డైరెక్టర్ల నివేదిక Mideast (India) Ltd.

Mar 31, 1997

Your Directors of the company have pleasure in presenting the 21st Annual Report together with Audited Statement of Accounts of the Company for the year ended 31st March, 1997

FINANCIAL RESULTS (Rs. in Lacs)

PARTICULARS CURRENT PREVIOUS YEAR YEAR 31.03.1997 31.03.1996

TOTAL INCOME 26584.53 31395.14 PROFIT BEFORE INTEREST, AND DEPRECIATION 3715.64 4852.27 INTEREST 1589.50 922.42 DEPRECIATION 193.83 149.36 PROFIT BEFORE TAX 1932.31 3780.49 PROVISION FOR TAXATION 0.00 300.00 LOSS ON FIRE 0.00 342.67 PROFIT AFTER TAX 1932.31 3137.82 PROFIT BROUGHT FORWARD FROM PREVIOUS YEAR 1775.92 1193.71 PROFIT AVAILABLE FOR APPROPRIATION 3646.94 4331.53

DIVIDEND

In order to conserve resources the Board of Directors of your Company are of opinion that no dividend for the financial year 1996-97 be recommended & resources be utilized for strengthening the existing operations of the Company.

OPERATIONS

Shoe Division

The year 1996-97 was not good for the Indian Footwear Industry, due to unfavourable Government policies like reservation of the Shoe Industry for Small Scale Industry and higher import duty on the raw materials and components. Your Company has also experienced its impact, resulting de-cline in the turnover. The turnover of the Company has de-cline from Rs. 31395.14 lacs to Rs. 26584.53 lacs, a fall of 15% as compare to the previous year. The Company has posted a net profit of Rs. 1932.31 lacs.

During the year under review your Company was in a consolidation phase being the 3rd year of domestic operation. The retail market was under severe strain due to the slump in the economy. Your Company faced the situation in a planned manner, and rationalized its distribution net work. The operations were regulated and inventory control system was improved. During the year six new showrooms were opened in strategically important markets.

A sales conference was organized, which was attended by all the business associates. In the conference the future plans were unveiled and new advertisement marketing strategies were formalized considering the direct market feedback.

Your Company is negotiating with two Foreign Shoe Companies for setting up a joint Venture shoe manufacturing unit for retail shoe marketing. As per market study conducted by the Company the prospect for the Indian Shoe Industry is very bright in the coming years.

OTHER VENTURES

Steel Project

The project implementation work of Mideast Integrated Steels Limited was delayed due to non disbursement of over run finance by some financial institutions. Your Company has appraised the affairs of the project to the lead term lending Financial Institution, IDBI and IDBI is taking all necessary steps including further finance to ensure early completion of the said project.

Aviation Project

Directors are pleased to inform that the Mesco Airlines Limited has once again baged prestigious contracts from ONGC and Government of Himachal Pradesh. The performance of the Mesco Airlines is assuring you the best long term returns.

L & T Shoe Division

The Company has installed all the machines purchased for L&T Shoe unit, at Bhiwadi (Rajasthan) instead Kalol (Gujarat), as L&T could not get the Industrial Licence transferred in our name within the stipulated period. The Bhiwadi unit has already started commercial production.

SUBSIDIARY

The Annual Report, together with Audited Accounts, of Mesco (Mauritius) Limited are annexed hereto. The information required under Section 212 of the Companies Act, 1956 relating to subsidiary is attached to the accounts of the Company.

FIXED DEPOSITS

The Company has invited fixed deposits from Public during the financial year as per section 58A of the Companies Act, 1956 & provisions of the Companies (Acceptance of Deposits) Rules, 1975. The position of the Fixed Deposits as on 31st March, 1997 are as follows :

1. Big deposits (only 2 nos.) : Rs. 232.50 lacs

2. Small deposits : Rs. 249.75 lacs

AUDITOR'S OBSERVATIONS

The Company has been keeping sufficient balances in its current accounts with various scheduled banks, free from charges or lien, to maintain the liquid assets as prescribed in Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975. As per the Auditors, liquid assets should be maintained in a separate account.

The Company could not repay some of its fixed deposits in time, however the Company is repaying to all its small depositors regularly with their mutual consent.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

As required under Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 a statement showing the information relating to the conservation of energy, technology, absorption and foreign exchange earnings and outgo is enclosed as Annexure-I and forms part of this report.

Information as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31st March, 1997.

I. CONSERVATION OF ENERGY

Your Company is not covered in the Schedule of Industries given under Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 requiring furnishing of information regarding conservation of energy in all phases of its operations.

II. RESEARCH & DEVELOPMENT

1. Specific Research & Development Activities : The Company has carried out various research and development activities for upgradation of the product and import substitution of components for shoe-making and consumables.

2. Benefits : The import content of the shoes has shown a declining trend and the net foreign exchange earnings have improved significantly.

3. Future Plan of Action : The future plan of action includes concentration of activities for import substitution, opening more and more retailing out-lets, expanding Brand name of MESCO.

III. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The Company had up-grade its shoe making operations for producing up-market shoes, by improving design and pattern for shoes.

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Mar 31, 1996

We have pleasure in presenting the Twentieth Annual Report together with Audited Statement of Accounts of the Company for the year ended 31st March, 1996.

FINANCIAL RESULTS

(Rs. in Lacs)

Year ended Year ended PARTICULARS 31.03.1990 31.03.1995

Total Income 31395.14 24201.26

Profit before Interest 4852.27 5295.16

Depreciation Interest 922.42 848.22

Depreciation 149.30 129.26

Profit before Tax 3780.49 4317.68

Provision for Taxation 300.00 360.00

Loss on Fire 342.67 -

Profit after Tax 3137.82 3957.68

Profit brought forward 1193.71 40.30 from previous year

Profit available for 4331.53 3997.98 appropriation

DIVIDEND

Directors are pleased to recommend payment of dividend, on pro-rata, at the rate of 12.50% on enhanced capital of Rs. 5020.54 lakhs for the year ended 31st March, 1996, subject to deduction of Income Tax at source, in accordance with the provisions of the Income Tax Act, 1961 as amended up to date. The dividend if approved by the Members at the ensuing Annual General Meeting will be paid out of the profits of the year under review and would absorb a sum of Rs 588.11 lakhs.

OPERATIONS

Shoe Division

The turnover of the Company has increased from Rs. 21454.19 lakhs to Rs. 28711.04 lakhs, registering a growth of 33.82%. The Company has posted a net profit of Rs.3137.82 lakhs.

During the year under review, your Company has increased the range of shoe products by successfully launching another set of brands, such as Originals, Incognito to the previous brands Mohawks, Options, etc. Because of your Company's smart and aggressive marketing strategy, the new Brands have already created niche for themselves in the market.

In spite of entry of several strong multinational brands into Indian market, the M'ESCOS brand was rated as one of the Biggest Brand Successes in 1995.

Your Company has established 21 exclusive show rooms in all the metros and other cities, spanning all the four regions. Your Company has also entered into Direct Dealership Agreements with 940 dealers across the country. Special warehouses have also been set-up to store and to ensure continuous supply of products to all the M'ESCOS shops located at various cities.

Your Company also entered into necessary agreements to open three more shops in Mauritius, Kenya and Reunion.

Shipping Division

Your Company planned to acquire two bulk cargo vessels at the total project cost of Rs. 156 crores. Out of this total cost, a consortium of financial institutions led by SCICI has financed Rs. 96 crores and the rest is being financed through internal accruals and through promoters' contribution, purpose for which your company may issue preference shares. Construction of one vessel, with a capacity of 42750 DWT, is under construction by Hindustan Shipyards Limited, Visakhapatnam. Construction work of second vessel will commence upon the delivery of the first vessel. The first vessel is expected to be delivered in the first quarter of 1997. Negotiations with Hindustan Shipyards Limited are also in the pipeline for expanding the fleet of vessels.

These vessels will primarily be used for the carriage of bulk cargo in and out of India, including export of pig iron from your Company's sister concern Mideast Integrated Steels Limited to China and importing metallurgical coke from China. Your own vessels will ensure continuous supply of raw material and other supplies to the steel project, thereby increasing profitability by safeguarding it from cyclical nature of shipping industry. However, these bulk vessels will also be given in the open market trade.

FUTURE OUTLOOK

The prospects of your Company in the current financial year are very bright. Having established wide distribution network and infrastructure base across the country, your Company is poised to expand its wings into the wider horizon by establishing its brand name in African Continent, Hong Kong and Middle East, beginning with. Your Company is also about to enter into a Manufacturing Agreement with K-Swiss of America, which will be a shot in the arm for the promotion of M'ESCOS sales.

OTHER VENTURES

Steel Protect

The project implementation work of Mideast Integrated Steels Limited, the first Indo-Chinese Joint Venture, is on full swing. Though cost of the project is escalated from Rs. 307 crores to Rs. 457 crores due to upgradation in technology and other factors, the enhanced capacity has been increased significantly from 46400 tpa to 59200 tpa. The increase in the cost of the project is being financed through long-term borrowings, upto Rs. 100 crores, from a consortium of financial institutions and by Issuing shares under preferential allotment to your company to the tune of Rs. 50 crores.

Due to substantial increase in the enhanced capacity, the overall production capacity, thanks to the state-of-the-art Chinese technology, is increased upto 128,000 tpa after completion of the Phase II. As enhanced capacity leads to better productivity, higher profitability of this project will strengthen the bottom line of your Company, thus giving you the high returns, in the years to come.

As the Steel project has already made a giant leap by blasting its Blast Furnace Stove Complex, the trial production is slated to be commenced by the end of 1996.

Aviation Project

Inspired by the 'Open Sky' Policy of the Government, your Company had also promoted Mesco Airlines Limited - An another infrastructure industry. The Company, armed with a fleet of Helicopters acquired from France, Russia and America, has entered into various contracts with ONGC, Pawan Hans, Government of Himachal Pradesh etc., apart from regularly performing multifarious tasks like Aerial Spraying, Locust Control, Casualty Evacuation, VIP Carriage, Tourism Sector and especially at the times of natural calamities.

Mesco Airlines has entered into long term contracts with various agencies, which assure non-stop business, whether the parties fly the helicopters or not. You may also be glad to note that Mesco Airlines is fast building up its fleet of helicopters, while making forays into every possible sector - Agriculture, Tourism, Paramedicare, Corporate Sector to name a few. This India's premier helicopter company in private sector is offering brightest prospects and promising fastest growth, which will enormously contribute to strengthen the bottom-line of your Company, thereby assuring you the best returns.

L & T Shoe Division

Your Company has taken L & T Shoe Division, located in the State of Gujarat, under its control consequent to the gutting down of one of its factories, located in Noida, U.P., to ensure the continuos production and flow of M'ESCOS shoes into the market. Now, your Company has production facilities, under its control, in Northern Western and Sourthern parts of the Country.

JOINT VENTURE

In collaboration with Fagus of Germany, your Company is establishing a separate project for the manufacture of shoe lasts. For this purpose, required machinery has already been imported.

Once all these ventures, which are under active implementation now, taken final shape, substantial income will accrue to you in the form of dividend. You may also be glad to appreciate that since your Company has promoted several ventures in diversified fields, there will be a continous and consistent rise in your benefits, irrespective of the nature of one industry or the other.

SUBSIDIARY

The Annual Report, together with Audited Accounts, of Mesco (Mauritius) Limited are annexed hereto. The information required under Section 212 of the Companies Act, 1956 relating to subsidiary is attached to the accounts of the Company.

DEPOSITS

The Company accepted Fixed Deposits during the year pursuant to provisions of Section 58A of the Companies Act, 1956. The total amount of Fixed Deposits held as on 31st March, 1996 was Rs. 54.16 lakhs. There was no overdue or unclaimed deposits.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

As required under Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, a statement showing the information relating to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is enclosed as Annexure I and forms part of this report.

ANNEXURE I

Information as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March, 1996.

I. CONSERVATION OF ENERGY

Your Company is not covered in the Schedule of Industries given under Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 requiring furnishing of information regarding conservation of energy in all phases of its operations.

II. RESEARCH & DEVELOPMENT

1. Specific R & D Activities: The Company has carried out various research and development activities for upgradation of the product and import substitution of components for shoe-making and consumables.

2. Benefits: The import content of the shoes has shown a declining trend and the net foreign exchange earnings have improved significantly.

3. Future Plan of Action: The future plan of action includes concentration of activities for import substitution, opening more and more retailing out-lets, expanding Brand name of M'ESCOS.

III. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The Company had up-graded its shoe making operations for producing up-market shoes, by improving design and pattern for shoes.

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Mar 31, 1995

We have pleasure in presenting the 19th Annual Report and audited accounts for the year ended 31st March, 1995.

FINANCIAL RESULTS

(Rs. in lakhs) Year ended Year ended 31.3.95 31.3.94

Total Income 24,201.26 12,102.70 Profit before 5,295.16 2,666.90 Interest & Depreciation 848.22 613.10 Interest Depreciation 129.26 88.20 Profit before Tax 4,317.68 1,965.60 Provision for Taxation 360.00 120.00 Profit after Tax 3,957.68 1,845.60

DIVIDEND

Your Directors are pleased to recommend payment of pro-rata dividend at the rate of 40% on enhanced share capital of Rs. 33.45 crores. Dividend, if approved by the members at the ensuing Annual General Meeting, will be paid after deduction of tax at source in accordance with the provisions of The Income Tax Act, 1961, as amended upto date. The said dividend would absorb Rs. 670.19 lakhs of the profits available for appropriation.

TRANSFER TO GENERAL RESERVE

The Directors propose to transfer a sum of Rs 2,000 lakhs to General Reserves.

OPERATIONS

You will be pleased to note that the Company recorded an impressive growth during the year. The turnover of the Company has increased from Rs. 12,102.70 lakhs to Rs. 24,201.26 lakhs, registering a growth of 100%. The net profit after tax has also increased from Rs. 1,845.60 lakhs to Rs. 3,957.68 lakhs, reflecting a growth of 114%.

The Company has launched a range of ladies/gents shoes in the domestic market under the brand name "M'ESCOS" in the month of September/October, 1994 in the country and the products have been well received. The Company tries to understand the needs of its customers and upgrade the quality of its products for increased customer satisfaction.

On 17th June, 1995 a fire broke out at one of the factories at B-12A, Phase-II, NOIDA-(U.P.). The Management took immediate action and tied up with other shoe factories for supply of shoes for continuous marketing of its products. The factory was fully insured and the Company has filed the insurance claim with the insurance Company.

GENERAL OUTLOOK

The prospects of your Company in the current financial year are very bright. The order book is full and there is further rising demand in the Retail Division, M'ESCOS.

Your Company is increasing the shoe manufacturing facilities with backward integration, setting up new and acquiring more factories. Your Company has also managed a tie up with M/s. K-Swiss, the leading shoe manufacturers in the United States. They are rated as the 'best shoe manufacturers of the year' for two consecutive years in U.S.A.. Your Company will be launching 'K-Swiss' brand of shoes in the local market, besides 'Heinz Hunmel' of Germany, which was launched eight months ago.

Construction of two bulk carriers of 42750 MT DWT each is in progress with Hindustan Shipyard Limited, Visakhapatnam, which will accrue profitability to your Company as the captive cargo is assured by your sister Company, Mideast Integrated Steels Limited.

The general outlook is very encouraging and your Company is confident of surpassing the projections for the current year.

OVERSEAS/DOMESTIC VENTURES

The performance of the overseas joint venture, MARITA-MESCO will be better this year because capacity utilisation improves as you gain experience.

Mideast Integrated Steels Limited (MISL), a joint Venture with China Metallurgical Import & Export Corporation (CMIEC) - World's largest Iron & Steel producers - is promoted by your Company. The project implementation is going full stream and it is expected to roll out Iron in the fourth quarter of 1995. Public Issue of Mideast Integrated Steels Limited of 3,33,25,000 Equity Shares of Rs. 10/- each for cash at a premium of Rs. 10/- per share aggregating Rs. 66.65 Crores in the month of September, 1994 was oversubscribed by five times.

Mesco Airlines Limited, promoted by your Company, has a large fleet of helicopters dedicated for activities like off-shore services, agro-aviation and passenger traffic including chartered services.

SUBSIDIARY

During the year, the subsidiary of the Company, i.e., Mesco (Mauritius) Limited commenced seed marketing operations of empty hard gelatin capsules and would add to the bottom line of your Company by way of dividend.

The Annual Report, together with Audited Accounts, of Mesco (Mauritius) Limited are annexed hereto. The information required under Section 212 of The Companies Act, 1956 relating to subsidiary is attached to the accounts of the Company.

DEPOSITS

The Company accepted Fixed Deposits during the year pursuant to provisions of Section 58A of The Companies Act, 1956. The total amount of Fixed Deposit held as on 31st March, 1995 was Rs. 200 lakhs. There was no overdue or unclaimed deposits.

CONVERSION OF FULLY CONVERTIBLE DEBENTURES

Part B of 52,67,133 Fully Convertible Debentures issue in connection with Rights-cum-Public Issue in May, 1993 were converted into 52,67,133 Equity Shares of the Company on 16th October, 1994.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

As required under Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, a statement showing the information relating to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is enclosed and forms part of this report.

PARTICULARS REGARDING EMPLOYEES

Particulars of Employees in terms of Section 217(2A) of The Companies Act, 1956 are set out in the Annexure forming part of this report.

DIRECTORS

Mr. R. Kandaswami has been nominated by SCICI Limited on the Board of the Company during the year.

Mr. T. Panduranga Rao and Ms. Natasha Singh retire by rotation at the conclusion of ensuing Annual General Meeting and being eligible have offered themselves for re-appointment.

PERSONNEL

During the year, the relations with the employees continued to be cordial. The cooperation and support received from them greatly helped in improving the performance.

AUDITORS

M/s. A.R. & Associates, Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The observations of the Auditors are self-explanatory and do not require further clarifications.

PROJECTED VS. ACTUAL PROFITABILITY

Your Directors are happy to report the comparison of the performance of the year against profitability projections made in the Prospectus dated 15th March, 1993 and Letter of Offer dated 27th April, 1993, in respect of Rights-cum-Public Issue of Fully Convertible Debentures as given below:

Projections for Actuals for the year the year ended 31.3.95 ended 31.3.95 (Rs. in lakhs) (Rs. in lakhs)

Share Capital 1,420.26 3,345.00 Reserves & Surplus 8,407.00 18,985.56 Net Worth 9,827.06 22,330.56 Net Profit 1,940.00 3,957.68 Book Value (Rs.) 69.19 66.65 E.P.S. 16.76 23.63 Dividend 50% 40%

ANNEXURE I

Information as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March, 1995

I. CONSERVATION OF ENERGY

Your Company is not covered in the Schedule of Industries given under Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 requiring furnishing of information regarding conservation of energy in all phases of its operations.

II. RESEARCH & DEVELOPMENT

1. Specific R & D Activities The Company has carried out various research and development activities for upgradation of the product and import substitution of components for shoe-making and consumables. The Company has installed 3-D CAD/CAM Centre for making international quality patterns and designs of shoes.

2. Benefits : The import content of the shoes has shown a declining trend and the net foreign exchange earnings have improved significantly.

3. Future plan of action : The future plan of action includes concentration of activities for import substitution.

III. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The agreement with M/s. Bally International, Switzerland for upgradation of shoe making operations for producing up-market shoes has benefitted the Company by way of better design and pattern for shoes and improved shoe-making.

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Mar 31, 1994

Your directors have the pleasure in presenting their 18th annual report together with the audited statement of accounts for the year ended 31st March, 1994.

Dividend : In view of the performance achieved by your company as mentioned above, your directors are pleased to recommend final dividend at the rate of 20%. Interim dividend at the rate of 20% approved by the board of directors in their meeting held on 14th April, 1994 has already been paid. Thus the total dividend for the year 1993-94 is 40%. The final dividend, if approved by the members at the ensuing annual general meeting will be paid after deduction of tax at source in accordance with the provisions of income tax act, 1961.

Transfer to General Reserve : Your directors propose to transfer a sum of Rs. 180 millions to General Reserves.

Operations :

Shoe Division : Both the factories of the shoe division are fully commissioned and have advanced facilities such as CAD/CAM. Presently, both the factories are operating one ship and producing 1.5 million pairs. In the coming months, the factories will start operating 1 1/2 shifts.

Leather Garments Division : The order book position of leather garments division is full and the company is exporting leather garments to Germany, USA, UK, Italy, etc.

Retailing Division : The company will be launching a range of ladies/gents shoes in the domestic market under the brand name "M'ESCOS" in the month of October, 1994. In the first year, it is proposed to tie up with 40 retail outlets on purchase/franchise basis.

Shipping Division : The company proposes to acquire two ships to carry iron ore to China and bring back coal from there for Mideast Integrated Steels Limited. An agreement has signed with Hindustan Shipyards Limited for acquisition of one ship. This is going to be a profitable venture for the company because of captive utilisation.

Euro issue : Your company has made an application to department of economic affairs, Ministry of Finance seeking its approval to make euro issue. The company proposes to utilise the proceeds of Euro issue in its expansion cum integration projects, which, inter alia, include : - to add further facilities to manufacture 2.4 million pairs per annum of leather shoes. -to manufacture major shoe components like sole, insole, toe-puffs, counters. - to manufacture lasts and sheets for making soles and insoles. - to manufacture PU slippers/sandles and sports/casual footwear; - to enter into retail business in domestic market for leather footwear and other leather products. - to invest into integrated steel projects being promoted by the company.

The company has already completed the major ground work for the aforesaid projects like finalisation of suppliers of technology, plant and machinery, site, etc. Once the above projects are implemented, there shall be a quantum jump in the profitability of the company.

Overseas/Domestic ventures : Joint venture of the company in Russia, viz., Marita Mesco is fully commissioned and is adding to the profitability of your company.

The German office of the company has also done very well and we are going to reinforce the operations into EEC countries.

Mesco (Mauritius) limited, which since the close of the accounting year is a wholly owned subsidiary of your company, shall commence the seed marketing shortly and will be in full stream by December this year. Lot of time has been saved by acquiring the readymade factory from Mauritius export development and investment authority (MEDIA).

The company has also received permission from Government of India to start overseas operations in Kenya, which is shortly being launched. The tannery in Zambia had minor problems because of politicalchange in that country. However, it is now being sorted out and it is expected to commence the normal working shortly. Since the company had not made any investment in Zambian tannery, it only had technology transfer agreement/royalty/management control, there was no major loss to the company on this account.

Mideast Integrated Steels Limited (MSIL), a joint venture with China Metallurgical Import & Export Corporation (CMIEC) - World's largest iron & steel producers - is promoted by your company. The project implementation is ahead of schedule and it is expected to roll out pig iron in the second quarter in 1995. The project is being split into two phases. The cost of phase I is Rs. 307 crores as appraised by Industrial Development Bank of India (IDBI). This project is unique in the sense that it is India's first 100% EOU steel project with buy back from chinese partners who have also agreed for equity participation in the project. To part finance phase I, Mideast Integrated steels limited (MISL) is coming out with a public issue of 3,33,25,000 equity shares of Rs. 10/- each for cash at a premium of Rs. 10/- per share aggregating Rs. 66.65 crores. Resident Indian shareholders of Mideast (India) Limited will get preferential allotment subject to a maximum of 200 equity shares. MISL is expected to declare dividend in the first full year of commercial production.

Mesco Airlines Limited, promoted by your company, has acquired two helicopters. The company has also acquired land for hangar at Juhu Airport, Bombay and heliport is under construction. The company is in the process of buying eight more helicopters, thereby making it India's largest private helicopter company and apart from agro-aviation and helicopter charter operations, it will be entering into cargo, courier and simulated training fields. It has also proposed to set up an academy at Nagpur for simulated training and maintenance of large aircrafts. It has also acquired aircraft observer P II from Taneja Aerospace, which is being used for charter operations.

Deposits : During the year, the company has not invited or accepted any fixed deposits from public pursuant to provisions of section 58A of the companies act, 1956.

Conservation of Energy, Research and Development, Technology absorption and foreign exchange earnings and outgo : As required under companies (disclosure of particulars in the report of the board of directors) rules, 1988, a statement showing the information relating to the conservation of energy, technology absorption and foreign exchange earnings and outgo is enclosed and forms part of this report. However, the same is not enclosed with the abridged annual report as permitted by the law.

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Mar 31, 1993

TO THE MEMBERS

Your Directors have the pleasure in presenting their 17th Annual Report together with audited statement of accounts for the year ended 31st March, 1993.

DIVIDEND - 40% for the second year running

In view of the performance achieved by your Company as mentioned above, your Directors are pleased to recommend the payment of dividend at the rate of 40%. The dividend, if approved by the shareholders at the ensuing Annual General Meeting will be paid after deduction of tax at source in accordance with the provisions of Income Tax Act, 1961 as amended upto date. However, Equity Shares allotted by the Board of Directors on 16th July, 1993 shall not be entitled to dividend for the year ended 31st March, 1993.

Transfer of Rs. 50 million to Reserves.

Your Directors propose to transfer a sum of Rs. 50 millions to the general reserve.

Overwhelming response to Rights cum Public Issue in the face of weak market sentiment.

Your Directors are pleased to place on record the appreciation of the overwhelming responses your Company received to its Rights-cum-Public Issue, inspite of the weak sentiment prevalent in the capital market. The Board allotted FCDs well in time and the application monies received by the Company have been invested as envisaged in the Prospectus and Letter of Offer issued by the Company.

OPERATIONS

SHOE PROJECT

Both phases of the shoe project are fully commissioned and producing at full capacity in the current financial year.

M/s. Bally International, Switzerland has upgraded the shoe making techniques and the Company has successfully launched its own brand names, viz., Belvedere and Bellarita in the international market.

MARKETING

Full Rupee Convertibility added to profits

Your Directors are pleased to inform you that the order book position of the Company is more than satisfactory. To enlarge the scope of its operations, your Company is going to tie up with a leading international company to embark upon retailing abroad.

Full Rupee Convertibility, which became effective this year, has added a lot more to the profit and effect of which will be fully reflected in the coming year's results. The Company is all set to achieve higher turnover with increased profitability.

OVERSEAS/DOMESTIC VENTURES

Joint Venture of the Company in Russia, viz., Merita Mesco is fully commissioned and is adding to the profitability of your Company.

The Germany Office of the Company has also done very well and we are going to reinforce the operations into EEC countries.

Mesco (Mauritius) Limited, which since the close the accounting year is a wholly owned subsidiary of your Company, shall commence the seed marketing shortly and will be in full stream by December this year. Lot of time has been saved by acquiring a Readymade factory from Mauritius Export Development and Investment Authority (MEDIA). The Company has also received permission from Government of India to start overseas operations in Kenya, which is shortly being launched.

Mideast Integrated Steels Limited (MISL), a Joint Venture with China Metallurgical Import & Export Corporation (CMIEC) - World's largest Iron & Steel producers - is promoted by your Company. The project implementation in going full stream and it is expected to roll out Iron & Steel in the first quarter of 1995. The project is being split into two phases. The cost of Phase I is approximately Rs. 300 Crores. This project is unique in the sense that it is India's first 100% EOU Steel Project with buy back from Chinese partners who have also agreed for equity participation in the project.

Mesco Airlines Limited, promoted by your Company, has acquired two helicopters. The Company has also acquired land for hanger at Juhu Airport, Bombay and Heliport is under construction. The Company is in the process of buying six more helicopters, thereby making it India's largest helicopter company and apart from agro-aviation, it will be entering into Air Taxi operations also.

DEPOSITS

The Company has not invited or accepted any and fixed deposits from public pursuant to provisions of Section 58A of the Companies Act, 1956 during the year.

PERSONNEL

The particulars of employees as per section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are set out in the statement annexed hereto and forms part of this report.

INDUSTRIAL RELATIONS

Your Directors are pleased to report that the industrial relations with the employees at all levels continued to be cordial.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO.

The information required undersection 217(a)(e) of the Companies Act, 1956 and read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to these matters is appended hereto and forms part of this report.

A. CONSERVATION OF ENERGY

The Company is engaged in the manufacture of Leather Goods and as such the disclosure of said particulars are not required.

B-1. RESEARCH AND DEVELOPMENT

1. Specific R & D activities: The Company has carried out various R & D activities for upgradation of the product and import substitution of components for shoe making & consumables. The Company has installed 3-D CAD/CAM Centre for making international quality patterns and design of shoes.

2. Benefits: The import content of the shoes has shown a declining trend and the net foreign exchange earnings have improved significantly.

3. Future plan of action: The future plan of action include concentration of activities for import substitution.

B-2. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The Company has entered into an agreement with M/s. Bally International, Switzerland for upgradation of shoe making operations for producing up-market shoes.

The benefits from the above agreement have come by way of better design and pattern for shoes and improved shoe makings.

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Mar 31, 1992

Your directors have the pleasure in presenting their 16th annual report together with audited statement of accounts for the period of 10 months ended 31st March, 1992.

Accounting year : The board of directors has decided that the current accounting year shall be of 10 months i.e. from 1.6.91 to 31.3.92, to maintain uniform accounting year as per Government policies.

Dividend : For the period under review, your directors are pleased to recommend the distribution of dividend of 40% (annualised) on prorata basis subject to deduction of tax at source as per the provisions of income tax act, 1961 as compared to a dividend of 15% for the previous accounting period.

Transfer to General Reserve : Your directors propose to transfer a sum of Rs. 350 lacs into the general reserves.

Public issue : Your directors are pleased to place on record that your company came out with its first public issue which opened on 3rd January, 1992 and the issue was overwhelmingly oversubscribed by 73.90 times (Indian public) and 4.29 times (NRI). The company has retained 15% of the oversubscription as permitted by CCI vide their letter no. R-432/7/CCI/91/946/91-92 dated 7.2.1992.

Operations :

Shoe Project : Your company has successfully implemented phase-I of the Shoe project at Noida. The installed capacity has increased to 6 lacs pairs per annum, as envisaged. The new layout, installation and commissioning of new shoe line was achieved in record time and commercial production commenced on 23rd March, 1992. Your directors are happy to report that the enhanced capacity is fully booked and production has reached with the improved quality.

As regards Phase II of the project, despite the balance of payment crisis and compression of import through Government policies, your directors made a conscious decision and negotiated a fully built factory building in the Noida Export Processing Zone (NEPZ) to take advantage of the revised government policies with regard to units set up in export processing zones and 100% EOUs. Infrastructural facilities available in NEPZ are excellent and will help in setting up phase-II of the project expeditiously. The factory building purchased will also prevent cost and time overruns of the project. The necessary permission from the Ministry of commerce, Government of India for setting up the unit in NEPZ has been obtained and commercial production is expected to commence in October this year.

Your directors have pleasure in disclosing the fact that your company has tied up with M/s. Bally International of Switzerland for the upgradation of the quality and shoe making techniques. This is being achieved through regular interaction and exchange of information as well as technical literature resulting in improved quality shoes. This is a step in the right direction to manufacture up market shoes under our own brand name of "Belvedere" shoes for men and "Bally Rita" shoes for ladies.

Your directors have decided to make certain changes in the suppliers of machinery for availing better after sales servie and price available now. This would result in prevention of project cost escalation and shall facilitate smooth commissioning of Phase-II, besides having sophisticated machinery.

Marketing : Your directors have pleasure to inform you that your company's order book for both leather garments and shoes is full till 1993. However, with a view to increase the profitability further, your directors have decided to launch your products through retail and wholesale outlets in Germany. Your company's joint venture in Russia, namely MARITO MESCO is also progressing well and will be able to supply good quality hides to meet in house requirement in the future. Your company is in the process for further tieing up more retail and wholesale outlets with other companies in the rest of Europe and Russia.

Your company has also decided to put up international merchandising division where we will trade our various merchandise from India to our proposed retail and wholesale outlets as well as sourcing from third countries.

Overseas ventures : You will be happy to learn that your company's joint venture in Russia-Marita Mesco is doing very good business and has earned substantial profits during the year. In Zambia also, your company's joint venture has made a good start and is supplying good quality hides regularly. Your company is now free from the uncertain supply position with enough hides from both the source in Zambia and Russia.

Diversification plans : Your directors are pleased to inform you of the ambitious diversification plans of your company. Looking at the changing world trade scenario, your company has entered into a collaboration with M/s. Rogers & Co. Ltd of Mauritius for a joint venture to manufacture hard gelitin capsules and also paracetamol, at a cost of around Rs. 20 crores. The permission from the Prime Minister's office in Mauritius is in hand and the necessary clearances from the Government of India for investment of Rs. 10 crores towards the projects are underway. The project will have advantage of lower production cost through sharing of common utilities, avoidance of excessive freight element for supply to other African countries and Europe and benefits accruing through export to PTA member countries.

Your directors have also decided to diversify into the activities of the core sector-steel. It has been decided to float a new company in joint venture with china metallurgical import & export corporation (CMIEC), Beijing under the banner of Mideast Integrated steels ltd. This is the first major joint venture project in India with Chinese participation in equity making use of Chinese technology resulting in considerably lower capital cost per tonne of steel capacity installed and higher productivity norms. The chinese participation in this venture will be to the tune of US$ 10 million, and your company will be the majority shareholder in the new venture.

The project will be unique and have the capability of conversion from iron ore to marketable finished steel at one location. The total project cost would be in the region of Rs. 600-700 crores depending on the utilities installed. The site location activities have been completed and the project will be established at a site in Orissa with excellent facilities which include rail and road linkages, availability of power, water and communication facilities at reasonable distance. The site is also located close to the all weather deep sea port of Paradeep. M/s. Metallurgical & Engineering consultants (India) Limited has been engaged as consultants.

Your company will soon go to the public with a rights cum public issue for promoting Mideast Integrated Steels Ltd. The details of the rights cum public issue will be given in the forthcoming annual general meeting.

MESCO Hotels Ltd. a group company has obtained a hotel management contract in Moscow and is running very successfully. This company is in the process of entering into tourism related activities in India with considerable potential of foreign exchange earnings.

MESCO Airlines Ltd, another group company has got the clearance from the Government of India to import two helicopters from USA for Agro aviation. Contract with Kerala based company for aerial spraying of crops and aerial seeding is in hand. 5 acres of land for a helicopt has been located in Goa and further action are in progress.

Deposits : The company has not inited fixed deposits so far.

Conservation of Energy : The company is engaged in the manufacturing of leather goods and as such the disclosures of said particulars are not required.

Research & Development :

Specific R&D activities : The company has carried out various R&D activities for upgradation of the product and import substitution of components for shoe making consumables.

Benefits : The import content of the shoes has shown a declining trend and the net foreign exchange earnings has improved significantly.

Future plan of action : The future plan of action include concentration of activities for import substitution and in house design centre with CAD system.

Technology Absorption, Adaptation and innovation : The company has entered into an agreement with M/s. Bally International, Switzerland for upgradation of shoe making operations for producing up market shoes. The benefits from the above agreement have come by way of better design and pattern for shoes and improved shoe makings.

Foreign Exchange earnings and outgo :

(Rs. in lacs) Earnings FOB value of exports 1229.10 Remittance from foreign office 6.96

Outgo Imports - Materials 97.07 - Capital goods 243.62 Commission 1.47 Advertisement 2.36 Fair & Exhibitions 2.30 Consultancy fees 74.32 Travelling 24.08