Essar Steel Trading FZEDIRECTORS’ REPORTToThe Shareholders of Essar Steel Trading FZEThe Directors present before you the second annual report together withthe Audited Financial Statements of the Company for the period ended on31st March, 2008.INCORPORATION OF THE COMPANYThe Establishment was incorporated on 14th June, 2006 in the name ofEssar Steel Trading FZE, registered under Dubai Airport Free Zone Authority(DAFZA) and issued Trade License No. 1054.PARENT COMPANYEssar Steel Limited a Company registered under the laws of India havingits registered office at 27 KM Surat Hazira Road, Surat, Gujarat, India isholding 100% share capital of the Company.PRINCIPAL ACTIVITYThe Principal activity of the Company is primarily trading in steel &construction materials.RESULTSDuring the year under review, the Company has achieved a turnover of USD81.90 Million (Previous Year: Nil). There was substantial increase in thetrading activity of the Company and therefore your Company could achievea profit of USD 1.85 Million in current year compared to the loss of USD 0.15million during the previous period ended on 31st March 2007.The finance cost of the Company has increased substaitially due to thevarious loans availed by the Company for its operation during the currentyear. The Management is of the view that the Company can maintain similargrowth in the next year.DIVIDENDThe Directors do not recommend payment of dividend during the periodunder review.STATEMENT OF DIRECTORS ‘RESPONSIBILITIES IN RESPECT OF THEFINANCIAL STATEMENTSThe Directors are required to prepare financial statements for each financialyear, which give a true and fair view of the state of affairs and of the profit orloss of the Company. In preparing those financial statements, the directorsare required to1. Select suitable accounting policies and then apply themconsistently;2. Make judgements and estimates that are reasonable and prudent;3. State whether applicable accounting standards have been followed,subject to any material departures disclosed disclosed and explainedin the financial statements, and4. Prepare the financial statements on the going concern basis unlessit is inappropriate to presume that the Company will continue inbusiness. The Directors confirm that they have complied with the aboverequirements in preparing the financial statements. The directors areresponsible for keeping proper accounting records, which disclose withreasonable accuracy at any time the financial position of the Companyand to enable them to ensure that the financial statements comply withthe international Financial Reporting Standards (IFRS). They are alsoresponsible for safeguarding the assets of the Company and hencefor taking reasonable steps for the prevention and detection of fraudother irregularities.AUDITORSThe auditors of the Company Ernst & Young, Dubai has expressed their desireto continue as the auditors of the Company during the forth coming year.B. SIVAKUMARDirectorDate: June 30, 2008INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ESSAR STEEL TRADING FZEReport on the Financial StatementsWe have audited the accompanying financial statements of Essar SteelTrading FZE (the “Establishment”), which comprise the balance sheet as at31 March 2008 and the income statement, cash flow statement and statementof changes in equity for the period then ended, and a summary of significantaccounting policies and other explanatory notes.Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation ofthese financial statements in accordance with International FinancialReporting Standards and the applicable provisions of the ImplementingRules and Regulations issued pursuant to Law No. (2) of 1996 andits amendment No. (2) of 2000 concerning the formation of legalestablishments at the Dubai Airport Free Zone. This responsibility includes:designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statementsbased on our audit. We conducted our audit in accordance with InternationalStandards on Auditing. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonableassurance whether the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the financial statements. The proceduresselected depend on the auditors’ judgement, including the assessment ofthe risks of material misstatement of the financial statements, whether dueto fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presenta tionof the financial statements in order to design audit procedures that areappropriate for the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and thereasonableness of accountin estimates made by management, as well asevaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material respects,the financial position of the Establishment as of 31 March 2008, and itsfinancial performance and its cash flows for the period then ended inaccordance with International Financial Reporting Standards.Report on Other Legal and Regulatory RequirementsWe also confirm that, in our opinion, the financial statements include inall material respects, the applicable requirements of the provisions ofImplementing Rules and Regulations issued pursuant to Law No. (2) of1996 and its amendment No. (2) of 2000 concerning the formation of legalestablishments at the Dubai Airport Free Zone and proper books of accounthave been kept by the Establishment. We have obtained all the informationand explanations which we required for the purpose of our audit and, to thebest of our knowledge and belief, no violations of the Implementing Rules andRegulations have occurred during the year which would have had a materialeffect on the business of the Establishment or on its financial position.June 30, 2008Ernst & Young,Dubai58
Income Statement for the year ended 31st March, 2008 1 April 2007 14 June 2006toto31 March 2008 31 March 2007Notes USD USDSales of goods 81,901,435 -Cost of sales (76,975,444) -GROSS PROFIT 4,925,991 -Other income 3 801,2<strong>65</strong> 450,284Administrative expenses (499,6<strong>65</strong>) (2<strong>65</strong>,225)Finance costs 4 (3,376,394) (342,995)PROFIT (LOSS) FOR THE YEAR/PERIOD 5 1,851,197 (157,936)Balance Sheet as at 31 March, 2008 1 April 2007 14 June 2006toto31 March 2008 31 March 2007USDUSDCurrent assetsAccounts receivable and prepayments 6 50,360,856 4<strong>65</strong>,130Due from a related party 10 106,306,349 25,518,836Bank balances and cash 7 3,124,402 20,405TOTAL ASSETS 159,791,607 26,004,371EQUITY AND LIABILITIESEquityShare capital 8 816,727 816,727Proposed increase in share capital 8 1,000,000 -Retained earnings/(accumulated losses) 1,693,261 (157,936)Total equity 3,509,988 <strong>65</strong>8,791Non-current liabilitiesTerm loans 9 15,000,000 20,000,000Current liabilitiesAccounts payable and accruals 11 1,281,619 345,580Current portion of term loans 9 140,000,000 5,000,000141,281,619 5,345,580Total liabilities 156,281,619 25,345,580TOTAL EQUITY AND LIABILITIES 159,791,607 26,004,371The attached notes 1 to 14 form part of these Financial Statements.The financial statements were authorised for issue in accordance with a resolution of the directors on 30 June 2008.B. SIVAKUMARDirector30 June 200859
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