GOLD FLAKE CORPORATION LIMITED

REPORT OF THE DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2002 1. The Directors hereby submit their Report and Accounts for the financial In accordance with the provisions of Article 93 of the Articles of year ended 31st March, 2002. Association of the Company, Mr. Partho Chatterjee will retire by rotation 2. CHANGE OF STATUS AND NAME OF THE COMPANY at the ensuing Annual General Meeting, and being eligible, offers himself for re-appointment. As stated in the Report of the Directors last year the Company which was a Deemed Public Company has been converted into a Public 5. DIRECTORS’ RESPONSIBILITY STATEMENT Limited Company with effect from 12th September, 2001. As per the provisions of Section 217(2AA) of the Companies Act, 1956, The name of the Company was also changed to Gold Flake Corporation the Directors have :- Limited with effect from 9th January, 2002. i) followed in the preparation of the Annual Accounts, the applicable 3. PERFORMANCE OF THE COMPANY Accounting Standards, and there are no material departures; There was no change in the activities of the Company during the year ii) selected such accounting policies and applied them consistently under review. and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of The net profit for the financial year ended the Company at the end of the financial year, and of the profit of 31st March, 2002, after deducting all charges and the Company for that period; expenses and providing for taxation amounts to Rs. 1,40,61,179/- iii) taken proper and sufficient care for the maintenance of adequate to which profit brought forward from last year accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company is added Rs. 1,75,94,303/- and for preventing and detecting fraud and other irregularities; making a balance of Rs. 3,16,55,482/- and which the Directors recommend be carried forward. iv) prepared the Annual Accounts on a going concern basis. 4. DIRECTORS 6. PARTICULARS OF EMPLOYEES Mr. Sanjay V. Shah resigned as Director of the Company with effect None of the employees are covered under the provisions of Section from 6th September, 2001. Mr. Ravindra S. Naware resigned as Director 217(2A) of the Companies Act, 1956, read with the Companies of the Company with effect from close of work on 12th September, (Particulars of Employees) Rules, 1975. 2001. 7. AUDITORS The Directors would like to record their appreciation of the services The Auditors, M/s Basu, Chatterjea & Co., Chartered Accountants, rendered by the aforesaid Directors. retire at the ensuing Annual General Meeting and being eligible, offer Mr. Partho Chatterjee resigned as the Chairman of the Board of Directors themselves for re-appointment. with effect from close of work on 12th September, 2001. 8. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, Mr. Krishnamoorthy Vaidyanath was appointed by the Board of Directors FOREIGN EXCHANGE EARNINGS AND OUTGO as Additional Director of the Company with effect from 12th September, Considering the nature of business of the Company, no comment is 2001, and Chairman of the Board of Directors with effect from 13th required on conservation of energy and technology absorption. There September, 2001. Mr. Bishwa Behari Chatterjee was appointed by the has been no foreign exchange income or outflow during the year under Board of Directors as Additional Director of the Company with effect review. from 12th September, 2001. By virtue of the provisions of Article 97 of the Articles of Association of the Company and Section 260 of the Companies Act, 1956, M/s Krishnamoorthy Vaidyanath and Bishwa Behari Chatterjee will vacate office at the ensuing Annual General Meeting of the Company and have filed their consent to act as Directors 17th April, 2002 On behalf of the Board of the Company, if appointed. Notices have been received for their appointment as Directors from a Member of the Company under 37, J. L. Nehru Road P. Chatterjee Director Section 257 of the Companies Act, 1956. Kolkata 700 071 S. Bandyopadhyay Director

AUDITORS' REPORT TO THE MEMBERS OF GOLD FLAKE CORPORATION LIMITED We have audited the attached Balance Sheet of GOLD FLAKE CORPORATION iii. The Balance Sheet and the Profit and Loss Account dealt with by this LIMITED as at 31st March, 2002 and also the relative Profit and Loss Account report are in agreement with the books of account; for the year ended on that date annexed thereto. These financial statements iv. In our opinion, the Balance Sheet and the Profit and Loss Account dealt are the responsibility of the Company’s management. Our responsibility with by this report are in compliance with the Accounting Standards is to express an opinion on these financial statements based on our audit. referred to in sub-section (3C) of Section 211 of the Companies Act, We conducted our audit in accordance with auditing standards generally 1956; accepted in . Those standards require that we plan and perform the v. On the basis of the written representations received from the Directors, audit to obtain reasonable assurance about whether the financial statements as on 31st March, 2002, and taken on record by the Board of Directors, are free of material misstatement. An audit includes examining, on a test we report that none of the Directors is disqualified as on 31st March, basis, evidence supporting the amounts and disclosures in the financial 2002 from being appointed as a Director in terms of clause (g) of sub- statements. An audit also includes assessing the accounting principles used section (1) of Section 274 of the Companies Act, 1956; and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides vi. In our opinion and to the best of our information and according to the a reasonable basis for our opinion. explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a As required by the Manufacturing and Other Companies (Auditor’s Report) true and fair view in conformity with the accounting principles generally Order, 1988 issued by the Central Government of India in terms of sub- accepted in India : section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of a. in the case of the Balance Sheet, of the state of affairs of the Company the said Order, to the extent applicable to the Company. as at 31st March, 2002; and Further to our comments in the Annexure referred to above, we report b. in the case of the Profit and Loss Account, of the Profit of the Company that : for the year ended on that date. i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; For Basu, Chatterjea & Co., ii. In our opinion, proper books of account as required by law have been Chartered Accountants kept by the Company so far as appears from our examination of those Sourabh Chakravarti books; Kolkata, 17th April, 2002 Partner

172 GOLD FLAKE CORPORATION LIMITED

ANNEXURE TO THE AUDITORS’ REPORT (Referred to in our Report of even date attached)

1) The Company has maintained proper records to show full particulars 08) There were no transactions during the year of purchase of goods and including quantitative details and situation of its fixed assets. The fixed materials and sale of goods, materials and services, made in pursuance assets of the Company have been physically verified by the management of contracts or arrangements entered in the Register maintained under at reasonable intervals and no discrepancies were noticed during the Section 301 of the Companies Act, 1956. verification. 09) The Company has not accepted deposits from the public. 2) None of the fixed assets of the Company has been revalued during 10) In our opinion, the Company has an internal audit system commensurate the year. with its size and the nature of its business. 3) The Company does not have any stock-in-trade. 11) There were no amounts outstanding as at 31st March, 2002 in respect 4) The Company has not taken any loans, secured or unsecured, from of undisputed Income Tax, Sales Tax, Customs Duty and Excise Duty companies, firms, or other parties listed in the Register maintained which were due for than six months from the date they became under Section 301 of the Companies Act, 1956. The provisions of payable. Section 370 of the Companies Act, 1956 are not applicable to a 12) According to the information and explanations given to us and the company on and from 31st October, 1998. records of the Company examined by us, no personal expenses have 5) The Company has not granted any loans, secured or unsecured, to been charged to the Profit and Loss Account. companies, firms or other parties listed in the Register maintained 13) The Company is not an industrial company and hence the provisions under Section 301 of the Companies Act, 1956. The provisions of of the Sick Industrial Companies (Special Provisions) Act, 1985 is not Section 370 of the Companies Act, 1956 are not applicable to a applicable to the Company. company on and from 31st October, 1998.

6) The Company has not made any interest bearing loans or advances.

7) In our opinion and in accordance with the information and explanations For Basu, Chatterjea & Co., given to us, there are adequate internal control procedures Chartered Accountants commensurate with the size of the Company and the nature of its business for the purchase of goods and assets and for the sale of Sourabh Chakravarti goods. Kolkata, 17th April, 2002 Partner

BALANCE SHEET AS AT 31ST MARCH, 2002 As at As at Schedule 31st March, 2002 31st March, 2001 (Rs.) (Rs.) (Rs.) (Rs.) I. SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share Capital 1 15,99,83,850 15,99,83,850 (b) Reserves and Surplus General Reserve 14,06,035 14,06,035 Profit and Loss Account 3,16,55,482 3,30,61,517 1,75,94,303 1,90,00,338 Total 19,30,45,367 17,89,84,188 II. APPLICATION OF FUNDS 1. Fixed Assets (Net) 2 10,540 17,132 2. Investments at Cost 3 4,12,81,875 4,12,81,875 3. Current Assets, Loans and Advances 4 15,22,93,582 13,88,19,377 4. Less : Current Liabilities and Provisions 5 5,40,630 12,72,196 5. Net Current Assets 15,17,52,952 13,75,47,181 6. Miscellaneous Expenditure (to the extent not written off or adjusted) Expenditure in connection with raising of capital –– 1,38,000 Total 19,30,45,367 17,89,84,188

Notes to Accounts 7 Significant Accounting Policies 8 The Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our Report of even date.

For Basu, Chatterjea & Co., On behalf of the Board Chartered Accountants Sourabh Chakravarti P. Chatterjee Director Partner S. Bandyopadhyay Director Kolkata, 17th April, 2002 T.K. Ghosal Secretary

173 GOLD FLAKE CORPORATION LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2002 Schedule For the year ended For the year ended 31st March, 2002 31st March, 2001 (Rs.) (Rs.) (Rs.) (Rs.) I. INCOME Profit on Sale of Current Investments –– 69,80,793 Interest Income 1,01,43,804 38,00,929 Dividend Income 77,94,421 33,07,487 Miscellaneous Income 2,351 1,79,40,576 99,836 1,41,89,045 1,79,40,576 1,41,89,045 II. EXPENDITURE Operating and Establishment Expenses 6 1,11,977 1,56,146 Loss on Sale of Current Investments 3,578 –– Auditors’ Remuneration — Audit Fees 15,750 8,000 — Other Services 3,500 2,500 — Out of Pocket Expenses –– 19,250 400 10,900 Depreciation 6,592 10,891 Miscellaneous Expenditure Written Off 1,38,000 54,000 2,79,397 2,31,937 III. PROFIT BEFORE TAXATION 1,76,61,179 1,39,57,108 Provision for Taxation 36,00,000 41,00,000 IV. PROFIT AFTER TAXATION 1,40,61,179 98,57,108 Balance Brought Forward From Last Year 1,75,94,303 77,37,195 V. BALANCE CARRIED FORWARD 3,16,55,482 1,75,94,303 Notes to Accounts 7 Significant Accounting Policies 8 The Schedules referred to above form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred to in our Report of even date.

For Basu, Chatterjea & Co., On behalf of the Board Chartered Accountants Sourabh Chakravarti P. Chatterjee Director Partner S. Bandyopadhyay Director Kolkata, 17th April, 2002 T.K. Ghosal Secretary

SCHEDULES TO THE ACCOUNTS SCHEDULE 1 - SHARE CAPITAL As at As at 31st March, 2002 31st March, 2001 (Rs.) (Rs.) Authorised : 2,00,00,000 Ordinary Shares of Rs. 10/- each 20,00,00,000 20,00,00,000 20,00,00,000 20,00,00,000 Issued, Subscribed and Paid up : 1,59,98,385 Equity Shares of Rs. 10/- each, fully paid up 15,99,83,850 15,99,83,850 15,99,83,850 15,99,83,850 (All the above shares are held by the Holding Company, ITC Limited)

SCHEDULE 2 - FIXED ASSETS Original Cost Original Cost Depreciation Depreciation Depreciation Net Book Value Particulars as at as at up to for the upto as at 31st March, 2001 31st March, 2002 31st March, 2001 year 31st March, 2002 31st March, 2002 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Plant and Machinery 40,80,853 40,80,853 40,64,910 6,377 40,71,287 9,566 Furniture and Fixtures 5,090 5,090 3,901 215 4,116 974 Total 40,85,943 40,85,943 40,68,811 6,592 40,75,403 10,540 Previous Year 40,85,943 40,85,943 40,57,920 10,891 40,68,811 17,132

174 GOLD FLAKE CORPORATION LIMITED

SCHEDULES TO THE ACCOUNTS (Contd.) SCHEDULE 3 - INVESTMENTS AT COST SCHEDULE 7 - NOTES TO ACCOUNTS As at As at 1. Uncalled liability in respect of partly paid up shares is Rs. 3,13,03,125/- (2001- 31st March, 2002 31st March, 2001 Rs. 3,13,03,125/-). Value Value 2. The income from interest and other income are stated gross. The amount of (Rs.) (Rs.) income tax deducted thereon is Rs.20,19,343/- (2001 - Rs.7,04,942/-). Unquoted Long Term 3. Dividend income includes Rs. 56,25,000/- (2001 - Rs. Nil) from long term investments. Trade Investments 4. During the year, the Company purchased and sold the following current ITC Filtrona Limited investments :– 22,50,000 (2001 - 22,50,000) Equity Scheme No. of Units Purchase value Shares of Rs. 10/- each, fully paid up 2,25,00,000 2,25,00,000 purchased (Rs.) Asia Company Limited and sold 55,650 (2001 - 55,650) Equity Shares Chola Liquid Institutional Dividend 1,38,70,661 13,87,06,613 of Rs. 100/- each, fully paid up 83,47,500 83,47,500 Reinvestment Plan 1,39,125 (2001 - 1,39,125) Equity Grindlays Cash Fund - Dividend Option 10,07,257 1,00,72,571 Shares of Rs. 100/- each, partly paid up 1,04,34,375 1,04,34,375 IL&FS Liquid Account - Daily Dividend 1,32,54,647 13,25,46,468 Total 4,12,81,875 4,12,81,875 (Reinvestment) Plan SCHEDULE 4 - CURRENT ASSETS, LOANS AND ADVANCES ING Treasury Portfolio - Dividend Option 81,23,282 9,16,44,562 SUN F&C Money Value Fund - Liquid - 6,09,921 60,99,207 As at As at Daily Dividend 31st March 2002 31st March, 2001 (Rs.) (Rs.) (Rs) (Rs) 5. In order to align the Accounting Policies followed by the Company with those A. CURRENT ASSETS of the Holding Company, there has been a change in the method of accounting for expenditure incurred in connection with raising of capital. The unamortised Cash and Bank Balances amount of such expenditure, which was earlier being written off over a period i. Balances with Scheduled Banks of ten years, has been charged to revenue in the current year. As a consequence – On Current Account 4,24,998 96,931 of the change, the profit before tax is lower by Rs. 84,000/-. – On Deposit Account 15,10,00,000 15,14,24,998 3,84,00,000 3,84,96,931 6. Provision for taxation included in the Profit and Loss Account represents current tax. The incidence of deferred tax being insignificant, is not considered. Other Current Assets 7. Figures for the previous year have been regrouped / rearranged wherever (Unsecured, considered good) necessary. i. Fixed Deposit with ICICI Limited –– 9,97,00,000 ii. Deposit with Others 5,000 5,000 SCHEDULE 8 - SIGNIFICANT ACCOUNTING POLICIES iii. Interest Accrued but not due Basis of Accounting – on Fixed Deposits 2,45,068 2,50,068 6,17,446 10,03,22,446 The Financial Statements are prepared on accrual basis under the historic cost convention. B. LOANS AND ADVANCES Fixed Assets (Unsecured, considered good) Fixed Assets are stated at cost including any incidental acquisition expenses. Advance Tax (Net of provisions) 6,18,516 –– Depreciation Depreciation is provided on “Written Down Value” basis at the rates prescribed in 15,22,93,582 13,88,19,377 Schedule XIV to the Companies Act, 1956. Investments SCHEDULE 5 - CURRENT LIABILITIES AND PROVISIONS Investments are stated at cost. However, suitable provisions are considered for As at As at permanent diminution in value of investments, if any. Income from Investments is 31st March, 2002 31st March, 2001 included together with the related tax credit in the Profit and Loss Account. (Rs.) (Rs.) Current Liabilities Inventories Sundry Creditors for Supplies The inventories are normally valued at cost or below, the average cost being and Expenses computed on the basis of weighted average method. – Total Outstanding dues of Foreign Currency Liabilities Creditors other than Foreign Currency Liabilities are restated at the rates ruling at the year end and all Small Scale Industrial Undertaking(s) 76,426 12,622 exchange gains / losses arising therefrom are adjusted in the Profit and Loss Account Sundry Deposits 4,64,204 4,64,204 except for those covered by forward contract rates where the gains / losses arising from such restatement are recognised over the period of such contracts. 5,40,630 4,76,826 Borrowing Costs Provisions Interest and other costs incurred by the Company in connection with the borrowing Provision for Income Tax of funds are recognised as an expense in the period in which they are incurred (Net of Advance Payment of Income Tax) –– 7,95,370 unless activities that are necessary to prepare the qualifying asset for its intended use or sale are in progress. Total 5,40,630 12,72,196 Lease Rentals SCHEDULE 6 - OPERATING AND ESTABLISHMENT EXPENSES Lease Rentals are being accounted for on an accrual basis. For the Year Ended For the Year Ended Taxes on Income 31st March, 2002 31st March, 2001 Current tax is determined as the amount of tax payable in respect of taxable income (Rs.) (Rs.) for the period. Filing Fees 7,500 5,000 Deferred tax is recognised, subject to the consideration of prudence, on timing Insurance 58 384 differences, being the difference between taxable income and accounting income Rates and Taxes 2,675 3,025 that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are not recognised unless there is virtual certainty Postage, Telephone, Telex, etc. 1,111 2,721 supported by convincing evidence that sufficient future taxable income will be Repairs and Maintenance 9,040 45,829 available against which such deferred tax assets can be realised. Travelling and Conveyance 2,080 5,086 Professional Fees 77,000 72,000 For Basu, Chatterjea & Co., Chartered Accountants On behalf of the Board Miscellaneous Expenses 5,905 9,024 Sourabh Chakravarti, Printing and Stationery 6,608 13,077 P. Chatterjee Director Partner S. Bandyopadhyay Director Total 1,11,977 1,56,146 Kolkata, 17th April, 2002 T. K. Ghosal Secretary

175 GOLD FLAKE CORPORATION LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE (As per Schedule VI, Part IV of the Companies Act, 1956)

I. Registration Details IV. Performance of the Company (Amount in Rs. Thousands)

Registration No. 0 0 8 3 1 4 State Code 2 1 Turnover * Total Expenditure 1 7 9 4 0 2 7 9 Balance Sheet Date 3 1 0 3 2 0 0 2 Date Month Year + – Profit / Loss Before Tax + – Profit / Loss After Tax ✓ 1 7 6 6 1 ✓ 1 4 0 6 1 II. Capital Raised during the Year (Amount in Rs. Thousands) (Please tick appropriate box + for profit, - for losss) Public Issue Rights Issue N I L N I L Earnings Per Share in Rs. Dividend Rate % Bonus Issue Private Placement 0 . 8 8 N I L N I L N I L * Includes Other Income

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) V. Generic Names of Principal Products / Services of Company Total Liabilities Total Assets 1 9 3 0 4 5 1 9 3 0 4 5 Item Code No. 2 4 0 1 1 0 . 0 1 (ITC Code) Sources of Funds Paid up Capital Reserves & Surplus Product Description F L U E C U R E D 1 5 9 9 8 4 3 3 0 6 1

Secured Loans Unsecured Loans V I R G I N I A T O B A C C O N I L N I L Application of Funds Net Fixed Assets Investments Item Code No. 2 4 0 1 1 0 . 0 4 1 1 4 1 2 8 2 (ITC Code) Net Current Assets Misc. Expenditure 1 5 1 7 5 2 N I L Product Description B U R L E Y T O B A C C O Accumulated Losses N I L

Audit Committee : Mr. K. Vaidyanath, Chairman, M/s. S. Bandyopadhyay, B.B. Chatterjee, Members

176