Ahmedabad. The Company has paid theannual listing fees to each of the above Stock Exchanges.The Company has made the application for delisting of its securitiesfrom Delhi Stock Exchange Association Limited. The approvalis awaited.

CORPORATE GOVERNANCEA detailed section on the code of Corporate Governance isattached to this Annual Report.

ACKNOWLEDGMENTSThe Directors would like to express their grateful appreciation forthe assistance and co-operation received from the variousDepartments of the Central and State Governments and the Banks.

On behalf of the Board of Directors

Mumbai Jatin R. Mehta3rd May, 2004 Chairman-cum-Managing Director

A. CONSERVATION OF ENERGYThe particulars regarding conservation of energy are not applicableto the Company as the Diamond Industry is not covered under theschedule prescribed by the said Rules.

B. TECHNOLOGY ABSORPTIONThe particulars regarding absorption of technology is given belowas per Form B of the Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988.

Research and Development (R & D):(1) Specific areas in which R&D is carried out by the Company

ANNEXURE TO THE DIRECTORS’ REPORT

Particulars Required under the Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988.

Cutting and polishing of diamonds and manufacture of jewellery as perinternational standards are the areas in which general research anddevelopment work pertaining to the manufacturing process is carriedout by the Company.

(2) Benefits derived as a result of the above R & DBetter productivity and cost reduction.

(3) Future Plan of ActionAppropriate actions are being planned.

(4) Expenditure on R & D:

(a) Capital )

(b) Recurring ) Included in the

(c) Total ) manufacturing cost.

(d) Total R & D expenditure as a )percentage of total turnover )

Technology absorption, adaptation and innovation:

(1) Efforts in brief, made towards technology absorption,adaptation and innovationThe Company is monitoring the technological upgradation takingplace in other countries in the field of diamond and jewellerymanufacturing and the same are being reviewed forimplementation.

(2) Benefit derived as a result of the above efforts e.g. productimprovement, cost reduction, product development, importsubstitution etc.1) Product improvement

2) Cost reduction

3) Import substitution in respect of main consumables

(3) In case of Imported Technology (imported during the last5 years reckoned from the beginning of the financial year),following information may be furnished :(a) Technology Imported }

(b) Year of Import }

(c) Has technology been fully }absorbed }

(d) If not fully absorbed, areas } Nilwhere this has not taken place, }reasons therefore and future }plan of action }

C. FOREIGN EXCHANGE EARNINGS AND OUTGOThe Company’s main line of business is the manufacture andexport of cut and polished diamonds and diamond studded goldand platinum jewellery. With the Government policies relatingto jewellery exports streamlined and the advantage of asubsidiary in Belgium, the Company looks forward to significantincrease in export turnover.

Total Foreign Exchange Earned Rs. 672,12,47,280/-

Total Foreign Exchange Used Rs. 543,70,62,743/-

* The foreign exchange used includes the remittances madefor raw materials which are under process and foreignexchange earned includes bills to be realised.


Mumbai Jatin R. Mehta3rd May, 2004 Chairman-cum-Managing Director

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DIRECTDIRECTDIRECTDIRECTDIRECTO RO RO RO RO R

Dr.Dharmendra Bhandari was appointed as an Additional Director of theCompany with effect from 30th June, 2004 and shall hold office up to thedate of the ensuing Annual General Meeting.The Company has received Notice under Section 257 of the CompaniesAct, 1956 from a member signifying his intention to propose the candidatureof Dr. Dharmendra Bhandari for the office of Director. The Directorsrecommend his appointment as a Director liable to retire by rotation.


Mumbai Jatin R. Mehta10th July, 2004 Chairman-cum-Managing Director

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CORPORATE GOVERNANCECompany’s Philosophy on Corporate Governance:Corporate Governance is an integral part of good management and Su-Raj in itspursuit of excellence, has implemented the concepts with openness, integrityand accountability. It is a process of building positive relationship and making awider impact to intensify the interest and appreciation of its members with greatercommitment and trust. Corporate Governance deals with conducting the affairsof the Company such that there is fairness to all stakeholders and that its actionbenefit the greater number of stakeholders. We at Su-Raj believe that the CorporateGovernance envisages the attainment of transparency, accountability and integrityin all facets of its operation and its interactions with shareholders, employees,banks and the Government.In so far as Compliance with the requirements of Clause 49 of the ListingAgreement with the Stock Exchange, the Company has complied with all themandatory norms and disclosures that have to be made on CorporateGovernance Format.1. Management’s Discussion and Analysisa) Industry Structure and Development:

Indian economy is on the threshold of a high gr owth tr ajectory andinternational e xperts have identified India as a major economic powe rin the 21 st Century. Economic gr owth in India during the third Quart er ofthe Financial Y ear 2003-04 stood at 10.4% sur passing the fastest growingChinese Economy. The economic gr owth r ate is e xpected to touch thetarget of 8.1% for the financial y ear 2003-04 as against a meagre 4% inthe last fiscal.The Gem and Jewe l lery industry being a significant f oreign e xchangeearner and one of the dri vers of a new resurgent India registered a22.26% increase in Gem & Jewe l lery export s for the y ear ended 31 st

December, 2003 with total e xports touching US$10,646 million ascompared to US$ 8707.61 million for the corresponding peri od in last year.

i) DiamondIndia enjoys domination in the world cut and polished diamond market andsmaller diamonds in particular, which was amply reflected in the exportgrowth of diamond industry with a total export of US$ 8023.40 million forthe year ended 31st December, 2003 as compared to US$ 6894.48 millionagainst the corresponding period in last year. Industry seeks further growthin large size stones and encouraging growth of Jewellery business restoresrobust health of diamond industry. The Company recorded diamond saleamounting to Rs.501.71 Crores for the financial year 2003-04.

ii) JewelleryGlobally India consolidates its position as the dominant player of theGem and Jewe l lery and a massive increase of 38.33% e xport growthregistered in jewe l lery export s i.e. US$ 1856.45 million dur ing the year2003 (January – December) as against US$ 1342.03 million in theprevious year. India can now truly boast of becoming a unique one-stopshop for gems and jewe l lery, something that no other international centrecan even remotely match. The positive perfo rmance by the industry hasbeen registered due to strong gr owth in sales as the wo rld economyand consumer confidence rebounded from the impact of negative globaleconomic scenari o. During the y ear 2003-04 the Company focused onJewel lery and recorded a massive gr owth rate of 204 % in the Jewe l lerysale amounting to Rs. 222.05 Crores for the financial y ear 2003-04.

b) Mission and Business Strategy :W e at Su-Raj maintain gener ally accepted standards of corporateconduct tow ards its employees, consumers and society and believesthat the policies must balance individual interest with corpor ate goalsand oper ate within accepted norms of propri ety, equity and sense ofjustice. The Company believes that it is rewarding to be better managedand gove rned and to align and intensify its activities with national interest.The Company has identified the tremendous potential of Jewe l lerybusiness and confident of achie ving greater heights in the coming y ears.The str ategic move of acquir ing 100% share capital of a going concernviz. Koradiam N.V., in Antwerp, Belgium enhanced the image as beinga Company with wo rld class e xper tise in the Industry. The Companymade an inv estment of US$ 8 Million in the wholly o wned subsidiary ofthe Company. The new manu facturing unit in Goa will help to increasethe productivity fur ther. The Company w ould take all round effo rt s in i tspursuit to enhance the market share in the inter national market andenhance share holders v alue in the industry.

c) Financial and Operating Performance:Your company’s total sales (including other income) for the year 2003-2004 is Rs.724.30 Cores, profit after tax is Rs. 21.89 Crores.

d) Segment wise / Product wise Performance:Sales of diamonds during the year 2003-2004 was Rs.501.71Crores,whereas the Sales of Jewellery was Rs.222.05 Crores, representing69.26% and 30.65% of the total turnover respectively.

Statement of continent-wise sale

Continent Sales Percentage

North America 176.25 24.35Europe 8.58 1.18Middle East 319.08 44.08Asia 219.98 30.39

TOTAL 723.88 100.00

e) Risk, Internal Control System and Adequacy:Your Company has a low debt equity ratio and is well placed to takecare of its borrowings. The foreign exchange transactions of theCompany are suitably covered and there are no materially significantexchange rate risks associated with the Company.There is Internal Control System including Internal Audit in order toensure efficient use of Company’s resources to improve the profit marginof the company through the effective control on stock and debtors. TheCompany has adequate internal control procedure commensurate withits size and nature of the business. The internal control system providesfor well documented policies, guidelines, authorization and procedures.Moreover, the Company continuously upgrades these systems in linewith best accounting practices.

f) Outlook, Opportunities and Threats:(i) Outlook:

Jewellery has been part of the Indian civilization since long and this art hasbeen perfected with modern styles. Since Diamonds are a gift of love andJewellery had its additional value input by way of security, globally thefascination for Diamonds and Jewellery prevail over centuries.The export performance of Jewellery was outstanding during the year2003 and registered a growth of 38.33% i.e. US$ 1856.45 million duringthe year 2003 (January – December) as against US$ 1342.03 million inthe previous year.U.S. economy showing signs of real recovery and the growth rate forthe third quarter of the year 2003 is the highest since 1984. In addition,retail sales are on the rise.India is known to be the largest consumer of Gold in the world and theannual demand for gold of the country is well over 800 tones. All aspectsof Jewellery manufacturing are advancing towards internationalstandards with relative ease.Realizing the tremendous potential of the industry, Government of Indiastreamlined its policies and in particular the mini exim policy 2004provides a major impetus to the industry by lifting the curbs on directgold imports. Further, the permission to set up Special Economic Zonein different parts of the country will help to build a firm base for rapidadvances in the jewellery sector.

(ii) Opportunities:The Gem and Jewellery Industry is looking at a export target of US$ 16billion by the year 2007.The long term out look for the Indian Diamondand Jewellery Industry continuous to be positive. Strategically located,the oil rich Middle East is a market of huge potential, now growing as astudded jewellery market. India has already positioned itself well to ridethis new wave by recording steady growth in the volumes of Jewellery itsupplies to the region. With India’s thrust in manufacturing jewellery inthe varieties that are suited to burgeoning Gulf demand, it appears thatbusiness ties with Gulf will grow much stronger. Further growth ofdiamond industry is likely to be largely driven by the cutting and polishingof medium and large size stones with higher realizations. India’scompetitive advantage will centre on its skilled labour combined withmodernized factories using latest automated machines, technology andtools. Jewellery outsourcing opening up further scope for jewellerymanufacturing in India. It is true that India is becoming the most soughtafter Jewellery centre and has a same position in the InternationalJewellery market it enjoys in the Diamond market, globally.

(iii)Threats:China may emerge as a viable rival in the longer term to Indian Industry,since it has rapidly been increasing its manufacturing base. India thoughhaving a good labour, it is expected to effectively and economically counterthe Chinese threat provided labour laws are made more pragmatic.

g) Human Resources:The Company regards its human resources as amongst its most valuableassets and proactively reviews policies and processes by creating a workenvironment that encourages initiative, provides challenges andopportunities and recognizes the performance and potentials of itsemployees. The industrial relations across different locations of the Company


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were cordial during the year. The Company continues to maintain its thruston human resources development. The number of employees stood at 33.

h) Cautionary StatementDetails given hereinabove relating to various activities and future plansmay be “forward-looking statements” within the meaning of applicablelaws and regulations. Actual performance may differ from thoseexpressed or implied.

2. Composition of Board:The Board consists presently of 5 Directors and is responsible for themanagement of the Company’s business.

Name of the Director Category

1. Mr. Jatin R. Mehta Promoter & Chairman cum ManagingDirector

2. Mr. K.N.Bhandari Non-Executive Independent Director3. Mr. Mohan M. Jayakar Non-Executive Independent Director4. Mr. G. Bharakatia Non-Executive Independent Director5. Mr. Atul S. Pethe Non-Executive Independent Director6. Mr. Jaikumar Begani* Non-Executive Independent Director

*Resigned with effect from 21st March, 2004Except the Chairman-cum-Managing Director, all other Directors are liableto retire by rotation as per the provisions of Companies Act, 1956.Directors’ Particulars:

Name of the Director Age Qualification

1) Mr.Jatin R. Mehta 47 B.Com.2) Mr.K.N.Bhandari 62 B.A., LLB.3) Mr.Mohan M. Jayakar 52 B.A., LLB.4) Mr.G. Bharakatia 58 B.Com., F.C.A.5) Mr.Atul S. Pethe 57 B.Sc.

Information on Directors Re-appointment / AppointmentMr. K.N.BhandariMr.K.N.Bhandari was appointed on the Board with effect from 20

th August,

2002. He was the Chairman cum Managing Director of New India AssuranceCo. Ltd. and United India Insurance Co. Ltd. He is having vast experience inGeneral Insurance and held various positions in the Insurance industry.Other directorships held by Mr.K.N.Bhandari as on 31.03.2004 are:1) Andhra Cements Ltd.2) Hindalco Industries Ltd.3) Agriculture Ins. Co. of India Ltd.4) Srei Venture Capital Ltd. and5) Kenbee Consultants Ltd.Mr. Mohan M. JayakarMr. Mohan M. Jayakar was appointed on the Board with effect from10

th September, 1985. He is a leading Solicitor and proprietor of M/s.Khaitan

& Jayakar, Mumbai.Other directorships held by Mr.Mohan M. Jayakar as on 31.03.2004 are:1) Photoquip India Ltd.2) Chirag Travels Pvt.Ltd. and3) Ezcomm Trade Technologies Ltd.He is a member of the Audit Committee of the Company.Board MeetingsDuring the year under review, 4 Board Meetings were held on thefollowing dates:29.04.2003, 31.07.2003, 30.10.2003 and 29.01.2004The Directors are paid sitting fees of Rs.2,500/-for each Board/CommitteeMeeting, (excluding Share Committee Meeting) attended by them.

Remuneration Policy :There is no Remuneration Committee, since the same being non-mandatory.The Board of Directors has laid out policy, which takes into account thecompetitive circumstances so as to attract and retain quality personnel. Theremuneration to the Managing Director is determined by the Board ofDirectors, subject to approval of the members of the Company.

Details of Remuneration of the Directors for the Financial Year :Remuneration paid or payable to Directors for 2003-04

Name Sitting Salaries, Professional Totalof the Fees allowances FeesDirector and

perquisites

Mr.Jatin R. Mehta Nil 9,00,000 Nil** 9,00,000Mr.K.N.Bhandari 5,000 Nil Nil** 5,000Mr.Mohan M. Jayakar 20,000 Nil Nil** 20,000Mr.G. Bharakatia 20,000 Nil Nil** 20,000Mr.Atul S. Pethe 20,000 Nil Nil** 20,000Mr.Jaikumar Begani* 2,500 Nil Nil** 2,500

*Resigned with effect from 21st March, 2004

** During the year the Company has paid fees of Rs 5,45,000/- to M/s.Khaitan& Jayakar, Advocates & Solicitors in which Mr. Mohan M. Jayakar is theproprietor. The professional fees of Rs.5,45,000/- paid during the year toM/s.Khaitan & Jayakar, Advocates & Solicitors is not considered materialenough to impinging the independence of Mr. Mohan M. Jayakar as a Directorof the Company.

Sitting Fees include payment to the Directors for attending Committee ofDirectors Meeting. The Directors are not paid any sitting fees for attendingthe meeting of Shareholders’/Investors’ Grievance Committee.

3. Audit Committee:The Audit Committee consists of 3 Non-executive Independent Directors, viz.:

Chairman Mr. G. BharakatiaMembers Mr. Mohan M. Jayakar

Mr. Atul S. Pethe

During the financial year 2003-2004, four Audit Committee Meetings were heldon 29

th April, 2003, 31

st July, 2003, 30

th October, 2003 and 29

th January, 2004.

Name Held Attended

Mr.G. Bharakatia 4 4Mr.Mohan M. Jayakar 4 4Mr.Atul S. Pethe 4 4

The members of the Committee are well versed in finance, accounts,company law and general business practices. The members of the AuditCommittee are paid sitting fees of Rs.2,500/- for every meeting of theCommittee attended by them.

The Audit Committee of the Company supported by professional InternalAuditors, interalia, provides reassurance to the Board on the effective internalcontrol and compliance environment that ensures :

a) efficiency and effectiveness of operations both domestic and overseas;b) reliability of financial and management information and adequacy of

disclosures;c) safeguarding of assets and adequacy of provisions of all liabilities; andd) compliance with all relevant statutes.

Name Board Meeting Whether No. of other Directorships & CommitteeAttendance Particulars attended Member/ Chairmanship

Held Attended last AGM Other Committee CommitteeDirectorship Membership Chairmanship

Mr. Jatin R. Mehta 4 3 YES - 1 -Mr. K. N. Bhandari 4 2 NO 5 1 -Mr. Mohan M. Jayakar 4 4 NO 4 1 -Mr. G. Bharakatia 4 4 YES 3 2 1Mr. Atul S. Pethe 4 4 NO 1 2 1Mr. Jaikumar Begani* 4 1 NO 1 - -

*Resigned with effect from 21st March, 2004

6


The role of the Audit Committee includes the following :a) To review quarterly, half yearly un-audited financial statements and yearly

audited financial statements and pre-publication announcements beforesubmission to the Board.

b) To ensure compliance of Internal Control Systems and action taken onInternal Audit reports.

c) To apprise the Board on the impact of accounting policies, auditingstandards and legislation.

d) To hold periodical discussions with statutory auditors on the scope andcontent of the audit.

e) To review the Company’s financial and risk management policies.

4. Shareholders’/Investors’ Grievance Committee:The Shareholders’ / Investors’ Grievance Committee functions with theobjective of looking into redressal of Shareholders’ and Investors’ grievancesrelating to non-receipt of dividend, refund orders, shares sent for registrationof transfer, non - receipt of Annual Report etc. The Committee consists ofthe following Directors:

Chairman - Mr. Atul S. PetheMembers - Mr.Jatin R. Mehta

- Mr.G. BharakatiaThe Directors are not paid any sitting fees for attending the meeting of theCommittee.

Presently the Company has approximately 70,000 shareholders.

During the year the Company had received 303 complaint letters and havebeen satisfactorily replied by the Company.

The Company has taken all steps to ensure that shareholders’ grievancesare given high priority and are resolved at the earliest.

Mr. Anil Cherian, Company Secretary, is the Compliance Officer in terms ofthe requirement of the Stock Exchanges.

5. Disclosures:(a) There were no transactions of a material nature undertaken by your

Company with its promoters, directors or the management, theirsubsidiaries or relatives that may have a potential conflict with theinterests of the Company.

(b) There are no instances of non-compliance by your Company, penalties,strictures imposed by Stock Exchange or SEBI or any statutory authority,on any matter related to capital markets, during the last three years.

Means of Communication:• Quarterly results are taken on record by the Board of Directors and

submitted to the Stock Exchanges in terms of the requirements of Clause41 of the Listing Agreement.

• Quarterly results are normally published in The Financial Express / TheEconomic Times and Nav Gujarat Times.

• The Company has made its own web site www.su-raj.com and thee-mail ID of Secretarial Department is [email protected], the Company posts financial results on SEBI websitewww.sebiedifar.nic.in for all quarters.

Su-Raj Code for prevention of insider trading:The Company has adopted a code of conduct for prevention of insider trading(Su-Raj Code for prevention of insider trading) in the shares of the Company.The Code interalia, prohibits purchase/sales, dealing of shares of theCompany by the insiders while in possession of unpublished price sensitiveinformation in relation to the Company.

6. Details of Annual General Meeting:All the 3 previous Annual General Meetings were held at Mahida Bhavan,Icchanath, Opp. S.V.R. Engineering College, Dumas Road, Surat 395 007

Year Date Time SpecialResolutionsapproved at

A.G.M. requiringpostal ballot

01-10-99 to 31-03-01 29-09-01 11.30 a.m. Nil01-04-01 to 31-03-02 30-09-02 11.30 a.m. Nil01-04-02 to 31-03-03 27-09-03 11.30 a.m. Nil

7. General Shareholder Information :a. AGM : Date, time and venue 31.08.2004, 11.30 A. M., Mahida Bhawan,

Icchanath, Opp.S.V.R.Engineering College, Dumas Road, Surat 395 007.b. Financial Calendar : 1st April, 2003 to 31st March, 2004.c. Date of Book Closure : 16th August, 2004 to 31st August, 2004 (both

days inclusive).d. Dividend Payment Date : on or after 4th September, 2004.e. Your Company’s shares are listed on the following Stock

Exchanges:The Stock Exchange Scrip Code:57910(Ahmedabad), (Regional)Kamdhenu Complex,Opp. Sahajanand College Panjara PoleAhmedabad 380 015The Stock Exchange, Mumbai Scrip Code:7892Phiroze Jeejeebhoy Towers,Dalal Street, Mumbai 400 023National Stock Exchange of Symbol:SURAJDIAMNIndia Limited Series: EQExchange Plaza, Bandra-Kurla ComplexBandra (East), Mumbai 400 051Demat Segment: ISIN INE 664A01015

f. Market Price Data :The price of the Company’s Share- High, Low during each month in thelast financial year :

MONTH BSE NSEHIGH (Rs.) LOW (Rs.) HIGH (Rs.) LOW(Rs.)

April, 2003 12.60 11.20 13.10 11.10May, 2003 15.65 11.25 15.00 11.20June, 2003 18.42 14.05 18.50 14.05July, 2003 18.20 14.35 19.45 14.25August, 2003 19.00 15.05 18.90 15.25September, 2003 18.00 11.80 18.10 13.25October, 2003 15.00 12.50 17.00 13.00November, 2003 24.80 13.60 25.75 13.40December, 2003 37.00 21.75 37.90 21.75January, 2004 32.70 20.00 31.60 20.75February, 2004 24.00 19.00 24.10 18.90March, 2004 20.90 16.15 21.75 16.00

g. Registrar and Share Transfer Agent:MCS Limited, Mumbai is the Registrar and Transfer Agents (R &TA) ofthe Company to handle physical and electronic share registry work.MCS LIMITEDUnit: Su-Raj Diamonds and Jewellery LimitedSri Venkatesh Bhavan, Plot No.27, Road No.11M.I.D.C., Andheri (East), Mumbai 400 093Maharashtra StateTel: (022) 2821 5235 (Hunting)Fax: (022) 2835 0456Website: www.mcsind.com, E-mail: [email protected]

h. Dematerialisation of Shares and Liquidity:The total number of shares dematerialized as on 31st March, 2004 are2,82,17,163 shares representing 70.15% of Share Capital.

i. Outstanding GDRs/ADRs/Warrants or any Convertible instruments,conversion date and likely impact on equity: Nil

j. Location of Factories:a. 143-D Bomasandra Industrial Area

Hosur Road, Hebbagodi, Bangalore 560 099b. Plot No.1 and 1A, Tivim Industrial Estate

Karaswada, Mapusa, Goa 403 526c. E-7, Marudhara Industrial Estate

IInd Phase, Basni, Jodhpur 342 005d. Vansda Road, Village Assura

Dharampur, Valsad, Gujarat


7

k. Investor’s Service Cell:Administrative Office:151/152/153 Mittal Court, ‘C’ Wing, Nariman PointMumbai 400 021. Phone & Fax No.: (022) 2285 3031e-mail : [email protected]

l. Distribution of Shareholding as on 31st March, 2004:

Category No. of % of ShareShares held Holding

A. Promoters’ Holdings1. Promoters

- Indian Promoters * 17600757 43.76- Foreign Promoters - -

2. Persons acting in Concert Nil Nil

Sub Total 17600757 43.76B. Non–Promoters Holding

3. Institutional Investora. Mutual Funds and UTI 44400 0.11b. Bankers, Financial

Institutions, 1011169 2.51Insurance Companies(Central / State Govt.Institutions / Non-Govt.Institutions)

c. FIIs 20000 0.05

Sub Total 1075569 2.674. Others

a. Private Corporate Bodies 1464621 3.64b. Indian Public 19019550 47.28c. NRIs/OCBs 1028851 2.56d. Other Directors and their

Relatives ********** 34,910 0.09

Sub Sub Sub Sub Sub TTTTTotalotalotalotalotal 2,15,47,9322,15,47,9322,15,47,9322,15,47,9322,15,47,932 53.5753.5753.5753.5753.57

GRAND GRAND GRAND GRAND GRAND TTTTTOOOOOTTTTTALALALALAL 4,02,24,2584,02,24,2584,02,24,2584,02,24,2584,02,24,258 100.00100.00100.00100.00100.00

* 1,50,200 Equity Shares of NRI’s included in Promoters Holdings.** Holding of Non-Executive Independent Directors & their Relatives.

m. Shareholding Pattern as on 31 st March, 2004

Shares No. of % to Total % ToFrom To Shareholders Total Shares Total

1 5,000 62,630 89.79 10009937 24.895,001 10,000 4518 6.48 3410462 8.48

10,001 20,000 1595 2.29 2357795 5.8620,001 30,000 403 0.58 1014686 2.5230,001 40,000 175 0.25 620377 1.5440,001 50,000 125 0.18 589217 1.4650,001 1,00,000 179 0.26 1292379 3.21

1,00,001 AND 125 0.18 20929405 52.03ABOVE

Total 69750 100.00 40224258 100.00

n. Non-mandatory Requirements:The Company has presently not adopted the non-mandatory requirementsgiven in the Annexure-3 to the Corporate Governance Code.

ToThe Members ofSu-Raj Diamonds and Jewellery LimitedWe have examined the compliance of conditions of CorporateGovernance by SU-RAJ DIAMONDS AND JEWELLERY LIMTED,for the year ended on 31st March, 2004, as stipulated in Clause49 of the Listing Agreement of the said Company with stockexchanges.The compliance of conditions of Corporate Governance is theresponsibility of the management. Our examination was limited toprocedures and implementation thereof, adopted by the Companyfor ensuring the compliance of the conditions of the CorporateGovernance. It is neither an audit nor an expression of opinion onthe financial statements of the Company.In our opinion and to the best of our information and according tothe explanations given to us, we certify that the Company hascomplied with the conditions of Corporate Governance asstipulated in the above mentioned Listing Agreement.We state that no investor grievances are pending for a periodexceeding one month against the Company as per the recordsmaintained by the Shareholders’/Investors’ Grievance Committee.We further state that such compliance is neither an assurance tothe future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairsof the Company.

For R.C. Reshamwala & Co.Chartered Accountants

Mumbai Rajnikant C. Reshamwala3rd May, 2004 Partner

Membership No. 5502

AUDITORS’ CERTIFICATE ONCORPORATE GOVERNANCE

8


ToThe Members of Su-Raj Diamonds & Jewellery LimitedWe have audited the attached Balance Sheet ofSU-RAJ DIAMONDS AND JEWELLERY LIMITED as at31st March, 2004 and also the annexed Profit and Loss Accountand the Cash Flow statement of the Company for the year endedon that date annexed thereto. These financial statementsare the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.1. We conducted our audit in accordance with auditing standards

generally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assurancewhether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingprinciples used and significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for ouropinion.

2. As required, by the Companies (Auditors Report) Order, 2003issued by the Central Government of India in terms of Section227(4A) of the Companies Act, 1956, we enclose in theannexure, a statement on the matters prescribed in Paragraphs4 and 5 of the said order.

3. Further, to our comments, in the annexure referred to inparagraph 2 above, we report that:(i) We have obtained all the information and explanations, which

to the best of our knowledge and belief were necessary forthe purposes of our audit;

AUDITOR’S REPORT

(ii) In our opinion, proper books of account, as required by lawhave been kept by the Company, so far as appears from ourexamination of these books;

(iii) The Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report are in agreement withthe books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by this report complywith the accounting standards referred to in sub-section (3C)of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from thedirectors, as on 31st March, 2004, and taken on record bythe Board of Directors, we report that none of the directorsis disqualified as on 31st March, 2004 from being appointedas a Director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956;

4. In our opinion and to the best of our information and according tothe explanations given to us, the said accounts, read with theNotes thereon, give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair viewin conformity with the accounting principles generally acceptedin India:

(a) in the case of the Balance Sheet, of the state of affairs ofthe Company as at 31st March, 2004;

(b) In the case of the Profit and Loss Account, of the Profit forthe year ended on that date.

And(c) in the case of the Cash Flow Statement, of the cash flows

for the year ended on that date.

For R. C. RESHAMWALA & Co.,CHARTERED ACCOUNTANTS

RAJNIKANT C. RESHAMWALAMumbai : 3rd May, 2004 PARTNER

Membership No. 5502


9

(Reffered to in para 2 of our report of even date on the accounts forthe year ended 31st March, 2004 of SU-RAJ DIAMONDS AND JEW-ELLERY LIMITED.On the basis of such checks as we considered appropriate and interms of information and explanations given to us, we state that:1. (a) The Company has maintained proper records, showing full

particulars including quantitative details and situation offixed assets.

(b) As explained to us, the fixed assets have been physicallyverified by the management in accordance with a phasedprogramme of verification which in our opinion is reasonableconsidering the size and nature of its business.

(c )Substantial part of fixed assets have not been disposed offduring the year. As such the determination as to whether ithas affected the going concern does not arise.

2. (a) The management, at regular intervals, has done physicalverification of the inventory. In our opinion, the frequency of theverification is reasonable. As regards materials lying with thirdparties, conformation have been received from the third parties.

(b) The procedures of physical verification of inventories followedby the management are reasonable and adequate in relationto the size of the company and the nature of its business.

(c )The Company is maintaining proper records of inventory.The discrepancies noticed on verification between thephysical stocks and the book records were not material.

3. (a) The Company has neither granted nor taken any loans to orfrom other companies, firms or other parties covered inthe register maintained under section 301 of the CompaniesAct, 1956.

(b) The rate of interest and other terms and conditions in respectof unsecured loans given by the company to its employeesand others are in our opinion, prima facie not prejudicial tothe interest of the company.

(c )The Payments of the principal amount and interest thereon,if any, are regular.

(d) There is no overdue amounts of loans and advances inexcess of Rs. 1,00,000/-.

4. In our opinion and according the explanations given to us, thereare adequate internal control procedures commensurate withthe size of the company and the nature of its business withregard to purchases of inventory, fixed assets and sale of goods.During the course of the audit we have not observed anycontinuing failure to correct major weaknesses in internal control.

5. (a) According to the information and explanations given to usand on the basis of the checks carried out by us, we are ofthe opinion that the transactions that need to be enteredinto the register maintained under section 301 of theCompanies Act, 1956 have been so entered.

(b) In the opinion of the management, the transactions made inpursuance of contracts or arrangements entered in theregister maintained under Section 301 of the CompaniesAct, 1956, and exceeding the value of rupees five lakhs inrespect of any party during the year have been made atprices which are reasonable having regard to prevailingmarket price. However, neither comparable quotations havebeen produced before us, nor are we in a position to verifyas to whether the transactions carried out are at prevailingmarket price, in view of the peculiar nature of the industry.

6. The Company has not accepted deposits from the public. As such,the question of complying with the directives issued by theReserve Bank of India and the provisions of Section 58A and58AA of the Companies Act, 1956 and rules framed thereunderdoes not arise.

7. In our opinion, the Company has an adequate Internal AuditSystem commensurate with its size and nature of its business.

8. In the present case, the Central Government has not prescribedthe maintenance of cost records under section 209 (1)(d) of theCompanies Act, 1956. As such, the question of reviewing the

books of account to be maintained by the company pursuant tosuch an order does not arise.

9. (a) According to the records of the company, undisputed statutoryduties including provident fund, investor education andprotection fund, employees state insurance, income-tax, salestax, wealth tax, customs duty, excise duty, cess and othermaterial statutory dues applicable, have generally beenregularly deposited with the appropriate authorities thoughthere have been a slight delay in a few cases. No undisputedamount are outstanding for more than six months at the end ofthe accounting year.

(b) Disputed Sales tax & Income tax liabilities have beendisclosed in the Notes to accounts under the head“Contingent Liabilities not provided for” (Note No. B-1)

10. The Company has no accumulated losses and the Companyhas not incurred cash losses during the financial year coveredby our audit and in the immediately preceding financial year.

11. In our opinion and according to the information and explanationsgiven to us, the Company has not defaulted on repayments ofdues to banks and financial institutions. There are no debenturesissued by the Company and as such the question of default inpayment to debenture holders does not arise.

12. As informed to us, the Company has not granted any loans andadvances on the basis of security by way of pledge of any shares,debentures and other securities. Therefore, the provisions ofclause 4(xii) of the Companies (Auditor’s Report) Order, 2003are not applicable to the Company.

13. In our opinion, the Company is not a chit fund or a nidhi mutualbenefit fund/society. Therefore, the provisions of clause 4(xiii)of the Companies (Auditor’s Report) Order, 2003 are notapplicable to the Company.

14. In our opinion, the Company is not dealing in or trading in shares,securities, debentures and other investment. Accordingly, theprovisions of clause 4(xiv) of the Companies (Auditor’s Report)Order 2003 are not applicable to the Company.

15. As informed to us, the Company had not given any guaranteesfor any loans taken by others from banks or financial institutions.Therefore, the provisions of clause 4(xv) of the Companies(Auditor’s Report) Order 2003 are not applicable to the Company.

16. In our opinion, the term loans have been applied for the purposefor which they have been raised.

17. According to the information and explanations given to us andoverall examination of the Balance Sheet of the Company, wereport that no funds raised on short term basis have been usedfor long term investments. The Company has not raised anylong term funds during the year.

18. The Company has not made any fresh allotment of shares.Therefore, the provisions of clause 4(xviii) of the Companies(Auditor’s Report) Order 2003 are not applicable to the Company.

19. The Company has not issued any debentures. Therefore, theprovisions of clause 4(xix) of the Companies (Auditor’s Report)Order 2003 are not applicable to the Company.

20. During the year under review, apart from small amounts received oncalls in arrears, the Company has not raised any monies by way ofpublic issues. Hence the question of verification of end use of moniesraised in public issue as per the provision of clause 4(xx) of theCompanies (Auditor’s Report) Order 2003 does not arise.

21. On the basis of our examinations and according to the informationand explanations given to us, no fraud/s on or by the Companyhas been noticed or reported during the course of the audit.

For R. C. RESHAMWALA & Co.CHARTERED ACCOUNTANTS

RAJNIKANT C. RESHAMWALAMumbai : 3rd May, 2004 PARTNER

Membership No. 5502

ANNEXURE TO THE AUDITORS’ REPORT

10


BALANCE SHEET AS AT 31ST MARCH, 2004

I. SOURCES OF FUNDS :1. Shareholders’ Funds :

a) Share Capital 1 38,78,56,595 38,78,43,160b) Reserves & Surplus 2 417,63,07,435 401,11,98,350

456,41,64,030 439,90,41,510

2. Loan Funds : 3a) Secured Loans 208,87,13,183 187,61,56,506

TOTAL 665,28,77,213 627,51,98,016

II. APPLICATION OF FUNDS :1. Fixed Assets :

a) Gross Block 4 31,64,76,998 27,80,40,306 Less : Depreciation 17,98,83,701 16,28,01,638

Net Block 13,65,93,297 11,52,38,668 b) Capital Work-in-Progress - 1,74,09,805

13,65,93,297 13,26,48,473

2. Investments : 5 39,88,05,800 20,075,280

3. Current Assets, Loans 6 And Advances :a) Inventories 191,74,59,352 179,10,19,604b) Sundry Debtors 444,18,86,241 37,38,061,689c) Cash and Bank Balances 107,95,01,841 32,82,82,271d) Loans and Advances 47,21,81,303 74,73,47,772

791,10,28,737 660,47,11,336Less Current Liabilities 7And Provisions :a) Current Liabilities 169,82,46,152 39,62,82,880b) Provisions 8,12,94,441 7,62,08,861

177,95,40,593 47,24,91,741Net Current Assets 613,14,88,144 613,22,19,595

4. Deferred Tax Liability ( Net ) : 8 (2,35,49,980) (2,31,01,261)5. Miscellaneous Expenditure : 9

( To the extent not written off or adjusted ) 95,39,952 1,33,55,929

TOTAL 665,28,77,213 627,51,98,016

NOTES ON ACCOUNTS 13

Current Year Previous YearSchedules Rupees Rupees Rupees

As per our attached report of even date For and on behalf of the Board

For R.C. Reshamwala & CO. Jatin R. Mehta Chairman-cum-

Chartered Accountants Managing Director

Rajnikant C. Reshamwala K. N. Bhandari

Partner Mohan M. Jayakar

Membership No. 5502 G. Bharakatia

Anil Cherian Atul S. PetheMumbai : 3rd May, 2004 Company Secretary

Directors


11

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2004

I. INCOMESales 723,87,82,148 583,45,38,855Other Income 10 42,64,663 14,74,465

724,30,46,811 583,60,13,320II. EXPENDITURE

Material Cost 11 671,38,88,841 536,95,34,829Manufacturing and other expenses 12 18,70,45,013 17,04,28,472

690,09,33,854 553,99,63,301

III. PROFITProfit before Interest and Depreciation 34,21,12,957 29,60,50,019

Interest 9,02,44,904 13,74,99,175Depreciation 1,75,38,773 1,51,40,914

10,77,83,677 15,26,40,089

Profit Before Tax 23,43,29,280 14,34,09,930

Provision for Taxa) Current 1,50,00,000 2,00,00,000b) Deferred Tax 4,48,719 23,54,738

1,54,48,719 2,23,54,738

Profit After Tax 21,88,80,561 12,10,55,192Balance brought forward from Previous Year 43,50,25,046 34,50,75,976

65,39,05,607 46,61,31,168Add :Excess/ (Short) Provision for Expenses/Income of earlier years ( Net ) 27,30,070 7,76,428Excess/(Short) Provision for Tax ( Net ) (1,35,12,837) 1,44,19,842

Profit available for appropriation Total 64,31,22,840 48,13,27,438

IV. APPROPRIATIONSProposed Dividend 4,02,24,258 3,21,79,406Tax on Dividend 51,53,733 41,22,987Transfer to General Reserve 1,00,00,000 1,00,00,000Transfer to General Reserve - Foreign Exchange Fluctuations 1,00,00,000 -Balance carried to Balance Sheet 57,77,44,849 43,50,25,046

Total 64,31,22,840 48,13,27,438

Earnings per share(Basic & Diluted) 5.64 3.12


Directors

Current Year Previous YearRupees Rupees Rupees








12


SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2004

SCHEDULE 1 : SHARE CAPITALAuthorised7,00,00,000 Equity Shares of Rs. 10/- each ( Previous Year : 7,00,00,000 70,00,00,000 70,00,00,000

Equity Shares of Rs. 10/- each )Issued and Subscribed4,02,24,258 Equity Shares of Rs. 10/- each ( Previous Year : 4,02,24,258 40,22,42,580 40,22,42,580

Equity Shares of Rs. 10/- each )Paid-up4,02,24,258 Equity Shares of Rs. 10/- each ( Previous Year : 4,02,24,258

Equity Shares of Rs. 10/- each ) 40,22,42,580 40,22,42,580Less: Calls Unpaid - Other than Directors 1,43,85,985 1,43,99,420

TOTAL 38,78,56,595 38,78,43,160

Note : Of the above paid-up Capital, Rs.10,48,06,450 represents capitalisation of General Reserveby issue of 1,04,80,645 Equity Shares of Rs. 10/- each fully paid up as Bonus Shares.

SCHEDULE 2 : RESERVES AND SURPLUSCapital Reserve

As per last Balance Sheet 5,03,41,338 5,03,41,338Add: Amount transferred during the year - -

5,03,41,338 5,03,41,338Share Premium Account

Premium Receivable 171,65,14,830 171,65,14,830Less : Allotment Money in Arrears 82,80,060 86,33,832Less : Call Money in Arrears 8,01,71,212 8,22,06,722

162,80,63,558 162,56,74,276General Reserve

As per last Balance Sheet 190,01,57,690 189,01,57,690Add : Amount transferred from Profit and Loss Account 1,00,00,000 1,00,00,000

191,01,57,690 190,01,57,690General Reserve - Foreign Exchange Fluctuations

As per last Balance sheet -Add : Amount transferred from Profit and Loss Account 1,00,00,000 1,00,00,000 -

Surplus in Profit and Loss Account 57,77,44,849 43,50,25,046

TOTAL 417,63,07,435 401,11,98,350

SCHEDULE 3 : LOAN FUNDS

(a) Secured LoansShort Term Loans from BanksSecured by hypothecation of stock-in-trade, book debts ( both presentand future ), personal guarantee of a Director and mortgage by way ofTitle Deeds of the immovable properties comprising of land and otherstructure, fixed machinery and plant, fixtures and fittings erected orinstalled thereof situated at Bangalore, Jodhpur and Valsad; andCollateral Security of Land & Building offered by Bombay DiamondCompany Pvt. Ltd, Kohinoor Diamonds Pvt. Ltd. and Plant & Machineryof Forever Diamonds Pvt.Ltd. 208,84,01,703 187,56,02,129

(b) Term Loans from Bank/Financial Institution(Secured by hypothecation of Vehicle) 3,11,480 5,54,377

TOTAL 208,87,13,183 187,61,56,506



13


Schedule 4 : Fixed Assets

GROSS BLOCK ( At Cost ) DEPRECIATION NET BLOCK

Description of Asset As At 1st Additions Sales Adjustment As At 31st As At 1st Sales Adjustment Provided As At 31st As At 31st As At 31stApril during the during the during March April during the during during the March March March2003 year year the year 2004 2003 year the year year 2004 2004 2003

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

1. Leasehold Land 44,32,169 28,00,000 - - 72,32,169 30,282 - 2,318 32,600 71,99,569 44,01,8882. Factory Premises 5,18,42,936 1,21,45,709 - - 6,39,88,645 1,97,45,880 - 34,23,021 2,31,68,901 4,08,19,744 3,20,97,0563. Plant and Machinery 17,12,84,474 1,58,28,798 - 8,342 18,71,21,614 10,75,03,270 - 1,212 99,94,673 11,74,99,155 696,22,459 6,37,81,2044. Furniture and Fixtures 1,02,77,358 14,07,677 - - 1,16,85,035 83,56,960 - 5,89,419 89,46,379 27,38,656 19,20,3985. Electrical Installations 1,59,44,001 17,39,583 - - 1,76,83,584 1,02,81,060 - 9,76,954 1,12,58,014 64,25,570 56,62,9416. Equipement 71,82,489 19,65,025 - - 91,47,514 53,68,204 - 4,79,780 58,47,984 32,99,530 18,14,2857. Air-conditioners 64,48,691 2,37,311 - - 66,86,002 44,16,654 - 2,88,925 47,05,579 19,80,423 20,32,0378. Computers 66,22,034 26,23,086 - - 92,45,120 50,53,158 - 11,58,340 62,11,498 30,33,622 15,68,8769. Vehicles 40,06,154 681,952 10,00,791 - 36,87,315 20,46,170 4,57,922 6,25,343 22,13,591 14,73,724 19,59,984

CURRENT YEAR’S TOTAL 27,80,40,306 3,94,29,141 10,00,791 8,342 31,64,76,998 16,28,01,638 4,57,922 1,212 1,75,38,773 17,98,83,701 13,65,93,297 11,52,38,668

PREVIOUS YEAR’S TOTAL 24,46,14,009 3,79,56,754 45,30,458 - 27,80,40,306 15,13,11,245 36,50,521 - 1,51,40,914 16,28,01,638 11,52,38,668

Note : The value of the capital work-in-progress capitalised during the year amounted to Rs. 1,74,47,575 (Previous YearRs. 2,09,30,622). The various items of expenditure comprised therein are :

PARTICULARS CURRENT YEAR PREVIOUS YEARRUPEES RUPEES

1) Factory Pemises 87,99,415 1,64,12,210

2) Plant & Machinery 21,72,034 45,00,581

3) Leasehold Land 28,00,000 -

4) Electrical Installation 9,23,287 -

5) Furniture & Fixture 7,31,804 -

6) Vehicles 3,812 -

7) Computers 43,315 -

8) Equipments 78,224 -

9) Pre-Operative Expenses 18,95,684 17,831

Total 1,74,47,575 2,09,30,622

Current Current Current Current Current YYYYYearearearearear Previous YearRupees RupeesRupeesRupeesRupeesRupees Rupees

SCHEDULE 5 : Investments : (At Cost) - UnquotedIn Government Securities

2 ( Previous Year : 2 ) Indira Vikas Patra of Rs. 500 each 1,000 1,000National Savings Certificates 5,000 5,000

6,000 6,000In Shares (Trade Investments)Subsidiary Company

30,880 ( Previous Year : Nil ) Equity Shares of Koradiam N.V. 37,85,30,800 -Other Companies

20,00,000 ( Previous Year : 20,00,000 ) Equity Shares of Rs. 10 each 2,00,00,000 2,00,00,000of Su-Raj Diamond Dealers Limited, Fully Paid-up

20,000 ( Previous Year : 28 ) Equity Shares of Rs. 10 each of 2,00,000 280Su-Raj Jewellery (India) Limited, Fully Paid-up

6,900 ( Previous Year : 6,900) Equity Shares of Rs. 10 eachof Su-Raj UK Industries Ltd., Fully paid-up 69,000 69,000

2,02,69,000 2,00,69,280

Total 39,88,05,800 2,00,75,280

14




SCHEDULE 6 : CURRENT ASSETS, LOANS AND ADVANCESA. Current Assets

(a) Inventories(As certified by a Director )I. Stores and Spare Parts ( At Cost ) 92,09,557 1,29,71,691II. Stock-in-Trade

(i) Raw Materials(Valued “At Cost” or “Net Realisable Value” whichever is lower)Diamonds 83,59,97,484 104,48,84,047Gold and Alloy 3,72,42,596 2,01,28,616Precious, Semi-precious and Other Stones 11,96,371 4,41,611Others 12,09,998 14,03,462

87,56,46,449 106,68,57,736(ii) Semi Finished Goods (At Cost of Materials) 79,06,332 31,22,004(iii) Finished Goods(Valued “ At Cost” or “Net Realisable Value’’whichever is lower)Diamonds and Studded Jewellery 102,45,37,125 70,48,31,437Press Pots and Diamond Scaives 1,59,889 32,36,736

102,46,97,014 190,82,49,795 70,80,68,173

191,74,59,352 179,10,19,604

(b) Sundry Debtors(Unsecured, considered good)Debts outstanding for a period exceeding six months 34,02,19,296 80,18,23,134Other Debts 410,16,66,945 293,62,38,555

444,18,86,241 373,80,61,689(c) Cash and Bank Balances

Cash on hand 21,64,103 1,2,23,129Balance with Scheduled Banks :In Current Account ( including chequeson hand Rs. 4,69,96,034 4,93,37,659 15,70,48,511Previous Year Rs. 44,15,76,399 )In Fixed Deposit Accounts 101,16,43,906 16,12,46,610

In Margin Money Accounts 1,63,56,173 87,64,021

107,95,01,841 32,82,82,271

TOTAL ‘ A ’ 743,88,47,434 585,73,63,564

B. Loans and Advances(Unsecured, considered good)Advances recoverable in cash or in kind or forvalue to be received 43,21,40,772 70,46,43,208Loans and advances to Employees 43,544 54,679Advance payment of Income-tax 3,99,96,987 4,26,49,885

TOTAL ‘ B ’ 47,21,81,303 74,73,47,772

TOTAL ‘ A ’ + ‘ B ’ 791,10,28,737 660,47,11,336


15



SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONSA. Current Liabilities

a) Sundry Creditors 168,78,45,356 38,73,92,387b) Bank Overdraft - 65,530c) Due to Directors 3,58,550 3,60,550d) Unclaimed Dividend 96,88,716 80,95,463e) Other Liabilities 3,53,530 3,68,950

169,82,46,152 39,62,82,880B. Provisions

a) Taxation 3,50,00,000 3,90,00,000b) Provision for Gratuity 9,16,450 9,06,468c) Proposed Dividend 4,02,24,258 3,21,79,406d) Tax on Dividend 51,53,733 41,22,987

8,12,94,441 7,62,08,861

TOTAL 177,95,40,593 47,24,91,741

SCHEDULE 8 : DEFERRED TAXDeferred Tax Assets and LiabilitiesAssetsProvision for Long Term Capital Loss 2,15,104 2,15,104LiabilitiesPreliminary expenses (1,812) (59,638)Provision for Short Term Capital Gain (28,50,924) (28,50,924)Provision for Depreciation (2,09,12,348) (2,37,65,084) (2,04,05,803)

TOTAL (2,35,49,980) (2,31,01,261)

SCHEDULE 9 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)a) Preliminary Expenses 28,70,601 40,18,842b) Commission and Brokerage on subscription of shares 66,69,351 93,37,087

TOTAL 95,39,952 1,33,55,929

SCHEDULE 10 : OTHER INCOMEInterest Received 23,90,272 -Labour Charges Received 8,84,454 -Profit on Sale of Assets (Net ) 24,631 -Rent Received 3,87,500 2,60,001

Miscellaneous ReceiptsPremium on Sale of Import Licences - 3,29,760From Others 577,806 8,84,704

5,77,806 12,14,464

TOTAL 42,64,663 14,74,465

16



Current Year Previous Year

Rupees Rupees Rupees

SCHEDULE 11 : MATERIAL COSTRaw Materials ConsumedOpening Stock 106,68,57,736 87,62,92,310Add : Purchases 679,45,77,842 525,62,89,885

786,14,35,578 613,25,82,195Less : Closing Stock 87,56,46,449 106,68,57,736

698,57,89,129 506,57,24,459(Increase)/ Decrease in Semi-Finished GoodsOpening Stock of Semi-Finished Goods 31,22,004 31,22,004Add : Purchase 2,67,147 -

33,89,151 31,22,004Less : Closing Stock 79,06,332 31,22,004

(45,17,181) -Goods Traded inOpening Stock - -Add : Purchases 4,92,45,734 3,05,29,093

4,92,45,734 3,05,29,093Less : Closing Stock - -

4,92,45,734 3,05,29,093(Increase)/ Decrease in Finished GoodsOpening Stock of Finished Goods 70,80,68,173 98,13,49,450Closing Stock of Finished Goods 102,46,97,014 70,80,68,173(Accretion) / Decretion in stock (31,66,28,841) 27,32,81,277

TOTAL 671,38,88,841 536,95,34,829

SCHEDULE 12 : MANUFACTURING AND OTHER EXPENSESSalaries, Wages and Bonus 30,58,355 29,22,187Contribution to Provident and other Funds 1,70,512 2,33,057Workmen and Staff Welfare Expenses 2,52,686 1,43,803

34,81,553 32,99,047Directors’ Remuneration 9,67,500 9,60,000Labour Charges 7,87,85,704 10,64,74,431Assortment and Valuation Charges 15,52,015 9,53,150Packing Materials Consumed 77,233 1,80,004Stores and Spare Parts Consumed 1,56,74,450 47,34,238Power and Fuel 37,99,359 14,62,984Electricity Charges 9,98,632 7,80,622Freight and Forwarding 43,65,759 31,77,178Postage and Telegram Charges 9,84,672 8,93,311Telephone, Telex and Fax Charges 11,28,360 8,73,876Advertisement and Sales Promotion Expenses 25,66,764 19,20,630Lease Rent 11,20,661 9,15,092Rates, Taxes and Duties (Including Rs. 27,29,072; Previous YearRs. 43,29,298 towards Stamp Duty ) 66,70,804 49,82,721Travelling Expenses 49,27,408 35,67,586Printing and Stationery 7,63,200 6,66,928Licence, Registration and Other Fees 5,07,901 2,59,628Repairs and Maintenance of :

Buildings 6,57,956 1,83,377Plant and Machinery 2,50,834 2,08,193Others 11,51,764 22,48,036

20,60,554 26,39,606Insurance Charges (Including Rs. 55,82,146; Previous Year Rs. 41,95,533for ECGC Premium reimbursed to banks ) 1,01,36,075 72,20,894Legal and Professional Charges 43,03,392 30,87,726Bank Charges 3,28,74,839 1,26,44,089Miscellaneous Expenses 39,60,200 31,30,894Loss on sale of fixed Assets - 7,49,975Donations 15,22,000 10,37,883Preliminary Expenses Written Off 38,15,978 38,15,978 TOTAL 18,70,45,013 17,04,28,472


17

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2004.

SCHEDULE 13:

NOTES FORMING PART OF THE BALANCE SHEET AND PROFITAND LOSS ACCOUNT.

A. Significant Accounting Policies :

1. Basis of Accounting and Preparation of FinancialStatements :

(a) All income and expenditure items are accounted on accrualbasis.

(b) Financial statements are based on historical costs. Thesecosts are not adjusted to reflect the impact of the changingvalue in the purchasing power of money.

2. Fixed Assets:(a) All fixed assets are valued at cost less depreciation.(b) Exchange differences relating to the acquisition of fixed

assets are adjusted in the cost of the assets.

3. Capital Work in Progress :(a) The cost of fixed assets, acquisition/construction , installation

of which are not completed are included under Capital Work-in-Progress and the same are apportioned/transferred torespective fixed assets on completion of the project.

(b) Expenses prior to set up of business premises and havingpart of capital work-in-progress are capitalised under thehead Factory Premises.

(c) Similarly, goods which are under production and cannot betermed as finished goods are treated as work in progress.

4. Investments :Investments are stated at Cost of acquisition.

5. Depreciation :(a) Depreciation is provided as per the “Written Down Value

“method at rates provided by Schedule XIV to the CompaniesAct,1956.Leasehold Land is amortised over the period of lease.

(b) Depreciation on additions and on sale/disposal of fixedassets is computed pro-rata on day to day basis from thedate of purchase or upto the date of sale.

(c) Depreciation on new unit is taken from the date ofcommissioning of the unit.

(d) Depreciation is also considered on those assets (idle assets)which were not used for whole or part of the year.

6. Inventories:The Company has complied with AS-2 Valuation of Inventoriesissued by the Institute of Chartered Accountants of India, to theextent practicable keeping in mind the peculiar nature of the industry.(a) Raw Materials (Rough Diamonds, Precious stones, Gold,

Silver, Alloys, Platinum, Pearls) are valued “At Cost”( i.e costof acquisition as on that date) or “Net Realisable Value”,whichever is lower.

(b) Closing stock of other Raw Materials is valued “At Cost” or“Net Realisable Value” whichever is lower (means averagecost with the proportionate value of freight and clearingcharges added to closing stock.).

(c) Finished Goods of Jewellery and Polished Diamonds arevalued “At Cost or Net Realisable value”, whichever islower.Cost includes Cost of Raw Materials,on weightedaverage cost basis, labour cost and proportionately allocatedother costs related to converting them into finished goodswhich are technically evaluated keeping in view the widevariety and grades of diamonds.

(d) Goods procured for trading (Studded and plain jewellery andDiamonds) are valued “At Cost or Net Realisable value”,whichever is lower.

(e) Semi Finished Goods of Engineering Division are valued“At Cost of Raw Materials.”.

(f) Stores and Spares are valued “At Cost”.(g) Stock on hand as on the last date which is under processing

and not yet converted to finished goods is considered to bea part of Stock of Raw Materials and hence is valued asRaw Materials as in (a) above.

7. Foreign Exchange Transactions :(a) Transactions in foreign currency are accounted at the

exchange rate prevailing on the date of transaction.Exchange fluctuations between the transaction date and thesettlement date in respect of revenue transactions arerecognized in Profit and Loss Account.

(b) All export proceeds not realised at the year end are restatedat the rate prevailing at the year end. The exchangedifference arising therefrom has been recognised as income/expenses in the current years Profit and Loss Account.

(c) Current Assets and Current Liabilities not covered by forwardexchange contracts are translated at year end exchangerates and the Profit/Loss so determined are recognized inthe Profit and Loss Account for the year.

(d) The Profit/Loss on forward exchange contract is recognizedas income/expenses over the life of the Contract.

8. Preliminary Expenses :Preliminary Expenses are treated as Deferred RevenueExpenditure and the same are written off in ten equal instalments.

9. Employees Retirement Benefits :(a) Gratuity liability due and payable on the last day of the

accounting year is determined in accordance with theprovision of the Payment of Gratuity Act, 1972 and the termsof appointment of the employee concerned and the gratuityliability is provided for in the books of account. At the sametime gratuity amounts paid to the retiring employees aredebited to Profit & Loss Account.

(b) The Company has made provision for leave encashmentdues as on the last date of the year.

10. Taxation :(a) Provisions for taxation is made after considering various reliefs

admissible under the provisions of the Income Tax Act.(b) Disputed amounts of tax are considered in contingent liabilities.(c) The Company has implemented ‘Accounting Standard 22’-

“Accounting of Taxes on Income”, issued by the Institute ofChartered Accountants of India, which is mandatory innature. The Company has recognized Deferred Taxes whichresult from the timing difference between the Book Profitsand Tax Profits.

11. Borrowing Cost :Borrowing Costs that are attributable to the acquisition/construction of fixed assets are capitalized as part of the cost ofthe respective assets. Other borrowing costs are recognized asexpenses in the year in which they are incurred.

18



B. Notes forming part of the accounts :1. Contingent Liabilities not provided for in respect of :

Rupees Rupees(a) Guarantee given by the Company Nil (3,25,000)

on behalf of associate companiesin respect of advances granted bya bank.

(b) Disputed Income/ Sales Tax Liability 22,85,695 (Nil)(c) Estimated amounts of contracts 11,00,000 (11,00,000)

remaining to be executed onCapital Account.

(d) EPCG Benefits (Customs 1,46,55,139 (98,20,485)Duties payable if exportobligations not met).

———————— ————————Total 1,80,40,834 (1,12,45,485 )

———————— ————————

2. In the opinion of the Directors :(a) The Current Assets, Loans and Advances are approximately

of the value stated, if realized in the ordinary course ofbusiness.

(b) The provision for Depreciation and for all known liabilitiesare adequate and not in excess of the amounts reasonablynecessary.

3. The Closing Stock of Raw Materials includes stock lying withthird parties.

4. The closing stock of Raw Materials-Gold includes Gold valuedat Rs. 2,79,81,080 (Rs.1,74,26,794 ) taken on loan from Bankof Nova Scotia.

5. Legal and Professional charges include payment to StatutoryAuditors :

Rupees Rupees(a) Audit Fees 2,10,000 (1,40,000)(b) Tax Audit Fees 60,000 (60,000)(c) As advisor or in any other capacity

in respect of certification charges 41,000 (72,500)(d) Reimbursement of expenses & 18,805 (13,625)

Service Tax.—————— ——————

Total 3,29,805 (2,86,125)—————— ——————

6. The closing balance of Sundry Debtors and Creditors are subjectto confirmation by the parties concerned.

7. The Company has engaged contractors who carry out diamondcutting, polishing, jewellery making work on behalf of theCompany. The Company has been legally advised that this doesnot amount to the sort of contract contemplated by Section297(1) of the Companies Act,1956 and hence the provisionsthereunder including the requirements of obtaining the CentralGovernment‘s prior approval are not attracted.

8. Gratuity provision has been made at Rs. 1,40,450 (Rs.85,187)as per the provisions of the Payment of Gratuity Act,1972.However, the Company has not ascertained gratuity liability onthe basis of Actuarial Valuation.

9. During the year a net gain on account of Foreign ExchangeFluctuation amounting to Rs.6,81,87,905 (Rs.5,38,93,820) hasbeen recognized in the Profit and Loss Account.

10. Excess/Short provisions for Expenses (Net) comprises offollowing items of expenditure/income relating to earlier years.

Rupees RupeesLegal and Professional Charges 12,093 ( — )Bank Interest 12,28,897 ( — )Miscellaneous Expenses 15,001 (5,207)Salaries,Wages and Bonus 7,777 (2,28,949)Purchase of Raw Material ( — ) (25,236)Directors Remuneration 5,000 ( — )Advertisement Expenses ( — ) (12,000)Repairs and Maintenance ( — ) (5,434)Forward Contracts 17,20,000 ( — )Sundry Credit Balance w/back 30,636 (10,09,673)Insurance Charges ( — ) (66)Rates and Taxes ( — ) (2,45,786)

—————— ——————Sub-total 30,19,404 (15,32,351)

—————— ——————Less:Salaries,Wages and Bonus ( — ) (2,309)Miscellaneous Expenses ( — ) (32,034)Repairs and Maintenance –others ( — ) (1,500)Sundry Debit Balance written off 1,88,996 (2,75,384)Bank Interest 284 (4,40,750)Proposed Dividend ( — ) (3,946)Rent 1,00,054 ( — )

—————— ——————Sub-total 2,89,334 (7,55,923)

—————— ——————TOTAL 27,30,070 (7,76,428)

—————— ——————11. Provision for excise duty liability on Finished Goods lying in

factory as on 31/3/2004 has not been provided for in the booksof account. The non provision of the same does not affect theprofit for the year.

12. Loans and Advances includes Lease Deposits of Rs.1,20,00,000 (Rs. 9,10,00,000) given to various parties as on31st March,1992 for taking premises on lease. The possessionof these premises has still not been received.

13. The Company has taken gold on loan from Bank of Nova Scotiaamounting to Rs. 64,43,75,921 (Rs.29,27,36,730).The said goldhas been processed and sales of jewellery made. As per theprovisions of the EXIM Policy, the value of purchase and sale istaken on the basis of the provisional sale certificate of the bank.The final value of purchase and sale is recorded on the date ofrepayment of the loan with the difference of sale and purchaseamount being recorded to respective accounts. This has noeffect on the profit of the Company.

14. The Company on the basis of legal advice, during the year hasadjusted the dividends payable against the amounts due fromshareholders who have not paid their call monies in respect ofwarrants subscribed by them. The amount of dividend adjustedagainst the Share Premium Account is Rs. 22,95,237 (Rs. 25,34,913).

15. There are no amounts of unclaimed dividend due and outstandingto be credited to Investor Education and Protection fund.

16. As per the provisions of Accounting Standard 17-“SegmentReporting “ issued by the Institute of Chartered Accountants ofIndia, the details of the Primary and Secondary Segment aregiven here below :


19


SEGMENT INFORMATION FOR THE YEAR ENDED 31 ST MARCH, 2004.

(i) Information about Primary Business Segment :(Rs.in Lacs)

Diamond Jewellery Engineering Un-allocated Total

REVENUESales / Other Income 50,171 22,205 11 43 72,430

(51,026) (7,301) (18) (15) (58,360)RESULT 1,820 1,828 (75) Nil 3,573Segment Result (2,546) (518) (-40) (-214) (2,810)Bank interest / 1,230 1,230charges (1,374) (1,374)Profit before tax 2,343

(1,434)Provision for tax 150Current (200)Deferred 4

(24)Profit after tax 2,189

(1,210)OTHER INFORMATIONSegment Assets 64,142 16,088 247 3,988 84,465

(66,283) (687) (359) (245) (67,574)Segment Liabilities 9,881 7,913 2 -- 17,796

(21,404) (2,064) (12) (6) (23,486)Share Capital & Reserves 45,641

(43,990)Deferred Taxation 235

(231)Non-cash 95expenses (135)other than depreciation

(ii) Information about Secondary Business Segment:Statement of continent wise sale :

Amount ( Rs. )

North America 176,24,63,130(105,06,07,253)

Europe 8,57,77,454(22,07,83,063)

Middle East 319,07,63,253(274,06,22,105)

Asia ( Incl. Japan and Fiji) 219,97,78,311(182,25,26,434)

————————Total 723,87,82,148

(583,45,38,855)————————

20


17. As per provision of Accounting Standard 18-“Related Party Transactions” issued by the Institute of Chartered Accountants of India, the details ofRelated Party Transaction based on disclosure certificate issued by the Directors, is enclosed herebelow : i) List of Related Parties : Particulars

Subsidiary Koradiam N VAssociates Professional Diamonds Limited, Forever Diamonds Private Limited,

Su-Raj Jewellery (India) Limited, Su-Raj Diamond Dealers LimitedKey Management Personnel Jatin R MehtaEnterprise with common key management personnel NilEnterprise in which key management personnel Su-Raj Diamond Traders Pvt Ltd., J. R. Diamonds Pvt Ltd,and their relatives have significant influence Su-Raj Diamond Consultancies Pvt Ltd., Diadem Investment and Finance Pvt Ltd.,

Bombay Diamonds Company Pvt Ltd.Relative of key management personnel Jatin R.Mehta (HUF), Ms.Sonia J.Mehta, S.J.& Co.

ii) Statement of Transactions :A. Transaction for the year ended 31.03.2004

Subsidiaries Associates Enterprise Relatives Totalin which key of Key

management ManagementPersonnel Personnel

have significantinfluence

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

1. Purchases 1,69,23,439 5,83,95,000 97,00,000 Nil 8,50,18,439(Nil) (24,75,42,731) (Nil) (Nil) (24,75,42,731)

2. Sales 2,11,97,401 6,30,48,000 99,97,866 Nil 9,42,43,267(Nil) (3,21,02,089) (4,60,984) (Nil) (3,25,63,073)

3. Sale of Licences Nil Nil Nil Nil Nil(Nil) (3,21,977) (Nil) (Nil) (3,21,977)

4. Labour charges paid Nil 1,89,07,983 1,58,31,975 Nil 3,47,39,958(Nil) (1,65,25,809) (1,23,50,989) (Nil) (2,88,76,798)

5. Lease Rent Nil Nil 24,000 Nil 24,000(Nil) (Nil) (24,000) (Nil) (24,000)

6. Loan Given Nil Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil) (Nil)

7. Loan Received Nil Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil) (Nil)

8. Guarantee Given Nil Nil Nil Nil Nil(Nil) (3,25,000) (Nil) (Nil) (3,25,000)

B. Outstanding as on 31.03.20041. Debtors 5,33,42,432 8,98,173 1,09,20,572 Nil 6,51,61,177

(Nil) (Nil) (Nil) (Nil) (Nil)2. Creditors 5,91,06,532 93,40,997 Nil Nil 6,84,47,529

(Nil) (Nil) (Nil) (Nil) (Nil)3. Lease Deposits Nil Nil 30,00,000 90,00,000 1,20,00,000

(Nil) (1,20,00,000) (90,00,000) (1,20,00,000) (3,30,00,000)

18. The Company has various operating leases for factory premises and office facilities that are renewable on a periodic basis and can be terminated at theoption of either parties. Rental expenses for operational leases recognized in the Profit and Los Account for the year is Rs. 11,20,661 (Rs. 9,15,092).

Minimum future lease rentals payable are : Rupees Rupees(a) Payable within one year 8,70,458 (9,15,000)(b) Payable within one year and five years. Nil (20,00)(c) Payable after five years. Nil (Nil)

Minimum future lease rentals receivable in respect of assets given on operatinglease in the form of Plant & Machinery after 1/10/2002 and Building after 1/8/2001 are : Rupees Rupees(a) Receivable within one year. 5,40,000 (2,50,001)(b) Receivable between one year and five years. 10,00,000 (Nil)(c) Receivable after five years. (Nil) (Nil)

19. Earnings per share:Profit computation for both Basic and Diluted earnings per share of Rs.10/-each.

Rupees RupeesNet Profit as per Profit and Loss Account available to shareholders. 21,88,80,561 (12,10,55,193)Weighted average no.of Equity Shares 3,87,82,973 (3,87,84,316)

3,73,44,374 Equity Shares fully paid up of Rs.10/- each. 3,73,44,37428,79,197 Equity Shares partly paid

up of Rs.5/-each=Rs.1,43,85,985Hence fully paid up EquityShares of Rs.10/- each 14,38,599

———————Total No.of Equity Shares 3,87,82,973

———————Earnings Per Share (Basic and Diluted ) 5.64 (3.12)


21

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2004.20. The Company has implemented ‘Accounting Standard 22’ - “Accounting of Taxes on Income”,issued by the Institute of Chartered Accountants of India,which

is mandatory in nature.The Company has recognized Deferred Taxes which result from the timing difference between the Book Profits and Tax Profits.As a result the deferred tax liability for the year aggregating to Rs. 4,48,719 has been recognized in the Profit and Loss account, the details of which areas under

Particulars Balance carried Arising during Balance carriedAs at 31/3/2003 the year. As at 31/3/2004.

(Rs.) (Rs.) (Rs.)Deferred Tax LiabilitiesDepreciation. (2,04,05,803) (5,06,544) (2,09,12,347)Amortisation of Preliminary expenses (59,638) 57,825 (1,813)Short Term Capital Gain (28,50,924) Nil (28,50,924)

—————— —————— ——————Total (2,33,16,365) (4,48,719) (237,65,084)

—————— —————— ——————Deferred Tax Assets.Short Term Capital Loss 2,15,104 Nil 2,15,104

—————— —————— ——————Total 2,15,104 Nil 2,15,104

—————— —————— —————— 21. Payment to Directors: Rupees Rupees

Salaries 9,00,000 (9,00,000)Meeting Fees 67,500 (60,000)

—————— ——————Total 9,67,500 (9,60,000)

—————— ——————22. Computation of Net Profit as per section 349 read with section 309(5) and section 198 of the Companies Act,1956 for calculation of the remuneration

of Managing Director and Whole Time Directors :Rupees Rupees

Profit before tax as per Profit and Loss Account. 23,43,29,280 (14,34,09,931)Add : Managerial Remuneration 9,00,000 (9,00,000)

Loss on Sale of fixed Assets Nil (7,49,975)Less: Profit on sale of fixed Assets 24,631 Nil

Profit for Directors Commission 23,52,04,649 (14,50,59,906)Calculation of Commission @ 1% of the net profit 23,52,046 (14,50,599)as per Schedule XIII to the Companies Act,1956Restricted to 50% of Actual Salary. 11,76,023 (4,50,000)

23. Additional information required under Para 4-D of Part-II of Schedule VI to the Companies Act,1956 as certified by a Director, is as followsRupees Rupees

a) Value of Imports on CIF basisRaw Materials 542,79,41,311 (373,18,74,252)Stores and Spares 23,41,283 (17,17,366)Capital Goods 67,80,149 (42,51,424)

———————— ————————543,70,62,743 (373,78,10,042)

———————— ————————b) Expenditure in foreign currency on account of

Travelling Expenses 2,87,296 (4,43,213)Others NIL (Nil)

———————— ————————2,87,296 (4,43,213)

———————— ————————Rupees Percentage

c) (i) Break-up of the value of Raw Materials Consumed:Imported 552,96,40,361 72

(316,28,21,916) (62)Indigenous 145,61,48,768 28

(190,29,02,543) (38———————— ————————

698,57,89,129 100(506,57,24,459) (100)

———————— ————————(ii) Break-up of the value of Stores & Spares Consumed:

Imported 87,51,864 68(20,48,589) (43)

Indigenous 69,22,586 32(26,85,648) (57)

———————— ————————1,56,74,450 100(47,34,238) (100)

———————— ————————d) Remittance of Dividend in foreign currency :

No.of Non-Resident Shareholders 28 31No.of shares held by them 33,971 36,071Dividend Year 2002-2003 2001-2002Dividend Amount Rs. 27,177 Rs.25,250

22


SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2004e) Earnings in Foreign Exchange : Rupees Rupees

i) Export of Goods on F.O.B basis 672,12,47,280 (494,04,77,420)ii) Recovery of Freight and Insurance 43,20,376 (25,87,719)

——————— ————————672,55,67,656 (494,30,65,139)

——————— ————————

24. Additional information pursuant to the provisions of Paragraph 3 and 4 of Part II of Schedule VI to the Companies Act,1956 (as certified by a Directorand accepted by Auditors ) :

a. Licensed and Installed capacity and Production Information in respect of goods manufactured (i.e fully processed polished diamonds, studded jewelleryand press pots)

Diamond Division Jewellery Division Engineering Divisioni) Licensed Capacity : Not-Applicable Not-Applicable Not Applicableii) Installed Capacity : Not-Applicable Not-Applicable 46,00,000 Pieces (Pots)iii) Actual Production : 11,91,986.23 cts. 8,29,613.33 gms. 2,500 Pieces (Scaives)

(11,37,035.69cts.) (11,80,641.00gms.) 14,64,286 Pieces (Pots)(16,64,480) Pieces (Pots)

(Nil) Pieces (Scaives)(Nil) Pieces (Scaives)

b. 1. Manufacturing Goods.

DESCRIPTION OPENING STOCK SALES CLOSING STOCKUnit Quantity Value Quantity Value Quantity Value

(Rupees) (Rupees) (Rupees)

FINISHED GOODS1 Fully Processed

Polished Diamonds Cts. 82,378.98 70,41,94,798 12,41,107.74 49,48,305,817 1,10,744.77 101,84,29,269(91,399.43) (97,74,61,992) (12,40,734.12) (50,81,223,840) (82,378.98) (70,41,94,798)

2 Studded Jewellery Gms. 39.50 6,36,640 3,45,560.40 16,70,11,629 1,664.38 58,58,523(39.50) (6,36,640) (48,849.14) (4,50,85,562) (39.50) (6,36,640)

3 Plain Jewellery Gms. - - 31,92,539.44 2,05,36,94,035 541.91 2,49,333(-) (-) (11,23,725.66) (65,63,72,402) (-) (-)

4 Press Pots Pcs. 33,13,224 14,17,736 12,84,708 11,28,183 1,99,861 1,59,889(33,41,387) (14,31,818) (15,44,661) (18,43,279) (33,13,224 (14,17,736)

5 Diamond Scaives Pcs. 659 18,19,000 - - - -(659) (18,19,000) (-) (-) (659) (18,19,000)

——————— ———————— ———————70,80,68,174 717,01,39,664 102,46,97,014

(98,13,49,450) (578,45,25,083) (70,80,68,174)——————— ———————— ———————

2. Purchase and Sale of Traded Goods.1 Gold Gms. - - - - - -

(37,938.00) (1,77,78,363) (23,328.00) (1,17,00,000) (-) (-)1 Polished Diamonds Cts. - - 51,792.20 4,73,31,943 - -

(-) (-) (-) (-) (-) (-)2 Gold and Platinum Jewellery GMS.

Studded with Diamond and - - 869.17 27,04,742 - -Other Stones (-) (-) (16,277.25) (1,68,96,847) (-) (-)

Pcs. - - - - -(-) (-) (184) (28,42,218) (-) (-)

——————— ——————— ———————TOTAL - 5,00,36,685 -

(1,77,78,363) (3,14,39,065) (-)——————— ——————— ———————

GRAND TOTAL 70,80,68,174 722,01,76,349 102,46,97,014(99,91,27,813) (581,59,64,148) (70,80,68,174)——————— ——————— ———————

C) Raw Materials Consumed :I. DIAMOND DIVISION :

Description QUANTITY (CARATS) VALUE (RUPEES)Rough Diamonds (including Rejection Diamonds) 3,79,709.55 53,17,03,176

(5,99,764.43) (61,89,83,250)Polished Diamonds 12,20,352.01 445,73,70,138

(11,34,574.96) (381,81,94,948)Precious, Semi Precious Stones 4,73,546.00 27,67,829

(-) (-)————————

TOTAL - I 499,18,41,143(443,71,78,198)————————

II. JEWELLERY DIVISION:QUANTITY (GMS) VALUE (RUPEES)

Gold 34,25,671.97 199,30,52,838(11,72,536.59) (62,76,25,956)

Precious, Semi- Precious and other Stones (-) (-)(6,932.97) (5,46,513)

Silver 3,996.14 35,586(-) (-)

Alloy 55,293.72 3,98,425(-) (-)

TOTAL - II ————————199,34,86,849(62,81,72,469)———————


23

III. ENGINEERING DIVISION:Steel Rods (Kgs) 11,867 4,61,137

(8,320.00) (3,73,792)———————

GRAND TOTAL (I+II+III) 698,57,89,129(506,57,24,459)

———————NOTE : The Consumption shown above has been arrived at on the basis of Opening Stock plus Purchases minus Closing stock

including wastage thereon, if any. Profit / Loss if any, on sale of Raw Materials gets adjusted in the Consumption.

25. Capital Work-in-Progress comprises of :Rupees Rupees

Plant and Machinery - (21,44,552)Leasehold Land - (28,00,000)Factory Building - (87,99,415)Electrical Installation - (9,23,287)Pre-operative Expenses - (14,25,539)Generator - (4,59,857)Furniture and Fixture - (7,31,804)Vehicles - (3,812)Computers - (43,315)Equipments - (78,224)

—————————- ————————— Total - (1,74,09,805)

————————— —————————26. The Company has during the year given donation of Rs. 50,000 to a political party viz. Bhartiya Janta Party.27. As per the information available with the Company, total outstanding due to small scale Industrial units at the end of the

year is Rs.Nil (Nil).28. Figures in brackets in notes 2 to 27 pertain to previous year.29. Previous Year figures have been re-arranged and re-grouped wherever necessary.



For R.C. Reshamwala & CO. Jatin R. Mehta Chairman-cum-Chartered Accountants Managing Director

Rajnikant C. Reshamwala K. N. BhandariPartner Mohan M. JayakarMembership No. 5502 G. Bharakatia


Directors

24


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

(Rs. in Lacs)

Current Year Previous Year

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit Before Tax 2343 1434Adjustment for :Depreciation 175 151Interest (Net) 902 1375Excess/ short provision for Expenses/ Income for earlier year - 153(Profit) / Loss on Sale of Assets (Net) and investments - 7Preliminary Expenses written off 39 38

—————— ——————Operating Profit before working capital changes 3459 3158Adjustment for :Trade and Other Receivables (4286) (3203)Inventories (1264) 844Trade Payable 12982 (720)

—————— ——————10891 79

Deferred Tax 4 -Taxes Paid (257) (1)Interest Paid (Net) (902) (1375)

—————— ——————Cash generated from operating activities 9736 (1297)

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (225) (223)Sale of Fixed Assets 10 1Purchase of Investments (3788) -Sale of Investments - -

—————— ——————Net cash from investing activities (4003) (222)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from Share Premium - 25Proceeds from Short Term borrowings 2126 3536Repayment of short term loans - (5597)Proceeds from Share Capital - -Dividend Paid (306) -Tax on Proposed Dividend (41) (282)

—————— ——————Net cash from financing activities 1779 3282

—————— ——————Net increase/ (decrease) in cash and cash equivalent (A+B+C) 7512 1763Cash and Cash Equivalent as at 1st April, 2003(Opening Balance) 3283 1520Cash and Cash Equivalent as at 31st March, 2004(Closing Balance) 10795 3283



Rajnikant C. Reshamwala K. N. BhandariPartner Mohan M. JayakarMembership No. 5502 G. Bharakatia


Directors


25

INFORMATION PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I Registration DetailsRegistration No. 15915 State Code 4

Balance Sheet Date 31/03/2004

II Capital Raised during the year ( Amount in Rupees Thousands)Public Issue NIL Right Issue NILBonus Issue NIL Private Placement NIL

III Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities 8,455,968 Total Assets 8,455,968

Sources of Funds Paid up Capital 387,857 Reserves and Surplus 4,176,307 Secured Loans 2,088,713 Unsecured Loans -

Application of FundsNet Fixed Assets 136,593 Investments 398,806Net Current Assets 6,131,488 Misc. Expenditure 9,540Accumulated Losses NIL Deferred Tax Liability (23,550)

IV Performance of Company ( Amount in Rs. Thousands)

Turnover 7,243,047 Total Expenditure 7,008,718Profit Before Tax 234,329 Profit after Tax 218,881Earnings per shares in Rs. 5.64 Dividend Rate (%) 10

V Generic Name of Three Principal Products/Services of Company (as per monetary terms)

a) Item Code No. (ITC Code) 710239.01Product Description DIAMONDS

b) Item Code No. (ITC Code) 711319.03Product Description STUDDED JEWELLERY

c) Item Code No. (ITC Code) 711319.01Product Description PLAIN JEWELLERY

26


INTEREST IN THE SUBSIDIARY COMPANIES1 Name of the Subsidiary KORADIAM N.V2 Financial Year of the subsidiary ended on 31st December, 20033 Date from which it became a subsidiary 1st April, 20034 Shares of the Subsidiary held by the Company on the above date

a) Number and face value 30088 Shares at Euro 248 eachb) Extent of Holding 100%

5 Net aggregating amount of Profits/ (Loss) of the subsidiaryfor the above financial year of the subsidiary so far as theyconcern members of the Companya) dealt with in the accounts of the Company Nil for year ended 31st March 2004b) not dealt with in the accounts of the Euro 29705 Company for the year ended 31st March 2004

6 Net aggregating amount of Profits/ (Losses) for the previous financialyears of the subsidiary, since it became a subsidiary so far as theyconcern members of the Companya) dealt with in the accounts of the Company for Nil the year ended 31st March 2004b) not dealt with in the accounts of the company Nil for the year ended 31st March 2004

For and on behalf of the Board

Jatin R. Mehta Chairman-cum-Managing Director

K. N. BhandariMohan M. JayakarG. Bharakatia


Directors

STSTSTSTSTAAAAATEMENT PURSUTEMENT PURSUTEMENT PURSUTEMENT PURSUTEMENT PURSUANT ANT ANT ANT ANT TTTTTO SECTION 212 OF O SECTION 212 OF O SECTION 212 OF O SECTION 212 OF O SECTION 212 OF THE COMPTHE COMPTHE COMPTHE COMPTHE COMPANIES AANIES AANIES AANIES AANIES A CTCTCTCTCT,,,,, 1956 1956 1956 1956 1956 TTTTTO COMPO COMPO COMPO COMPO COMPANY’SANY’SANY’SANY’SANY’S


27

AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors

Su-Raj Diamonds and Jewellery Limited.We have audited the attached consolidated balance sheet of Su-Raj Diamonds Group as at 31st March, 2004, and also the consolidated profit and lossaccount and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of theSu-Raj Diamond Group’s management and have been prepared by the management on the basis of separate financial statements and other financialinformation regarding components. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

We did not audit the financial statements of the subsidiary, Koradiam N V, whose financial statements reflect total assets of Rs. 705,715,827 as atDecember 31, 2003, the total revenue of Rs. 1,369,229,244 and cash flows amounting to Rs. 102,422,121 for the year then ended. These financialstatements and other financial information have been audited by other auditor whose report has been furnished to us, and our opinion is based solely onthe report of the other auditor.

We report that the consolidated financial statements have been prepared by Su-Raj Diamonds Group’s management in accordance with the requirementsof Accounting Standards (AS) 21-Consolidated Financial Statements, and Accounting Standard (AS) 23-Accounting for Investments in Associates inConsolidated Financial Statements issued by the Institute of Chartered Accountants of India.

Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of thecomponents, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached consolidated financialstatements give a true and fair view in conformity with the accounting principles generally accepted in India :

(a) in the case of the consolidated balance sheet, of the state of affairs of Su-Raj Diamond Group as at 31st March, 2004;(b) in the case of consolidated profit and loss account, of the profit for the year ended on that date; and(c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

For R. C. Reshamwala & Co.Chartered Accountants

Mumbai Rajnikant C. Reshamwala3rd May, 2004 Partner

Membership No. 5502

28


CONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED BTED BTED BTED BTED BALANCE SHEET AS AALANCE SHEET AS AALANCE SHEET AS AALANCE SHEET AS AALANCE SHEET AS AT 31ST MARCH,T 31ST MARCH,T 31ST MARCH,T 31ST MARCH,T 31ST MARCH, 2004 2004 2004 2004 2004

I. SOURCES OF FUNDS :1. Shareholders’ Funds :

a) Share Capital 1 387,856,595b) Reserves & Surplus 2 4,204,573,298

4,592,429,8932. Loan Funds : 3

a) Secured Loans 2,088,713,182b) Unsecured Loans 298,719,167

TOTAL 6,979,862,242

II. APPLICATION OF FUNDS :1. Fixed Assets :

a) Gross Block 4 325,109,753Less : Depreciation 184,046,823

Net Block 141,062,930 b) Capital Work-in-Progress -

141,062,930

2. Investments : 5 20,075,0003. Current Assets, Loans 6

And Advances :a) Inventories 2,274,606,864b) Sundry Debtors 4,857,878,907c) Cash and Bank Balances 1,187,796,027d) Loans and Advances 472,619,172

8,792,900,970Less Current Liabilities 7And Provisions :a) Current Liabilities 1,873,814,764b) Provisions 86,351,866

1,960,166,630Net Current Assets 6,832,734,340

4. Deferred Tax Liability ( Net ) : 8 (23,549,980)5. Miscellaneous Expenditure : 9

(To the extent not written off or adjusted ) 9,539,952

TOTAL 6,979,862,242


ScScScScSchedulesheduleshedulesheduleshedules RupeesRupeesRupeesRupeesRupees RupeesRupeesRupeesRupeesRupees








Directors


29

CONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED PRTED PRTED PRTED PRTED PROFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS A CCOUNT FOR CCOUNT FOR CCOUNT FOR CCOUNT FOR CCOUNT FOR THE THE THE THE THE YEAR ENDED 31ST MARCH,YEAR ENDED 31ST MARCH,YEAR ENDED 31ST MARCH,YEAR ENDED 31ST MARCH,YEAR ENDED 31ST MARCH, 2004 2004 2004 2004 2004

I. INCOMESales 8,417,453,164Other Income 10 4,391,091

8,421,844,255II. EXPENDITURE

Material Cost 11 7,844,829,590Manufacturing and other expenses 12 211,591,939

8,056,421,529

III. PROFITProfit before Interest and Depreciation 365,422,726Interest 110,971,799Depreciation 18,537,746

129,509,545

Profit Before Tax 235,913,181Provision for Taxa) Current 15,000,000b) Deferred Tax 448,719

15,448,719

Profit After Tax 220,464,462Balance brought forward from Previous Year 435,025,046

655,489,508Add :Excess/ (Short) Provision for Expenses/Income of earlier years ( Net ) 2,730,070Excess/(Short) Provision for Tax ( Net ) (13,512,836)

Profit available for appropriation TOTAL 644,706,742

IV. APPROPRIATIONSProposed Dividend 40,224,258Tax on Dividend 5,153,733Transfer to General Reserve 11,535,616Transfer to General Reserve - Foreign Exchange Fluctuations 10,000,000Balance carried to Balance Sheet 577,793,135

TOTAL 644,706,742









Directors

ScScScScSchedulesheduleshedulesheduleshedules RupeesRupeesRupeesRupeesRupees RupeesRupeesRupeesRupeesRupees

30


SCHEDULES FORMING PART OF THE CONSOLIDA TED ACCOUNTS FOR THE YEAR ENDED31ST MARCH, 2004

SCHEDULE 1 : SHARE CAPITALAuthorised7,00,00,000 Equity Shares of Rs. 10/- each 700,000,000

Issued and Subscribed4,02,24,258 Equity Shares of Rs. 10/- each 402,242,580

Paid-up4,02,24,258 Equity Shares of Rs. 10/- each 402,242,580

Less: Calls Unpaid - Other than Directors 14,385,985

TOTAL 387,856,595

Note :Of the above paid-up Capital, Rs. 10,48,06,450 represents capitalisation of General Reserveby issue of 1,04,80,645 Equity Shares of Rs. 10 each fully paid up as Bonus Shares.

SCHEDULE 2 : RESERVES AND SURPLUSCapital Reserve

As per last Balance Sheet 50,341,338Add : on consolidation 26,551,377 76,892,715

Share Premium AccountPremium Receivable 1,716,514,830Less: Allotment Money in Arrears 8,280,060Less: Call Money in Arrears 80,171,212 1,628,063,558

General ReserveAs per last Balance Sheet 1,900,488,274Add : on consolidation 1,535,616Add : Amount transferred from Profit and Loss Account 10,000,000

1,912,023,890Less: Transfer to Deferred Tax Liability of earlier year -

1,912,023,890General Reserve - Foreign Exchange Fluctuations

As per last Balance Sheet -Add : Amount transferred from Profit and Loss Account 10,000,000 10,000,000

Surplus in Profit and Loss Account 577,793,135Less: Adjustment in carrying amount of investment in an associate,

namely Su-Raj Jewellery (India) Limited. (200,000)

TOTAL 4,204,573,298

SCHEDULE 3 : LOAN FUNDS(a) Secured Loans

Short Term Loans from BanksSecured by hypothecation of stock-in-trade, book debts ( both present and future),personal guarantee of a Director and mortgage by way of Title Deeds of theimmovable properties comprising of land and other structure, fixed machinery and plant,fixtures and fittings erected or installed thereof situated at Bangalore, Jodhpurand Valsad; and Collateral Security of Land & Building offered by Bombay DiamondCompany P. Ltd., Kohinoor Diamonds Pvt. Ltd. and Plant & Machinery ofForever Diamonds Pvt. Ltd. 2,088,401,703Term Loans from Banks/Financial Institution 311,479(Secured by hypothecation of Vehicle)

TOTAL 2,088,713,182

(b) Unsecured LoansShort Term Loans from Banks 298,719,167

TOTAL 298,719,167

Rupees RupeesRupeesRupeesRupeesRupees


31

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED31ST MARCH, 2004Schedule 4 : Fixed Assets

GROSS BLOCK ( At Cost ) DEPRECIATION NET BLOCK

Description of Asset As At 1st Additions Sales Adjustment As At 31st As At 1st Sales Adjustment Provided As At 31st As At 31stApril during the during the during March April during the during during the March March2003 year year the year 2004 2003 year the year year 2004 2004

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

1. Leasehold Land 4,432,169 2,800,000 7,232,169 30,282 0 2,318 32,600 7,199,5692. Factory Premises 58,339,556 12,145,709 70,485,265 21,837,615 0 4,072,683 25,910,298 44,574,9673. Plant and Machinery 171,284,474 15,828,798 8,342 187,121,614 107,503,270 0 1,212 9,994,673 117,499,155 69,622,4594. Furniture and Fixtures 14,695,549 1,539,013 3,542,857 12,691,705 12,363,829 3,542,857 633,462 9,454,434 3,237,2715. Electrical Installations 17,424,821 1,739,582 351,356 18,813,047 11,240,819 351,356 976,954 11,866,417 6,946,6306. Equipment 7,182,489 1,965,025 9,147,514 5,368,204 0 708,200 6,076,404 3,071,1107. Air-conditioners 6,448,691 237,311 6,686,002 4,416,654 0 288,924 4,705,578 1,980,4248. Computers 6,622,034 2,623,087 9,245,121 5,053,158 0 1,235,187 6,288,345 2,956,7769. Vehicles 4,006,154 681,953 1,000,791 3,687,316 2,046,170 457,923 625,345 2,213,592 1,473,724CURRENT YEAR’S TOTAL 290,435,937 39,560,478 4,895,004 8,342 325,109,753 169,860,001 4,352,136 1,212 18,537,746 184,046,823 141,062,930

Note :

The v alue of the capital wo rk-in-progress capitalised dur ing the y ear amounted to Rs. 1,74,47,575. The va rious items ofexpenditure compr ised therein are :

PARTICULARS CURRENT YEARRUPEES

1) Factory Premises 8,799,415

2) Plant & Machinery 2,172,034

3) Leasehold Land 2,800,000

4) Electrical Installation 923,287

5) Furniture & Fixture 731,804

6) Vehicles 3,812

7) Computers 43,315

8) Equipments 78,224

9) Pre-Operative Expenses 1,895,684

Total 17,447,575

Rupees Rupees

SCHEDULE 5 : INVESTMENTS : (AT COST) - UNQUOTEDIn Government Securities

2 Indira Vikas Patra of Rs. 500 each 1,000National Savings Certificates 5,000

6,000Other Companies

20,00,000 Equity Shares of Rs. 10 each of Su-Raj Diamond Dealers 20,000,000Limited Fully Paid-up

6,900 Equity Shares of Rs. 10 eachof Su-Raj UK Industries Ltd., Fully paid-up 69,000

20,069,000

Total 20,075,000

32



Rupees Rupees

SCHEDULE 6 : CURRENT ASSETS, LOANS AND ADVANCESA. Current Assets

(a) Inventories(As certified by a Director)I. Stores and Spare Parts ( At Cost ) 9,209,557II. Stock-in-Trade

(i) Raw Materials(Valued “ At Cost” or “ Net Realisable Value” whichever is lower)Diamonds 1,193,144,996Gold and Alloy 37,242,596Precious, Semi-precious and Other Stones 1,196,371Others 1,209,998

1,232,793,961(ii) Semi Finished Goods (At Cost of Materials) 7,906,332(iii) Finished Goods

(Valued “At Cost” or “Net Realisable Value” whichever is lower )Diamonds and Studded Jewellery 1,024,537,125Press Pots and Diamond Scaives 159,889

1,024,697,014 2,265,397,307

2,274,606,864(b) Sundry Debtors

(Unsecured, considered good)Debts outstanding for a period exceeding six months 340,219,296Other Debts 4,517,659,611

4,857,878,907(c) Cash and Bank Balances

Cash on hand 5,487,512Balance with Scheduled Banks :In Current Account ( including cheques on hand Rs. 4,69 ,96,034) 154,308,436In Fixed Deposit Accounts 1,011,643,906In Margin Money Accounts 16,356,173

1,187,796,027

TOTAL ‘A’ 8,320,281,798

B. Loans and Advances(Unsecured, considered good)Advances recoverable in cash or in kind or for value to be received 432,578,641Loans and advances to Employees 43,544Advance payment of Income-tax 39,996,987

TOTAL ‘B’ 472,619,172

TOTAL ‘A’ + ‘B’ 8,792,900,970


33

Rupees Rupees


SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONSA. Current Liabilities

a) Sundry Creditors 1,854,316,503b) Due to Directors 358,550c) Unclaimed Dividend 9,688,716d) Other Liabilities 9,450,995

1,873,814,764B. Provisions

a) Taxation 40,057,425b) Provision for Gratuity 916,450c) Proposed Dividend 40,224,258d) Tax on Dividend 5,153,733

86,351,866

TOTAL 1,960,166,630

SCHEDULE 8 : DEFERRED TAX

Deferred Tax Assets and LiabilitiesAssetsProvision for Long Term Capital Loss 215,104LiabilitiesPreliminary expenses (1,812)Provision for Short Term Capital Gain (2,850,924)Provision for Depreciation (20,912,348) (23,765,084)

TOTAL (23,549,980)

SCHEDULE 9 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)a) Preliminary Expenses 2,870,601b) Commission and Brokerage on subscription of shares 6,669,351

TOTAL 9,539,952

SCHEDULE 10 : OTHER INCOMEInterest Received 2,390,272Labour Charges Received 884,454Profit on Sale of Assets (Net) 24,631Rent Received 387,500Miscellaneous ReceiptsPremium on Sale of Import Licences -From Others 704,234

704,234

TOTAL 4,391,091

34


Rupees Rupees

SCHEDULE 11 : MATERIAL COSTRaw Materials ConsumedOpening Stock 1,066,857,736Add : Purchases 7,913,408,827

8,980,266,563Less : Closing Stock 875,646,449

8,104,620,114(Increase)/ Decrease in Semi-Finished GoodsOpening Stock of Semi-Finished Goods 3,122,004Add : Purchase 267,147

3,389,151Less: Closing Stock of Semi-Finished Goods 7,906,332

(4,517,181)Goods Traded InOpening Stock -Add : Purchases 49,245,734

49,245,734Less : Closing Stock -

49,245,734(Increase)/ Decrease in Finished GoodsOpening Stock of Finished Goods 708,068,173Less: Closing Stock of Finished Goods 1,012,587,250

(Accretion )/ Decretion in stock (304,519,077)

7,844,829,590

SCHEDULE 12 : MANUFACTURING AND OTHER EXPENSESSalaries, Wages and Bonus 5,088,863Contribution to Provident and other Funds 629,079Workmen and Staff Welfare Expenses 252,686

5,970,628Directors’ Remuneration 967,500Labour Charges 78,785,704Assortment and Valuation Charges 1,552,015Packing Materials Consumed 77,233Stores and Spare Parts Consumed 15,674,451Power and Fuel 3,799,359Electricity Charges 998,632Freight and Forwarding 4,365,760Postage and Telegram Charges 984,672Telephone, Telex and Fax Charges 1,128,360Advertisement and Sales Promotion Expenses 2,566,764Lease Rent 1,120,661Rates, Taxes and Duties (Including Rs. 27,29,072 towards Stamp Duty ) 6,670,804Travelling Expenses 4,927,408Printing and Stationery 763,200Licence, Registration and Other Fees 507,901Repairs and Maintenance of : Buildings 657,956

Plant and Machinery 250,834Others 1,151,764

2,060,554Insurance Charges ( Including Rs. 55,82,146 for ECGC Premium reimbursed to banks ) 10,136,075Legal and Professional Charges 4,303,392Bank Charges 32,874,839Miscellaneous Expenses 25,861,613Loss on sale of fixed Assets -Donations 1,522,000Preliminary Expenses Written Off 3,815,978Interest paid to others 156,436

211,591,939



35

AAAAACCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOTES TES TES TES TES TTTTTO AO AO AO AO ACCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PA RA RA RA RA RT OF T OF T OF T OF T OF THETHETHETHETHECONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED ATED ATED ATED ATED ACCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR THE THE THE THE THE YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31STSTSTSTST MARCH, MARCH, MARCH, MARCH, MARCH, 2004. 2004. 2004. 2004. 2004.

A. SIGNIFICANT ACCOUNTING POLICIES :

1. Basis of Accounting and Preparation of financial Statements(a) All income and expenditure items are accounted on accrual basis.(b) Financial statements of the company and its subsidiary are based

on historical costs. These costs are not adjusted to reflect the impactof the changing value in the purchasing power of money. The saidstatements are prepared in accordance with the AccountingStandards issued by the Institute of Chartered Accountants of India,and generally accepted accounting principles.

2. Principles of consolidationa) The consolidated financial statements comprising the financial statement

of Su-Raj Diamonds and Jewellery Limited (the company) and its whollyowned subsidiary being a foreign company, Koradiam N V.

(a) The financial statements have been consolidated on a line by linebasis by adding together the book values of like items of assets,liabilities, income and expenses after eliminating intra groupbalances and the un-realised profits/ losses on intra grouptransactions, if any.

(b) The accounts of the foreign subsidiary have been prepared incompliance with the local laws applicable in that country.

(c) The consolidated financial statements are prepared by adoptinguniform accounting policies for like transactions and other eventsin similar circumstances and are presented to the extent possiblein the same manner as that followed by the company in its separatefinancial statements.

(d) Investment in associate companies is accounted as per AccountingStandard (AS) 23 “ Accounting for Investments in Associates inConsolidated Financial Statements” issued by the Institute of theChartered Accountants of India.

(e) The excess of the share of equity in the subsidiary over its cost ofinvestment is recognized as Capital Reserve and adjusted underthe head Reserves and Surplus.

3. Reporting date of subsidiary for consolidationFor the purpose of preparing the consolidated statements the financialsof the subsidiary is for the year ending on 31 December, 2003 as thelast financial statements were prepared for that period.

4. Fixed Assets(a) All fixed assets are valued at cost less depreciation.(b) Exchange differences relating to the acquisition of fixed assets are

adjusted in the cost of the assets.

5. Capital Work in Progress(a) The cost of fixed assets, acquisition/construction , installation of

which are not completed are included under Capital Work-in-Progress and the same are apportioned/transferred to respectivefixed assets on completion of the project.

(b) Expenses prior to set up of business premises and having part ofcapital work-in-progress are capitalised under the head FactoryPremises.

(c) Similarly, goods which are under production and cannot be termedas finished goods are treated as work in progress.

6. InvestmentsInvestments are stated at Cost of acquisition.

7. Depreciation

Indian Company(a) Depreciation is provided as per the “Written Down Value “method at

rates provided by Schedule XIV to the Companies Act,1956.Leasehold Land is amortised over the period of lease.

(b) Depreciation on additions and on sale/disposal of fixed assets iscomputed pro-rata on day to day basis from the date of purchase orupto the date of sale.

(c) Depreciation on new unit is taken from the date of commissioningof the unit.

(d) Depreciation is also considered on those assets (idle assets ) whichwere not used for whole or part of the year.

Foreign CompanyDepreciation has been provided on the basis of the method and ratesprevailing as per the local laws.

8. InventoriesThe Company has complied with AS-2 Valuation of Inventories issuedby the Institute of Chartered Accountants of India, to the extentpracticable keeping in mind the peculiar nature of the industry.(a) Raw Materials (Rough Diamonds, Precious stones, Gold, Silver,

Alloys, Platinum, Pearls) are valued “At Cost”( i.e cost of acquisitionas on that date) or Net Realisable Value”, whichever is lower.

(b) Closing stock of other Raw Materials is valued “At Cost “ or “NetRealisable Value” which ever is lower (means average cost with theproportionate value of freight and clearing charges added to closingstock.).

(c) Finished Goods of Jewellery and Polished Diamonds are valued“At Cost or Net Realisable value”, whichever is lower. Cost includesCost of Raw Materials, on Weighted average cost basis, labourcost and proportionately allocated other costs related to convertingthem into finished goods which are technically evaluated keepingin view the wide variety and grades of diamonds.

(d) Goods procured for trading (Studded and plain jewellery andDiamonds) are valued “At Cost or Net Realisable value”, whicheveris lower.

(e) Semi Finished Goods of Engineering Division are valued “At Costof Raw Materials.”.

(f) Stores and Spares are valued “At Cost”.(g) Stock on hand as on the last date which is under processing and

not yet converted to finished goods is considered to be a part ofStock of Raw Materials and hence is valued as Raw Materials as in(a) above.

9. Foreign Exchange Transactions :(a) Transactions in foreign currency are accounted at the exchange

rate prevailing on the date of transaction. Exchange fluctuationsbetween the transaction date and the settlement date in respect ofrevenue transactions are recognized in Profit and Loss Account.

(b) All export proceeds not realised at the year end are restated at therate prevailing at the year end. The exchange difference arisingtherefrom has been recognised as income/ expenses in the currentyears Profit and Loss Account.

(c) Current Assets and Current Liabilities not covered by forwardexchange contracts are translated at year end exchange rates andthe Profit/Loss so determined are recognized in the Profit and LossAccount for the year.

(d) The Profit/Loss on forward exchange contract is recognized asincome/expenses over the life of the Contract.

10. Preliminary ExpensesPreliminary Expenses are treated as Deferred Revenue Expenditureand the same are written off in ten equal installments.

11. Employees Retirement Benefits

Indian company(a) Gratuity liability due and payable on the last day of the accounting

year is determined in accordance with the provision of the Paymentof Gratuity Act, 1972 and the terms of appointment of the employeeconcerned and the gratuity liability is provided for in the books ofaccount .At the same time gratuity amounts paid to the retiringemployees are debited to Profit & Loss Account.

(b) The Company has made provision for leave encashment dues ason the last date of the year.

36


Foreign companyEmployees retirement benefits are provided by the foreign company inaccordance with the applicable local laws.

12. Taxation

Indian Company(a) Provisions for taxation is made after considering various reliefs

admissible under the provisions of the Income Tax Act.(b) Disputed amounts of tax are considered in contingent liabilities.(c) The Company has implemented ‘Accounting Standard 22’-

“Accounting of Taxes on Income”, issued by the Institute of CharteredAccountants of India, which is mandatory in nature. The Companyhas recognized Deferred Taxes which result from the timingdifference between the Book Profits and Tax Profits.

Foreign CompanyProvision for taxation and other tax expenses are recognized by theforeign company in accordance with the applicable local laws.

13. Borrowing CostBorrowing Costs that are attributable to the acquisition/construction offixed assets are capitalized as part of the cost of the respective assets.Other borrowing costs are recognized as expenses in the year in whichthey are incurred.

B. NOTES FORMING PART OF THE ACCOUNTS :1. Contingent Liabilities not provided for in respect of :

Rupees(a) Guarantee given by the Company on behalf of

associate companies in respect of advancesgranted by a bank. Nil

(b) Disputed Income/ Sales Tax Liability 22,85,695(c) Estimated amounts of contracts remaining

to be executed on Capital Account. 11,00,000(d) EPCG Benefits (Customs Duties payable

if export obligations not met ). 1,46,55,139

Total 1,80,40,434

2. In the opinion of the Directors :(a) The Current Assets, Loans and Advances are approximately of the

value stated, if realized in the ordinary course of business.(b) The provision for Depreciation and for all known liabilities are

adequate and not in excess of the amounts reasonably necessary.3. The Closing Stock of Raw Materials includes stock lying with third parties.4. The closing stock of Raw Materials-Gold include Gold valued at

Rs. 2,79,81,080 taken on loan from Bank of Nova Scotia. 5. Legal and Professional charges include payment to Statutory

Auditors :Rupees

(a) Audit Fees 210,000(b) Tax Audit Fees 60,000(c) As advisor or in any other capacity in respect of

certification charges 41,000(d) Reimbursement of expenses & Service Tax 18,805(e) Foreign Company Audit Fees 457,000

Total 786,805

6. The closing balance of Sundry Debtors and Creditors are subjectto confirmation by the parties concerned.

7. The Company has engaged contractors who carry out diamondcutting, polishing, jewellery making work on behalf of the Company.The Company has been legally advised that this does not amountto the sort of contract contemplated by Section 297(1) of theCompanies Act,1956 and hence the provisions there under including

the requirements of obtaining the Central Government‘s priorapproval are not attracted.

8. Gratuity provision has been made at Rs. 1,40,450 as per theprovisions of the Payment of Gratuity Act,1972. Expense of SocialSecurity by foreign company is Rs. 451,620.

9. During the year a net gain on account of Foreign ExchangeFluctuation amounting to Rs.6,81,87,905 has been recognized inthe Profit and Loss Account.

10. Excess/Short provisions for Expenses (Net) comprises of followingitems of expenditure/income relating to earlier years.

RupeesLegal and Professional Charges 12,093Bank Interest 1,228,897Miscellaneous Expenses 15,001Salaries, Wages and Bonus 7,777Purchase of Raw Material ( — )Directors Remuneration 5,000Advertisement Expenses ( — )Repairs and Maintenance ( — )Forward Contracts 17,20,000Sundry Credit Balance w/back 30,636Insurance Charges ( — )Rates and Taxes ( — )

Sub-total 3,019,404

Less:Salaries, Wages and Bonus ( — )Miscellaneous Expenses ( — )Repairs and Maintenance –others ( — )Sundry Debit Balance written off 188,996Bank Interest 284Proposed Dividend ( — )Rent 100,054

Sub-total 289,334

TOTAL 2,730,070

11. Provision for excise duty liability on Finished Goods lying in factoryas on 31/3/2004 has not been provided for in the books of account.The non provision of the same does not affect the profit for the year.

12. Loans and Advances includes Lease Deposits of Rs. 1,20,00,000 givento various parties as on 31st March,1992 for taking premises on lease.The possession of these premises has still not been received.

13. The Company has taken gold on loan from Bank of Nova Scotiaamounting to Rs. 64,43,75,921. The said gold has been processedand sales of jewellery made. As per the provision of the EXIM Policy,the value of purchase and sale is taken on the basis of the provisionalsale certificate of the bank. The final value of purchase and sale isrecorded on the date of repayment of the loan with the difference ofsale and purchase amount being recorded to respective accounts.This has no effect on the Profit of the Company.

14. The Company on the basis of legal advice ,during the year hasadjusted the dividends payable against the amounts due fromshareholders who have not paid their call monies in respect ofwarrants subscribed by them. The amount of dividend adjustedagainst the Share premium Account is Rs. 22,95,237.

15. There are no amounts of unclaimed dividend due and outstandingto be credited to Investor Education and Protection fund.

16. As per the provisions of Accounting Standard 17- “SegmentReporting “ issued by the Institute of Chartered Accountants ofIndia, the details of the Primary and Secondary Segment are givenhere below :

AAAAACCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOTES TES TES TES TES TTTTTO AO AO AO AO ACCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PA RA RA RA RA RT OF T OF T OF T OF T OF THE CONSOLIDTHE CONSOLIDTHE CONSOLIDTHE CONSOLIDTHE CONSOLIDAAAAATEDTEDTEDTEDTEDAAAAACCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR THE THE THE THE THE YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31STSTSTSTST MARCH,2004. MARCH,2004. MARCH,2004. MARCH,2004. MARCH,2004.


37

AAAAACCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOTES TES TES TES TES TTTTTO AO AO AO AO ACCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PA RA RA RA RA RT OF T OF T OF T OF T OF THETHETHETHETHECONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED ATED ATED ATED ATED ACCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR THE THE THE THE THE YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31STSTSTSTST MARCH,2004. MARCH,2004. MARCH,2004. MARCH,2004. MARCH,2004.

SEGMENT INFORMATION FOR THE YEAR ENDED 31 ST MARCH, 2004.

(i) Information about Primary Business Segment :(Rs. in Lacs)

Diamond Jewellery Engineering Un-allocated Total

REVENUESales 61,915 22,205 11 44 84,175RESULTSegment Result 1,962 1,826 (75) Nil 3,713Bank interest / charges 1,354Profit before tax 2,359Provision for tax 150Deferred 4Profit after tax 2,205OTHER INFORMATIONSegment Assets 62,270 16,088 247 3988 82,593Segment Liabilities 7,546 7,913 2 15,461Share Capital & Reserves 46,103Deferred Taxation 133 66 36 235Non-cash expenses 95other than depreciation

(ii) Information about Secondary Business Segment:Statement of continent wise sale :

Amount (Rs.)

North America 182,91,00,144Europe 24,99,53,143Middle East 323,15,56,488Asia (Incl. Japan) 310,68,42,389

Total 841,74,53,164

17. As per provision of Accounting Standard 18- “Related Party Transactions” issued by the Institute of Chartered Accountants of India, the details ofRelated Party Transaction based on disclosure certificate issued by the Directors, is enclosed herebelow : i) List of Related Parties : Particulars

Subsidiary Koradiam N VAssociates Professional Diamonds Limited, Forever Diamonds Private Limited, Su-Raj

Jewellery (India) Limited, Su-Raj Diamond Dealers LimitedKey Management Personnel Jatin R MehtaEnterprise with common key management personnel NilEnterprise in which key managementpersonnel and their relatives have significant influence Su-Raj Diamond Traders Pvt Ltd., J. R. Diamonds Pvt Ltd, Su-Raj Diamond

Consultancies Pvt Ltd., Diadem Investment and Finance Pvt Ltd., BombayDiamonds Company Pvt Ltd.

Relative of key management personnel Jatin R.Mehta (HUF), Ms.Sonia J.Mehta, S.J.& Co.

38


A. Transaction for the year ended 31-03-2004.

Associates Enterprise in which key Relatives of TOTALmanagement personnel Key Management

have significant influence Personnel(Rs.) (Rs.) (Rs.) (Rs.)

1. Purchases 58,395,000 9,700,000 Nil 68,095,000

2. Sales 63,048,000 9,997,866 Nil 73,045,866

3. Labour charges paid 18,907,983 15,831,975 Nil 34,739,958

4. Lease Rent Nil 24,000 Nil 24,000

B. Outstanding as on 31.03.20041. Debtors 898,173 10,920,572 Nil 11,818,7452. Creditors 9,340,997 Nil Nil 9,340,9973. Lease Deposits Nil 3,000,000 9,000,000 12,000,000

18. The Company has various operating leases for factory premises and office facilities that are renewable on a periodic basis and can be terminated atthe option of either parties. Rental expenses for operational leases recognized in the Profit and Loss Account for the year is Rs. 11,20,661 . Minimum future lease rentals payable are :

Rupees(a) Payable within one year 870,458(b) Payable within one year and five years. Nil(c) Payable after five years. Nil

Minimum future lease rentals receivable in respect of assets given on operating lease in the form of Plant & Machinery after 1/10/2002 and Buildingafter 1/8/2001 are :

Rupees(a) Receivable within one year 540,000(b) Receivable between one year and five years 1,000,000(c) Receivable after five years (Nil)

19. The parent company has invested into the shares of Koradiam N V during the year under consideration resulting in Koradiam N V becoming the whollyowned subsidiary of Su-Raj Diamonds and Jewellery Limited. As this is the first year of consolidation the question of giving the previous yearcomparable figures do not arise.



Rajnikant C. Reshamwala K. N. BhandariPartner Mohan M. JayakarMembership No: 5502 G. Bharakatia


Directors

AAAAACCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOCCOUNTING POLICIES AND NOTES TES TES TES TES TTTTTO AO AO AO AO ACCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PCCOUNTS FORMING PA RA RA RA RA RT OF T OF T OF T OF T OF THETHETHETHETHECONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED ATED ATED ATED ATED ACCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR THE THE THE THE THE YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31YEAR ENDED 31STSTSTSTST MARCH, MARCH, MARCH, MARCH, MARCH, 2004. 2004. 2004. 2004. 2004.


39

CONSOLIDCONSOLIDCONSOLIDCONSOLIDCONSOLIDAAAAATED CASH FLOTED CASH FLOTED CASH FLOTED CASH FLOTED CASH FLOW STW STW STW STW STAAAAATEMENT FOR TEMENT FOR TEMENT FOR TEMENT FOR TEMENT FOR THE THE THE THE THE YEAR ENDED MARCH 31,YEAR ENDED MARCH 31,YEAR ENDED MARCH 31,YEAR ENDED MARCH 31,YEAR ENDED MARCH 31, 2004 2004 2004 2004 2004

(Rs. in Lacs)A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit Before Tax 2359Adjustment for :Depreciation 185Interest and Bank Charges (Net) 1437Excess / short provision for Expenses/ Income for earlier year(Profit)/ Loss on Sale of Assets (Net) and investmentsPreliminary expenses written off 38

4019Operating Profit before working capital changesAdjustment for :Trade and Other Receivables (53305)Inventories (22746)Trade Payable 19602

(52430)Deferred Tax 235Taxes PaidInterest Paid (Net) (1437)Cash generated from operating activities (53632)

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (1595)Sale of Fixed AssetsPurchase of Investments (200)Sale of InvestmentsNet cash from investing activities (1795)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from Share Premium 3878Proceeds from Short Term Borrowings 23874Proceeds from Parent company Reserves 39553Repayament of Short Term LoansProceeds from Share CapitalDividend PaidTax on Proposed DividendNet cash from financing activities 67305Net increase/ (decrease) in cash and cash equivalent (A+B+C) 11878Cash and Cash Equivalent as at 1st April, 2003 (Opening Balance) 0Cash and Cash Equivalent as at 31st March, 2004 (Closing Balance) 11878



Rajnikant C. Reshamwala K. N. BhandariPartner Mohan M. JayakarMembership No.: 5502 G. Bharakatia


Directors

40

KORADIAM N V ANNUAL REPORT 2003

REPORT OF THE BOARD OF DIRECTORSThe Directors submit their report for the year ended 31st December, 2003.DirectorsThe directors in office during the period were as under.1. Jatin R Mehta (Representing Su-Raj Diamonds and Jewellery Limited )2. Rajen S ParikhDirectors’ Interest in share capitalInterest of the Directors in the shares of the company are listed below:

Ordinary shares of Euro 248 each1. Su-Raj Diamonds and Jewellery Ltd 300882. Rajen S Parikh NilPrincipal ActivitiesThe company is engaged in trading activity in diamonds.Review of the BusinessThe results and the financial position of the company are shown in the annexed report.Dividend and ReservesThe directors do not recommend any dividend for the period under review.Future ProspectsThe company is looking into the prospects of jewellery trading since the parent company is one of the leading jewellery manufacturers in India.Director’s ResponsibilitiesCompany law required the directors to prepare financial statements for each financial period that give a true and fair view of the state of affairs of theCompany at the end of the financial period and the profit and loss for that period and that they must comply with applicable accounting standards subjectto any material departures disclosed and explained in the financial statements. The directors must prepare the financial statements on the going concernbasis unless it is inappropriate to presume that the company will continue in business. The directors are also responsible for the adoption of suitableaccounting policies, their consistent use in the financial statements, supported wherever necessary by reasonable and prudent judgement. The directorsconfirm that the above requirements have been complied with, in the financial statements.

For and on behalf of the Board

Rajen ParikhAntwerp April 29, 2004 Director


41

STATUTORY AUDITOR’S REPORT FOR THE YEAR ENDED 31 DECEMBER, 2003 TO THE SHAREHOLDERS’ MEETING

In accordance with the legal and regulatory requirements, we are pleased to report to you on the performance of the audit mandate which you haveentrusted to us.We have audited the financial statements as of and for the year ended 31 December, 2003 which have been prepared under the responsibility of the boardof directors and which show a balance sheet total of Euro 16.855.717,22 and a profit for the year of Euro 29.705,53. We have also carried out the specificadditional audit procedures required by law.Unqualified audit opinion on the financial statements with reserve concerning the valuation of the stocks and the movements of the goods.We conducted our audit in accordance with the standards of the “Instituut der Bedrijfsrevisoren “. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, taking into account the legal and regulatoryrequirements applicable to financial statements in Belgium.The company is characterized by a relatively restricted extent, structure and organization. In conformity with the general auditing standards issued by theBelgian “Instituut der Bedrijfsrevisoren “ we have adapted our system of controls. Seen the limitation of the system of internal controls, we have focusedour controls on a profound substantial control of the annual accounts. Company officials have responded clearly to our requests for explanations andinformation.We examined, on a test basis, evidence supporting the amounts in the financial statements. We assessed the accounting principles used and significantestimates made by the company, as well as the overall presentation of the financial statements. We believe that our audit provides a reasonable basis forour opinion.We have established the reconciliation between the movements of the goods and the final stock amount in carats as these have been entered into theannual declaration of stock and industry for the year ended to the Board of Trade on the one hand and into the accounting records on the other hand. Thestocks are valued by the individualization of the price of each element based on the principle of the lowest of market or purchase price. Due to thefluctuating market prices and the administration concerned, we are not able to judge of the applied valuation. Therefore, we cannot form an opinion of thestocks which amount to Euro 6.698.190,39 at balance date.Apart from the above mentioned reserve concerning the valuation of the stocks and the movements of the goods, we raise no further objections concerningthe remaining elements of the annual accounts as of 31 December, 2003.Additional certificationsWe supplement our report with the following certifications and information which do not modify our audit opinion on the financial statements :• The directors’ report contains the information required by the law and is consistent with the financial statements.• Without prejudice to certain formal aspects of minor importance, the accounting records are maintained and the financial statements have been

prepared in accordance with the legal and regulatory requirements applicable in Belgium.• There are no transactions undertaken or decisions taken in violation of the company’s statutes or company law which we have to report to you. The

appropriation of results proposed to the general meeting complies with the legal and statutory provisions.LMD & Partners bvba

Antwerp April 29, 2004 Represented byBart Meynendonckx

42


Current Current Current Current Current YYYYYearearearearear Previous YearEurEurEurEurEur ooooo EurEurEurEurEur ooooo Euro

SOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDSShareholders’ FundsShare Capital 7462000.007462000.007462000.007462000.007462000.00 62000.00Reserves & Surplus 171095.64171095.64171095.64171095.64171095.64 141390.11

7633095.647633095.647633095.647633095.647633095.64 203390.11Un-secured Loans 5602384.985602384.985602384.985602384.985602384.98 9087120.63

T OTAL 13235480.6213235480.6213235480.6213235480.6213235480.62 9290510.74

APPLICAAPPLICAAPPLICAAPPLICAAPPLICATION OF FUNDSTION OF FUNDSTION OF FUNDSTION OF FUNDSTION OF FUNDSFixed AssetsGross Block 161904.61161904.61161904.61161904.61161904.61 159441.44Less : Depreciation 78078.0778078.0778078.0778078.0778078.07 59342.65

83826.5483826.5483826.5483826.5483826.54 100098.79Current Assets,Loans and Adv ancesCurrent Assets 16763678.5816763678.5816763678.5816763678.5816763678.58 20064658.69Loans and Adv ances 8212.108212.108212.108212.108212.10 8609.39

16771890.6816771890.6816771890.6816771890.6816771890.68 20073268.08Less: Current Liabilitiesand Pro visions

Current Liabilities 3525386.173525386.173525386.173525386.173525386.17 10823334.28Provisions 94850.4394850.4394850.4394850.4394850.43 59521.85

3620236.603620236.603620236.603620236.603620236.60 10882856.13

Net Current Assets 13151654.0813151654.0813151654.0813151654.0813151654.08 9190411.95

TOTAL 13235480.6213235480.6213235480.6213235480.6213235480.62 9290510.74

As per our report attached For and on behalf of the BoardFor LMD & Pa rtners bvba

BarBarBarBarBar t Met Met Met Met Me ynendoncynendoncynendoncynendoncynendonc kxkxkxkxkx RAJEN PRAJEN PRAJEN PRAJEN PRAJEN PARIKHARIKHARIKHARIKHARIKHPPPPPararararar tnertnertnertnertner DIRECTDIRECTDIRECTDIRECTDIRECTO RO RO RO RO R

Antwerp : 29th Apr il, 2004

BBBBBALANCE SHEETALANCE SHEETALANCE SHEETALANCE SHEETALANCE SHEETAS AAS AAS AAS AAS AT 31ST DECEMBER,T 31ST DECEMBER,T 31ST DECEMBER,T 31ST DECEMBER,T 31ST DECEMBER, 2003 2003 2003 2003 2003

P RP RP RP RP ROFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS AOFIT AND LOSS A CCOUNT FORCCOUNT FORCCOUNT FORCCOUNT FORCCOUNT FORTHE THE THE THE THE YEAR ENDED 31ST DECEMBER,YEAR ENDED 31ST DECEMBER,YEAR ENDED 31ST DECEMBER,YEAR ENDED 31ST DECEMBER,YEAR ENDED 31ST DECEMBER, 2003 2003 2003 2003 2003


INCOMEINCOMEINCOMEINCOMEINCOME

Sale of Diamonds 25677097.0825677097.0825677097.0825677097.0825677097.08 30095632.14

Other Income 2371.122371.122371.122371.122371.12 58872.23

25679468.2025679468.2025679468.2025679468.2025679468.20 30154504.37

EXPENDITUREEXPENDITUREEXPENDITUREEXPENDITUREEXPENDITURE

Mater ial Cost 24781930.7824781930.7824781930.7824781930.7824781930.78 29202905.42

Manufactur ing andother e xpenses 849096.47849096.47849096.47849096.47849096.47 880355.78

Depreciation 18735.4218735.4218735.4218735.4218735.42 18742.08

Total Expenditure 25649762.6725649762.6725649762.6725649762.6725649762.67 30102003.28

Profit Bef ore T axation 29705.5329705.5329705.5329705.5329705.53 52501.09

Provision fo r Taxation 0.000.000.000.000.00 0.00

- Deferred 0.000.000.000.000.00 0.00

Profit After T axation 29705.5329705.5329705.5329705.5329705.53 52501.09

Balance brought forwardfrom pre vious year 135190.11135190.11135190.11135190.11135190.11 101005.10

Excess Pro vision fo r Tax 0.000.000.000.000.00 (8981.49)

164895.64164895.64164895.64164895.64164895.64 162487.68

APPRAPPRAPPRAPPRAPPROPRIAOPRIAOPRIAOPRIAOPRIATIONSTIONSTIONSTIONSTIONS

Transfer to Reserves 28800.0028800.0028800.0028800.0028800.00 27297.57

Balance carried to Balance Sheet 136095.64136095.64136095.64136095.64136095.64 135190.11

164895.64164895.64164895.64164895.64164895.64 162487.68





43

DEPRECIADEPRECIADEPRECIADEPRECIADEPRECIATION SCHEDULETION SCHEDULETION SCHEDULETION SCHEDULETION SCHEDULE

GrGrGrGrGross Blocoss Blocoss Blocoss Blocoss Bloc kkkkk DepreciationDepreciationDepreciationDepreciationDepreciation Net BlocNet BlocNet BlocNet BlocNet Bloc kkkkk

Descr iption of Asset As at Additions Sales As at As at Pro vided Sales As at As at As at01.04.03 dur ing the during the 31.03.04 01.04.03 dur ing the during the 31.03.04 31.03.04 31.03.03

year year year year

Secur ity Installation 22792.94 0.00 6589.58 16203.36 14016.52 1816.53 6589.58 9243.47 6959.89 8776.42

Furniture and Fixtures 82861.79 2463.17 66445.18 18879.78 75147.58 3738.78 66445.18 12441.18 6438.60 7714.21

Lease of T elephones 4979.37 0.00 0.00 4979.37 3983.47 995.90 0.00 4979.37 0.00 995.90

Renovation Costs 121842.10 0.00 0.00 121842.10 39229.84 12184.21 0.00 51414.05 70428.05 82612.26

232476.20232476.20232476.20232476.20232476.20 2463.172463.172463.172463.172463.17 73034.7673034.7673034.7673034.7673034.76 161904.61161904.61161904.61161904.61161904.61 132377.41132377.41132377.41132377.41132377.41 18735.4218735.4218735.4218735.4218735.42 73034.7673034.7673034.7673034.7673034.76 78078.0778078.0778078.0778078.0778078.07 83826.5483826.5483826.5483826.5483826.54 100098.79100098.79100098.79100098.79100098.79


SHARE CAPITSHARE CAPITSHARE CAPITSHARE CAPITSHARE CAPITALALALALALAUTHORISEDISSUED AND SUBSCRIBED30088 shares at 248 Euro per share 7462000.007462000.007462000.007462000.007462000.00 62000.00

GENERAL RESERGENERAL RESERGENERAL RESERGENERAL RESERGENERAL RESERVEVEVEVEVEAs per last Balance Sheet 35000.0035000.0035000.0035000.0035000.00 6200.00Surplus in Profit & Loss Account 136095.64136095.64136095.64136095.64136095.64 135190.11

171095.64171095.64171095.64171095.64171095.64 141390.11

CURRENT ASSETS,CURRENT ASSETS,CURRENT ASSETS,CURRENT ASSETS,CURRENT ASSETS, LO LO LO LO LO ANS AND ADANS AND ADANS AND ADANS AND ADANS AND ADVVVVVANCESANCESANCESANCESANCESA.A.A.A.A. CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS

1. Stock -in-trade 6698190.396698190.396698190.396698190.396698190.39 6925305.24 2. Sundry Debtors

(Unsecured -considered good )Trade Debtors 7418861.537418861.537418861.537418861.537418861.53 9523297.66Other Debts 615602.92615602.92615602.92615602.92615602.92 3505928.59

3. Cash and Bank Balance 2031023.742031023.742031023.742031023.742031023.74 110127.20

16763678.5816763678.5816763678.5816763678.5816763678.58 20064658.69B.B.B.B.B. L OL OL OL OL OANS AND ADANS AND ADANS AND ADANS AND ADANS AND ADVVVVVANCESANCESANCESANCESANCES

Advances recove rable in cash orkind or for v alue to be received 8212.108212.108212.108212.108212.10 8609.39

16771890.6816771890.6816771890.6816771890.6816771890.68 20073268.08

CURRENT LIABILITIES AND PRCURRENT LIABILITIES AND PRCURRENT LIABILITIES AND PRCURRENT LIABILITIES AND PRCURRENT LIABILITIES AND PR OOOOOVISIONSVISIONSVISIONSVISIONSVISIONSA. CURRENT LIABILITIES

Sundry Cre ditors 3354766.033354766.033354766.033354766.033354766.03 10675873.25Other Liabilities 170620.14170620.14170620.14170620.14170620.14 147461.03

3525386.173525386.173525386.173525386.173525386.17 10823334.28

SCHEDULES FORMING PSCHEDULES FORMING PSCHEDULES FORMING PSCHEDULES FORMING PSCHEDULES FORMING PA RA RA RA RA RT OF T OF T OF T OF T OF THE ATHE ATHE ATHE ATHE ACCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR CCOUNTS FOR THE THE THE THE THE YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31, 2003 2003 2003 2003 2003

B. P ROVISIONSFor Taxation 25123.3425123.3425123.3425123.3425123.34 16561.25For Others 69727.0969727.0969727.0969727.0969727.09 42960.60

94850.4394850.4394850.4394850.4394850.43 59521.85

3620236.603620236.603620236.603620236.603620236.60 10882856.13


OOOOOTHER INCOMETHER INCOMETHER INCOMETHER INCOMETHER INCOMEMiscellaneous Income 2371.12 58872.23

M AM AM AM AM ATERIAL COSTTERIAL COSTTERIAL COSTTERIAL COSTTERIAL COSTPurchase of Diamonds 24554815.9324554815.9324554815.9324554815.9324554815.93 27967574.36(Increase)/Decrease in Diamonds 227114.85227114.85227114.85227114.85227114.85 1235331.06

24781930.7824781930.7824781930.7824781930.7824781930.78 29202905.42


M A N U FM A N U FM A N U FM A N U FM A N U FAAAAACTURING AND OCTURING AND OCTURING AND OCTURING AND OCTURING AND OTHER EXPENSESTHER EXPENSESTHER EXPENSESTHER EXPENSESTHER EXPENSESSalar ies & Allow ances to Employees 38081.5538081.5538081.5538081.5538081.55 30720.25Employer’s Contri bution to Social Securi ty 8469.928469.928469.928469.928469.92 5843.53Employer’s Premium for ex trasocial secur ity insur ance 130.36130.36130.36130.36130.36 557.40Bank Interest and other financial charges 391660.36391660.36391660.36391660.36391660.36 424659.33Miscellaneous Expenses 410754.28410754.28410754.28410754.28410754.28 418575.27

849096.47849096.47849096.47849096.47849096.47 880355.78

44


N ON ON ON ON OTES TES TES TES TES TTTTTO O O O O THE FINANCIAL STTHE FINANCIAL STTHE FINANCIAL STTHE FINANCIAL STTHE FINANCIAL ST AAAAATEMENTS FOR TEMENTS FOR TEMENTS FOR TEMENTS FOR TEMENTS FOR THE THE THE THE THE YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31,YEAR ENDED DECEMBER 31, 2003 2003 2003 2003 2003

BacBacBacBacBackgrkgrkgrkgrkgr oundoundoundoundound

Koradiam N V is a 100% subsidiary of Su-Raj Diamonds and Jewe l lery Limited engaged in the b usiness of tr ading in diamonds.

The v aluation r ules are deter mined according to the pro visions of the Roya l Decree of January 30, 2001 in implementation of Company Law, on annualaccounts enterp rises.

The financial statements are prepared under the histor ical cost conv ention on accrual basis of accounting. The significant accounting policies are asunder:

Fixed assets are stated at cost less accum ulated depreciation.

Depreciation is pro vided using the str aight line method over the estimated useful life of the asset. The r ates charged by the company are as fo l lows:

Asset PercentageMin Max

Plant and Machinery 10 20

Leased T elephone Installation 20 20

Office Fur niture 10 33.33

Other T angible As sets 10 10

Foreign currency tr ansactions dur ing the y ear are recognised at r ates of e xchange prev ailing on the date of the tr ansaction. Foreign currency denominatedcurrent assets and liabilities are restates at the r ates prevailing on the date of the Balance Sheet. Al l exchange differences are dealt with in the statementof Profit and Loss.

Stocks are valued at acquisition cost deter mined according to the method of w eighted ave rage pr ice method, fifo, lifo. Goods for resale are v alued byidentifying individually the pr ice of each element or by lower marke t value.





45

BOARD OF DIRECTORS Jatin R. Mehta Chairman-cum-Managing Director

K. N. Bhandari Director

Mohan M. Jayakar Director

G. Bharakatia Director

Dharmendra Bhandari Director

Atul S. Pethe Director

COMPANY SECRETARY Anil Cherian

SOLICITORS M/s. Khaitan & Jayakar

Advocates & Solicitors

AUDITORS M/s. R. C. Reshamwala & Co.

Chartered Accountants

BANKERS Standard Chartered Bank

Punjab National Bank

Canara Bank

State Bank of Hyderabad

Bank of Maharashtra

The United Western Bank Limited

Union Bank of India

Central Bank of India

UTI Bank Limited

Vijaya Bank

REGISTERED OFFICE Kesharba Market-2

Gotalawadi, Katargam

Surat - 395 004

ADMINISTRATIVE OFFICE 151/152/153, Mittal Court

‘C’ Wing, Nariman Point

Mumbai - 400 021

REGISTRAR & TRANSFER AGENT MCS Limited

Sri Venkatesh Bhavan

Plot No.27, Road No.11

M.I.D.C., Andheri (East)

Mumbai - 400 093

ATTENDANCE SLIP(Shareholders/Proxy holders are requested to bring the Attendance slip with them duly filled when they come to the meeting and

hand it over at the gate after affixing signature on it.)

I hereby record my presence at the Eighteenth Annual General Meeting of the Company at Mahida Bhawan, Icchanath, Opp. S. V.

R. Engineering College, Dumas Road, Surat 395 007 on Tuesday, the 31st August, 2004 at 11.30 A.M.

No. of Share held _______________________________________

Full name of the Shareholders/Proxyholder _______________________________________________________________________

(in block letters)

Signature__________________

PROXY FORMI/We ��........................................................................................................�

of ��.................................................................................................... being

member/members of SU-RAJ DIAMONDS AND JEWELLERY LIMITED, hereby appoint ..........................................................................

��of ��

or failing him �� of ��...

or failing him �� of ��...

as my/our proxy to attend and vote for me/us and on my/our behalf at the EIGHTEENTH ANNUAL GENERAL MEETING of the

Company to be held on Tuesday, the 31st August, 2004 and at any adjournment thereof.

Signed this ��. day of ��.., 2004.

No. of Shares held _________________________________

NOTE: This form duly completed and signed should be deposited at the Registered office of the Company not less than 48 hoursbefore the time for holding the meeting.

AffixRevenueStamp

SU-RAJ DIAMONDS AND JEWELLERY LIMITEDREGISTERED OFFICE: K esharba Mark et-2, Gotalaw adi, Katargam, Surat - 395 004

SU-RAJ DIAMONDS AND JEWELLERY LIMITEDREGISTERED OFFICE: K esharba Mark et-2, Gotalaw adi, Katargam, Surat - 395 004

SU-RAJ DIAMONDS AND JEWELLERY LIMITED

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