Vst Industries Limited

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VST INDUSTRIES LIMITED

ANNUAL REPORT 2000

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CONTENTS VST Industries Limited

Page

Notice of Meeting 4 Report of the Board of Directors .. 12 Report of the Auditors 17 Balance Sheet 18 Profit and Loss Account 19 Schedules to the Balance Sheet .. 20 Schedules to the Profit and Loss Account 27 Significant Accounting Policies 33 Cash Flow Statement 34 Balance Sheet Abstract and Company's General Business Profile 36 Statement Regarding Subsidiary Companies .. 37 Report & Accounts of Subsidiaries : Hallmark Tobacco Company Limited 38 Hallmark Investments Limited 44 Tobacco Leaf Investments Limited 49 Vazir Investments Limited 54 VST Distribution, Storage & Leasing Company Limited 59 Tobacco Diversification Investments Limited 65 Annexure to the Directors' Report 72 Intimation to Shareholders 74 Operating Results 76

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BOARD OF DIRECTORS VST Industries Limited

Chairman ABHIJIT BASU

Managing Director RAYMOND S. NORONHA

Deputy Managing Director & Secretary SAMPATHKUMARAN THIRUMALAI

Directors GARY ARMSTRONG S.K. ARORA I.A.S. AIR CHIEF MARSHAL IDRIS HASAN LATIF, P.V.S.M. (Retd.) T. LAKSHMANAN R.V.K.M. SURYARAU

Auditors Lovelock & Lewes Chartered Accountants Hyderabad - 500 082

Registered Office 1-7-1063/1065, Azamabad Hyderabad - 500 020 Andhra Pradesh

Registrars and Share Transfer Agents Sathguru Management Consultants Private Limited Plot No. 15, Hindi Nagar Near Sai Baba Temple, Punjagutta Hyderabad - 500 034

Public Deposits Sathguru Management Consultants Private Limited Plot No. 15, Hindi Nagar Near Sai Baba Temple, Punjagutta Hyderabad - 500 034

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NOTICE OF MEETING VST Industries Limited

NOTICE IS HEREBY GIVEN THAT the Sixty-ninth Annual "RESOLVED pursuant to the provisions of Sections 198, General Meeting of VST INDUSTRIES LIMITED will be held at 269, 309, 310, 31 1, Schedule XIII and other applicable Bharatiya Vidya Bhavan, Kulapati Munshi Sadan, 5-9-1 105, provisions of the Companies Act, 1956, subject to such Bashirbagh-King Kothi Road, Hyderabad-500 001, Andhra approvals as may be necessary and further to the Pradesh, on Tuesday, September 26, 2000 at Resolution passed at the 68th Annual General Meeting 10.30 a.m. for transaction of the following business : of the Company held on September 27, 1999, in respect of the terms of appointment and remuneration of Mr. 1. To receive and consider the Audited Balance Sheet as at Raymond S. Noronha as the Managing Director of the March 31, 2000, the Statement of Accounts, Auditors' Company, approval be and is hereby accorded to vary, Report and Directors' Report for the Company's year alter and modify the terms of the appointment and ended March 31, 2000. remuneration of Mr. Raymond S. Noronha, with effect 2. To declare a Dividend on the Ordinary Share Capital. from April 1, 2000, for the period of his office upto October 31, 2003, on such consolidated salary, 3. To elect Directors in place of those retiring by rotation. performance bonus and perquisites as have been set out in the Statement (a copy whereof initialled by the 4. To appoint Auditors and to fix their remuneration. In this Chairman for the purpose of identification is placed before connection to consider and, if thought fit, to pass the this meeting), consent of Mr. Raymond S. Noronha having following Resolution which will be proposed as a Special been obtained in respect of such variation, alteration and Resolution : modification, with liberty to the Board to vary, alter and modify such consolidated salary, performance bonus and "RESOLVED that Messrs Lovelock & Lewes, Chartered perquisites so as not to exceed the limits specified in Accountants, be and are hereby appointed as the Auditors Schedule XIII to the Companies Act, 1956, or any of the Company to hold such office until the conclusion of statutory modifications, substitutions or re-enactments the next Annual General Meeting at a remuneration of thereof as may be agreed to by the Board of Directors Rs.4,00,000/- (Rupees Four lakhs only) payable in two and Mr. Raymond S. Noronha. equal instalments plus out of pocket expenses incurred." SPECIAL BUSINESS RESOLVED FURTHER that where in any financial year of the Company during the aforesaid period of Mr. Raymond 5. To consider and, if thought fit, to pass with or without S. Noronha's office as Managing Director of the modification, the following Resolution which will be Company, the Company has no profits or its profits are proposed as an Ordinary Resolution : inadequate, the Company may pay him remuneration by way of consolidated salary and perquisites in accordance "RESOLVED that Mr. T. Lakshmanan who was appointed with the limits laid down in Section II Part II of Schedule a Director of the Company with effect from May 16, XIII to the Companies Act, 1956, or any statutory 2000, under Article 98 of the Articles of Association of modifications, substitutions or re-enactments thereof as may the Company in the casual vacancy arising out of the be agreed to by the Board of Directors and Mr. Raymond demise of Shri M.V. Purohit and who holds office upto S. Noronha." the date of this Annual General Meeting, and in respect of whom the Company has received notice in writing from 7. To consider and, if thought fit, to pass with or without a shareholder proposing him as a candidate for the office modification, the following Resolution which will be of a director under the provisions of Section 257 of the proposed as a Special Resolution ; Companies Act, 1956 along with a deposit of Rs. 500 and who is eligible for reappointment be and is hereby "RESOLVED pursuant to the provisions of Sections 198, appointed a Director of the Company whose period of 269, 309, 310, 311, 314, Schedule XIII and other office is liable to determination by retirement of Directors applicable provisions of the Companies Act, 1956, subject by rotation." to such approvals as may be necessary and further to the Resolution passed at the 68th Annual General Meeting 6. To consider and, if thought fit, to pass with or without of the Company held on September 27, 1999, in respect modification, the following Resolution which will be of the terms of appointment and remuneration of proposed as an Ordinary Resolution : Mr. S. Thirumalai as the Deputy Managing Director of

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VST Industries Limited

the Company, approval be and is hereby accorded to as the Board of Directors of the Company may from time vary, alter and modify the terms of the appointment and to time determine and in default of such determination remuneration of Mr. S. Thirumalai with effect from April equally, provided that the payment of the sum in the 1, 2000, for the period of his office upto October 28, manner aforesaid shall be in addition to the sitting fee 2003, on such consolidated salary, performance bonus per meeting of the Board of Directors and its Committee and perquisites as have been set out in the Statement (a which the Directors aforesaid are entitled to receive under copy whereof initialled by the Chairman for the the Articles of Association of the Company. purpose of identification is placed before this meeting), RESOLVED FURTHER that for the purpose of giving effect consent of Mr. S. Thirumalai having been obtained in to this Resolution the Directors be authorised to take respect of such variation, alteration and modification, with necessary steps and give such directions as they may in liberty to the Board to vary, alter and modify such their absolute discretion deem necessary to settle any consolidated salary, performance bonus and perquisites question, difficulty or doubt that may arise in regard to so as not to exceed the limits specified in Schedule the determination and payment of the said amount as XIII to the Companies Act, 1956, or any statutory they may think fit and that the Directors be hereby further modifications, substitutions or re-enactments thereof as empowered to accept on behalf of the Company may be agreed to by the Board of Directors and modifications, if any, relating to the determination and Mr. S. Thirumalai. payment of the said amount as may be proposed by any RESOLVED FURTHER that where in any financial year of Authority from whom approval will have to be obtained the Company during the aforesaid period of and which the Directors in their discretion think fit and Mr. S. Thirumalai's office as Deputy Managing Director proper." of the Company, the Company has no profits or its profits 9. To consider and, if thought fit, to pass with or without are inadequate, the Company may pay him remuneration modification, the following Resolution which will be by way of consolidated salary and perquisites in proposed as a Special Resolution ; accordance with the limits laid down in Section II Part II of Schedule XIII to the Companies Act, 1956, or any "RESOLVED that in accordance with the provisions of statutory modifications, substitutions or re-enactments Section 163 of the Companies Act, 1956, the Registers thereof as may be agreed to by the Board of Directors and Index of Members of the Company and copies of and Mr. S. Thirumalai". Annual Returns together with copies of the certificates and documents required to be annexed thereto under 8. To consider and, if thought fit, to pass with or without Sections 159 and 161 of the Companies Act, 1956, be modification, the following Resolution which will be kept at the office of Sathguru Management Consultants proposed as a Special Resolution : Private Limited at Plot No. 15, Hindi Nagar, Near Sai "RESOLVED pursuant to the provisions of Section 309(4), Baba Temple, Punjagutta, Hyderabad - 500 034, with and other applicable provisions if any, of the Companies effect from September 26, 2000 or such other date as Act, 1956 and subject to such other approvals in law as may be approved upon by the Board of Directors." may be necessary, the Company hereby accords its 10. To consider and, if thought fit, to pass with or without approval to the payment of commission to the Non- modification, the following Resolution which will be Executive Directors of the Company, with effect from April proposed as a Special Resolution : 1, 1999 for each of the five financial years of the Company, not exceeding one percent of the net profits "RESOLVED pursuant to the provisions of Sections 198, of the Company, as provided under Section 309(4) of 269, 309, 310, 311, 314, Schedule XIII and other the Companies Act, 1956, or any amendment or applicable provisions of the Companies Act, 1956, subject modification thereof and computed in the manner referred to such approvals in law as may be necessary, the to in Section 198(1) of the Companies Act, 1956 or any Company hereby accords its approval to the payment of amendment or modification thereof, subject to a ceiling an additional ad hoc Performance Linked Bonus of of Rupees Ten lakhs, in the aggregate or such amount as Rs.4.75 lakhs (Rupees Four takhs Seventy Five Thousand) may be determined by the Board of Directors, to be for the Financial Year 1999-2000 upon receipt of divided amonjfst the Directors aforesaid in such manner necessary approval from the Central Government to

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VST Industries Limited

Mr. S. Thirumalat, Deputy Managing Director of the The Register of Members will remain closed from September Company. Provided however, the aggregate of the total 20, 2000 to September 26, 2000 (both days inclusive) for remuneration paid by the Company in respect of Mr. S. payment of Dividend, if approved. Thirumalai shall always be subject to the overall ceilings laid Transfers of shares received in order by the Company's down in Sections 198 and 309 of the Companies Act, 1956. Registrars and Share Transfer Agents, Sathguru Management RESOLVED FURTHER that for the purpose of giving effect to Consultants Private Limited, Plot No. 15, Hindi Nagar, Near this Resolution the Directors be authorised to take necessary Sai Baba Temple, Punjagutta, Hyderabad - 500 034, before steps and give such directions as they may in their absolute the close of business on September 19, 2000, will be discretion deem necessary to settle any question, difficulty registered in time for the transferees to become eligible for or doubt that may arise in regard to the determination and Dividend, if approved. payment of the said amount as they may think fit and that Dividend, if approved, will be paid on October 25, 2000 the Directors be hereby further empowered to accept on to those shareholders whose names appear in the Register behalf of the Company modifications, if any, relating to the of Members of the Company on September 26, 2000 or to determination and payment of the said amount as may be their Mandatees. proposed by any Authority from whom approval will have By Order of the Board, to be obtained and which the Directors in their discretion S. THIRUMALAI think fit and proper." Secretary Dated this 26th day of July, 2000. 11. To consider and, if thought fit, to pass with or without Azamabad, Hyderabad - 500 020, modification, the following Resolution which will be proposed Andhra Pradesh. as an Ordinary Resolution : NOTES : "RESOLVED pursuant to the provisions of Sections 198, 269, 1. A Member entitled to attend and vote at the General 309, 310, 311, Schedule XIII and other applicable Meeting may appoint a proxy, who need not be a provisions of the Companies Act, 1956, subject to such Member, to attend and on a poll, to vote on his approvals in law as may be necessary, the Company hereby behalf. Such proxies should be deposited at the Registered Office of the Company not less than accords its approval to the payment of an additional ad hoc forty-eight hours before the commencement of the Performance Linked Bonus of Rs. 1.0 lakh (Rupees One Lakh) Meeting. for the Financial Year 1999-2000 upon receipt of necessary 2. In accordance with Section 173 of the Companies Act, 1956, an approval from the Central Government to Mr. Raymond Explanatory Statement in respect of items 5, 6, 7,8,9,10 and 11 being items of Special Business is annexed to the Notice of the S. Noronha, Managing Director of the Company. Provided Meeting. however, the aggregate of the total remuneration paid by 3. In accordance with the provisions of Article 93 of the Articles of the Company in respect of Mr. Raymond S. Noronha shall Association of the Company, Air Chief Marshal I.H. Latif (Retd.) and always be subject to the overall ceilings laid down in Sections Mr. S. Thirumalai will retire by rotation at this Annual General Meeting 198 and 309 of the Companies Act, 1 956. and being eligible offer themselves for reappoirttment. 4. Shareholders should inform the Company's Registrars and Share RESOLVED FURTHER that for the purpose of giving effect to Transfer Agents, Sathguru Management Consultants Private Limited this Resolution the Directors be authorised to take necessary of any change in their registered address, before September 20, steps and give such directions as they may in their absolute 2000. discretion deem necessary to settle any question, difficulty 5. Shareholders who have multiple folios in identical names or joint names in the same order are requested to intimate to the Registrars or doubt that may arise in regard to the determination and and Share Transfer Agents, Sathguru Management Consultants Private payment of the said amount as they may think fit and that Limited, these folios to enable consolidate all such shareholdings into the Directors be hereby further empowered to accept on one folio. behalf of the Company modifications, if any, relating to the 6. Shareholders are requested to refer to the Annexure titled "Intimation determination and payment of the said amount as may be to the Shareholders" which inter-alia contains intimation pursuant to Rule 4A of the Companies Unpaid Dividend (Transfer to General proposed by any Authority from whom approval will have Revenue Account of the Central Government) Rules, 1978. to be obtained and which the Directors in their discretion 7. Shareholders are requested to bring their copies of the Annual Reports think fit and proper." to the Meeting. "

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EXPLANATORY STATEMENT VST Industries Limited

In accordance with Section 173 of the Companies Act, 1956, the the Explanatory Statement annexed to the Notice dated May 27, following information is given in explanation of the items of Special 1999, convening the Sixty-eighth Annual General Meeting with Business set out in the attached Notice of the Sixty-ninth Annual liberty to the Board to vary, alter and modify such consolidated General Meeting of the Company to be held at Bharatiya Vidya salary, performance linked bonus and perquisites so as not to Bhavan, Kulapati Munshi Sadan, 5-9-1 105, Bashirbagh-King Kothi exceed the limits specified in Schedule XIII to the Companies Act, Road, Hyderabad-500 001, Andhra Pradesh, on Tuesday, 1956 or any statutory modifications, substitutions, or re-enactments September 26, 2000. thereof, as may be agreed to by the Board of Directors and Mr. Raymond S. Noronha. Item No. 5 Your Board of Directors at their meeting held on July 26, 2000, Your Company had been requested by General Insurance subject to the approval of the Members, have with the consent of Corporation of India on its own behalf and on behalf of the other Mr. Raymond S. Noronha varied, altered and modified with effect Investment Institutions such as Life Insurance Corporation of India from April 1, 2000, the terms of appointment and remuneration and Unit Trust of India who collectively hold 22.44% of the equity paid or payable to Mr. Raymond S. Noronha, for the period of capital of the Company to appoint Mr. T. Lakshmanan, General his office upto October 31, 2003. This variation, alteration and Manager of the General Insurance Corporation of India, Mumbai modification in the terms of appointment and remuneration in as their nominee on the Board of Directors of the Company, whose respect of Mr. Raymond S. Noronha is within the limits specified period of office will be liable to determination by retirement of in Part II of Schedule XIII to the Companies Act, 1956. Directors by rotation. Accordingly, with effect from April 1, 2000, Mr. Raymond S. Your Board of Directors appointed Mr. T. Lakshmanan as a Director Noronha is entitled to the remuneration stated below which was approved by your Board in pursuance of Sections 198, 269, with effect from May 16, 2000, pursuant to the provisions of 309, 310 and 311 of the Companies Act, 1956, read with Article 98 of the Articles of Association of the Company in the Schedule XIII thereof: casual vacancy arising out of the demise of Shri M.V. Purohit. In terms of Article 98, Mr. T. Lakshmanan, holds office upto the date I. Consolidated Salary: of the forthcoming Annual General Meeting and being eligible, At the rate of Rs.2,30,000/- per month in the scale of offers himself for appointment as a Director whose period of office Rs.l,95,000 - Rs.2,30,000. is liable to determination by retirement of Directors by rotation under the provisions of the Companies Act, 1956. II. Performance Bonus :

Notice, along with a deposit of five hundred rupees, as required Payable annually for each financial year ending 31 st March, under Section 257 of the Companies Act, 1956, has been received 2001 and thereafter, not exceeding 50% of Consolidated by the Company from a Member proposing the appointment of Salary per annum after approval of the Accounts as may be Mr. T. Lakshmanan as a Director of the Company. determined by the Board of Directors of the Company.

The resolution relates to the appointment of Mr. T. Lakshmanan as In addition to the aforesaid Consolidated Salary and a Director of the Company and hence he will be deemed to be Performance Bonus, Mr. Raymond S. Noronha shall be concerned or interested in the resolution. No other Director of entitled to perquisites like gas, electricity, water, furnishings, your Company is in anyway concerned or interested in this medical reimbursement and leave travel concession for self Resolution. and family, club fees, personal accident insurance etc. in accordance with the Rules of the Company, the monetary Your Directors commend the appointment of Mr. T. Lakshmanan value of such perquisites being limited to Rs.4,50,000/- per as a Director of the Company. annum, for the purposes of which limit perquisites shall be Hem No. 6 evaluated as per Income Tax Rules, wherever applicable, and in absence of any such Rule, perquisites shall be At the Sixty-eighth Annual General Meeting of your Company on evaluated at actual cost. However, the following shall not September 27, 1999, approval was accorded to the appointment be included in the aforesaid perquisite limit :- of Mr. Raymond S. Noronha, Director and Managing Director of your Company, with effect from November 1, 1998 for the period (a) Rent free furnished accommodation owned/leased/ of his office upto October 31, 2003, on such consolidated salary, rented by the Company, or Housing Allowance in lieu performance linked bonus and perquisites as had been set out in thereof, as per the Rules of the Company.

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VST Industries Limited

(b) Contribution to Provident Fund and Superannuation Fund The resolution relates to the remuneration of Mr. Raymond upto 27%" of1 salary and contribution to Gratuity Fund S. Noronha and hence he would be deemed to be concerned or upto 8.33% of salary as defined in the Rules of the interested in the resolution. No other Director of your Company is respective Funds, or upto such other limit as may be in anyway concerned or interested in this Resolution. prescribed under the Income Tax Act, 1961 and the This may also be treated as the Memorandum issued pursuant to Rules thereunder for this purpose. the provisions of Section 302 of the Companies Act, 1 956. (c) Use of Company car for official purposes and telephone Item No. 7 at residence (including payment for local calls and long distance official calls). At the Sixty-eighth Annual General Meeting of your Company on September 27, 1 999, approval was accorded to the appointment (d) Encashment of unavailed leave as per the Rules of the of Mr. S. Thirumalai, Deputy Managing Director of your Company, Company at the time of retirement/cessation of service. with effect from October 29, 1998 for the period of his office (e) Long service award as per the Rules of the Company. upto October 28, 2003, on such consolidated salary, performance linked bonus and perquisites as had been set out in (f) Costs and expenses incurred by the Company in the Explanatory Statement annexed to the Notice dated May 27, connection with joining/transfer from one location to 1999, convening the Sixty-eighth Annual General Meeting with another as per the Rules of the Company. liberty to the Board to vary, alter and modify such consolidated salary, performance linked bonus and perquisites so as not to The aggregate of the remuneration and perquisites/benefits exceed the limits specified in Schedule XIII to the Companies Act, including contribution towards Provident Fund, 1 956 or any statutory modifications, substitutions or re-enactments Superannuation Fund and Gratuity Fund, payable to thereof, as may be agreed to by the Board of Directors and Mr. Raymond S. Noronha shall not exceed 10% of the profits Mr. Thirumalai. of the Company calculated in accordance with the provisions of Sections 198 and 309 of the Companies Act, 1956. Your Board of Directors at their meeting held on July 26, 2000, subject to the approval of the Members, have with the consent of Minimum Remuneration Mr. S. Thirumalai varied, altered and modified with effect from April 1, 2000, the terms of appointment and remuneration paid Notwithstanding anything herein, where in any financial year during or payable to Mr. S. Thirumalai, for the period of his office upto the period of office of Mr.Raymond S. Noronha as Managing October 28, 2003. This variation, alteration and modification in Director, the Company has no profits or its profits are inadequate the terms of appointment and remuneration in respect of the Company may pay him remuneration by way of consolidated Mr. S. Thirumalai is within the limits specified in Part II of Schedule salary and perquisites in accordance with the limits laid down in XIII to the Companies Act, 1956. Section II Part II of Schedule XIII to the Companies Act, 1 956, or any statutory modifications, substitutions, or re-enactments thereof, Accordingly, with effect from April 1, 2000, Mr. S. Thirumalai is as may be agreed to by the Board of Directors and Mr. Raymond entitled to the remuneration stated below which was approved by S. Noronha. your Board in pursuance of Sections 1 98, 269, 309, 3 1 0, 3 1 1 and 314 of the Companies Act, 1956, read with Schedule XIII Power is also being taken in terms of this resolution for the Board thereof : to effect any variations, alterations or modifications in future in I. Consolidated Salary : respect of the appointment and remuneration of Mr.Raymond S. Noronha within the limits specified in Schedule XIII to the At the rate of Rs.1,90,000/- per month in the scale of Companies Act, 1956, or any statutory modifications, substitutions Rs. 1, 50,000 -Rs. 1,90,000. or re-enactments thereof, as may be agreed to by the Board of II. Performance Bonus : Directors and Mr. Raymond S. Noronha. Payable annually for each financial year ending 3 1 st March, Your Directors consider that it would be appropriate and desirable 2001 and thereafter, not exceeding 50% of Consolidated to vary,,qlter and modify the terms of apppintment and remuaejxrtina. in respect of Mr. Raymond S. Noronha as set out in the Resolution said financial year as may be determined by the Board of and commend passing of the Resolution. Directors of the Company.

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VST Industries Limited

In addition to the aforesaid Consolidated Salary and any statutory modifications, substitutions or re-enactments thereof, Performance Bonus, Mr. S. Thirumalai shall be entitled to as may be agreed to by the Board of Directors and perquisites like gas, electricity, water, furnishings, medical Mr. S. Thirumalai. reimbursement and leave travel concession for self and family, Power is also being taken in terms of this resolution for the Board club fees, personal accident insurance etc. in accordance to effect any variations, alterations or modifications in future in with the Rules of the Company, the monetary value of such respect of the appointment and remuneration of Mr. S. Thirumalai perquisites being limited to Rs. 4,50,000/- per annum, for the purposes of which limit perquisites shall be evaluated as within the limits specified in Schedule XIII to the Companies Act, per Income Tax Rules, wherever applicable, and in absence 1956, or any statutory modifications, substitutions or re-enactments of any such Rule, perquisites shall be evaluated at actual thereof, as may be agreed to by the Board of Directors and cost. However, the following shall not be included in the Mr. S. Thirumalai. aforesaid perquisite limit :- Your Directors consider that it would be appropriate and desirable (a) Rent free furnished accommodation owned/leased/ to vary, alter and modify the terms of appointment and remuneration rented by the Company, or Housing Allowance in lieu in respect of Mr. S, Thirumalai as set out in the Resolution and thereof, as per the Rules of the Company. commend passing of the Resolution. Mr. S. Thirumalai continues to hold office as Company Secretary. As appointment and (b) Contribution to Provident Fund and Superannuation Fund remuneration are subject to compliance with the requirements of upto 27% of salary and contribution to Gratuity Fund Section 314 and other applicable provisions of the Companies upto 8.33% of salary as defined in the Rules of the Act, 1956, your Directors commend passing of the Special respective Funds, or upto such other limit as may be Resolution set out in the Notice of Meeting. prescribed under the Income Tax Act, 1961 and the Rules thereunder for this purpose. The resolution relates to the remuneration of Mr. S. Thirumalai and hence he would be deemed to be concerned or interested in (c) Use of Company car for official purposes and telephone the resolution. No other Director of your Company is in anyway at residence (including payment for local calls and long concerned or interested in this Resolution. distance official calls). This may also be treated as the Memorandum issued pursuant to (d) Encashment of unavailed leave as per the Rules of the the provisions of Section 302 of the Companies Act, 1956. Company at the time of retirement/cessation of service. Item No. 8 (e) Long service award as per the Rules of the Company. At the Sixty-fourth Annual General Meeting of the Company held (f) Costs and expenses incurred by the Company in on July 7, 1995, Members had approved payment of remuneration connection with joining/transfer from one location to to the Non-Executive Directors of the Company, by way of another as per the Rules of the Company. commission not exceeding 1 % of the net profits of the Company, The aggregate of the remuneration and perquisites/benefits subject to a ceiling of Rs. 5,00,000/- (Rupees Five lakhs) for each including contribution towards Provident Fund, financial year, for a period of five years from April 1, 1994. During Superannuation Fund and Gratuity Fund, payable to the said period payment of commission to the Non-Executive Mr. S. Thirumalai shall not exceed 10% of the profits of the Directors was made for the financial years 1994-95 and Company calculated in accordance with the provisions of 1995-96. However, no payment by way of commission could be Sections 198 and 309 of the Companies Act, 1956. made for the financial years 1996-97, 1997-98 and 1998-99 owing to absence or inadequacy of profits. The said approval Minimum Remuneration expired on March 31, 1999.

Notwithstanding anything herein, where in any financial year during The Board of Directors recommend the extension of the said the period of office of Mr. S. Thirumalai as Deputy Managing approval, for the payment of remuneration to Non-Executive Director, the Company has no profits or its profits are inadequate Directors, by way of commission not exceeding 1 % of the net the Company may pay him remuneration by way of consolidated profits of the Company which will be determined in accordance salary and perquisites in accordance with the limits laid down in with the provisions of Section 198 read with Sections 349 and Section II Part II of Schedule XIII to the Companies Act, 1956, or 350 and other applicable provisions, if any, of the Companies