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KARNATAKA SILK MARKETING BOARD Ltd

in 26th ANNUAL ACCOUNTS FOR THE YEAR 2004-05

2nd Floor, Mysugar Building, J.C.Road, Bangalore-560 002.

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DIRECTORS REPORT
To;

The Shareholders, Karnataka Silk Marketing Board Ltd., Mysugar Building,

J.C. Road,

Banglalorc-560 002. Your Directors hereby present the 26th Annual Report of the Company together with the Audited Balance Sheet as at 31st March 2005 and Profit and Loss Account for the year ended on that duto along with the Review and Comments of the Comptroller and Auditor General of India as required under Section 619(4) of the Companies
- Act.

1.0 OPERATIONS: As in the recent past years the unprecedented fluctuations, continued to daunt the industry in general arid Company in particular and our purchases and sales activities dwindled considerably due to the following important reasons. (a) Poor demand for our silk (b) Stiff competition from other fibre fabrics. (c)Un-abelted availability of foreign silk, has not allowed the market prices to improve even during seasons. However, the prices in the market during the year 2004-05 was stable of course on the lower side both in the cocoons and yarn stages. A table is given below showing the comparative average purchases prices for silk yam during 2003-2004 and 2004-05 which reflects the stability in prices. (d) Continued less arrivals of silk yarn at Silk Exchange and i Iruu.sactions preventing KSMI3 to compete in

price and volume.

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: 2: (Average purchase price/kg of silk yarn)

Filalture Chaiaka 2003-04 2004-05 2003-04 2004-05 Rs. Rs. Rs. Rs. April 920 991 1141 1106 May 1044 959 1088 1147 June 1140 1096 1150 977 July 1167 1038 938 1189 August 1074 1155 998 1179 1163 974 1045 September 1205 1114 976 October 1040 1195 955 1197 1044 1143 November 1047 1028 1084 December 1135 1077 1035 1105 January 1133 1080 1112 1102 February 1153 1040 1089 1068 March 1123 Source: Silk exchange Monthly report Month Due to stable prices of silk yarn from June 2004 till February 2005, the purchase was maintained at a low-key and more concentration was given for the liquidation of stock. This was intact a good achievement as the company liquidated all the old stocks and maintained very limited inventory comprising recent purchases and new stock. However, the Company was planning to make more mainly in Feb. & Mar.

purchases in the normal purchase season

months but contrarily this year the prices did not come down as normally expected. In fact the prices prevailed almost the same and we could not make much purchases. As a result, the total purchases for the. year 2004-05 was 71 tons, which was 20 tons less than the purchases of 2003-04. Likewise, the sales achieved in the year 2004-05 was 103

tons. As the Company was holding stock of 77 tons in the beginning of !he year eilbrls were made lo liquidate, llic old slock and reduce, ihe.

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level of Inventory o f ' 45 tons valued at Rs. 4.79 crores at the end of the current financial year. The stock is valued by adoption of Accounting standards (AS) 2 by the Company since 2002-03, as per the amendment made to the Company's Act. Our approach and perception taking into account the Liberalization, Globalization and Privatization for a free trade economy and WTO agreement are challenges before the Company for survival and its continuation. For tiiis, the Company has to be prepared to face the challenges in the coining years by changing its policy and perception and strategics. The Company has already started thinking in those lines to meet these challenges and we hope to introduce new strategies and ideas in the coming period. Several representations have been made to the Government of India to ban/restrict the import of silk so that our Sericulture Industry in the State is not aHected. However the availability of imported silk in bulk quantities continued unabated, during the year under report thus affecting the total transactions of silk in general and Company in particular. The comparative table giving the state production of silk yarn and the import of silk yarn for the past five years will substantiate adverse impact of the imported silk to domestic silk.
r

ear

Karnataka Silk Production (in tons)

Import of Silk Yarn into the country (in tons)

1999-2000 2000-2001 2001-2002 2002 - 2003 2003 - 2004 2004 - 2005 *( uplo Feb)

8121 8121 8200 8728 6760 7301*

4581 4713 6808 9054 9258 6953

: Central Silk Monnl

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2.0: FINANCIAL RESULTS The financial results of the company arc as under: ( Rs. in Lakhs ) PARTICULARS 2004-2005 2003-2004 Turnover including other Iiicome Profit(+) Loss(-) APPROPRIATION Loss transferred to Balance Sheet 1219.84 (-) 186.96 (-) 902.26 2152.54 (+) 11.65 (-) 715.31

2.1 REIMBURSEMENT OF LOSS BY GOVERNMENT OF KARNATAKA Company is primarily discharging the function of Price Stabilisation of silk yarn activity which is generally a non-profitable proposition. Company and farmers is expected to protect the interest of rcclcrs purchasing silk in all the being the biggest Silk Govt. by continuously

Exchanges in Karnataka. Company

.licensed buyer of silk at Silk Exchanges of Karnataka Slate has to strive to maintain price stability and to prevent formation of groups and cartels among traders and merchants, thereby to protect the interests of cocoon producers (farmers), reelers and weavers. Company has to maintain sufficient buffer stock to meet the daily requirement of consumers spread in Karnataka, Tumilnadu & Andhra Pradesh with 19 sales outlets. It sells silk to poor rural Artisans (i.e. weavers). At times when the prices are continuously stable This is in fact the role of any Priee Therefore, involves and distribution points intervention by KSMB may not be necessary. This will result in veiy low purchase and sales. Stabilisation Institution and KSMB is one among them. maintenance of procurement

considerable overhead expenses such as rent for Office and godown insurance Etc. Any loss incurred in the process of price stabilisation is nothing but the loss incurred in the process of protecting the interest of the reelers.This matter is being taken up with Government separately.
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2.2 Deferred Tax: As per the Accounting Standard (AS) 22 ..deferred Tax asscl(nel) as on 31.03.2005 arnouatiiig io Rs. 413.43 lakhs is not accounted as a measure of prudence, further taxable income available against which such deferred tax asset can be realised is not possible to estimate at this stage, as the silk yarn prices are prone for wide fluctuations. 3.0: REVENUE TO GOVERNMENT OF KARNATAKA: Operations during the year resulted in contribution of Rs. 13.80 laklis (Previous year Rs. 18.93 lakhs) lo the revenue ofGovernmenl of Kamataka as Market fee. 4.0: DIVIDEND. Your Directors are unable to recommend dividend for the Financial
i

Year 2004-2005 as the Company has suffered loss during the year. 5.0: PUBLIC DEPOSITS: The Company has not invited/accepted Deposits from the Public and hence no claim for refund of outstanding deposit arises. The Present Board consists of the following Directors: 1. 2. 3. 4. 5. Sri. C.H. Govinda Biiat, IAS, Managing Director Smt. G. Latha Krishna Rao, IAS., Dr.S Subramanya IAS Sri. Sandeep Dave, I AS Sri Aravi.nd Jannu, IAS During the financial year 2004-2005, the following non official Directors were in the Board. 1. 2. 3. 4. 5. 6. 7 Sri. D. Tulasiram, Chairman Sri. N. Nagaraj S.V. Thambidurai S. Lakshman R. Srinivas A. Manjunath Smt. H.D. Vaiiamsh Mch.i::
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Your Directors wish to place on record their appreciation for the valuable services rendered by former Directors.

7.0: PARTICULARS OF EMPLOYEES: The relationship between the Management and the staff during the year 2004-05 continued to be cordial. As on 31st March 2005 the number of employees in the Company was 163 out of which number of employees belonging to SC/'S'f category in the Company is 35. 8.0: AUDITORS: The Comptroller and Auditor General of India, New Delhi, have appointed M/S Jayaprabhu & CO. Chartered Accountants, 1st floor, SSB Mutt Building, East Tankbund Road, Bangalorc-560009, remuneration of Rs.20,000/9.0: DIRECTORS RESPONSIBILITY, CONSERVATION ..OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO: a) DIRECTOR RESPONSIBILITY: Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000 the Directors confirm that: i) In the preparation of Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures. (ii)'fhat the Directors had selected such Accounting Policies and applied them consistently, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the stale of affairs of the Company as at March 31, 2005 and profit or loss of the company for that period. iii) That the Directors had taken, proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies A.c-1 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
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as

Statutory Auditors of the Company for the year 2004-2005 on a

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:: 7 :-. iv)That the Directors had prepared the Annual accounts on a going concern basis. v)CONSERVATION OF ENERGY: There is no significant scope for conservation of energy since the Company is not carrying on any manufacturing activity. . vi) TECHNOLOGY ABSORPTION: The Company is discharging' the function of price stabilisation of silk yarn and related marketing activity. Hence there is no reporting involved in regard to technology absorption as required under Rules. vii)FOREIGN EXCHANGE EARNINGS AND

OUTGO:
There is no export activity involved, hence there is no reporting in respect of export market and foreign exchange outgo etc., as required under the Rules.

10.0: ACKNOWLEDGEMENT: Your Directors wish to place on record their sincere appreciation for the whole hearted support, co-operation of timely assistance extended by various departments of Government of Karnataka, in particular Commerce and Industries Dept, Directorate of Sericulture, Finance Dcpt, DDPER, Central Silk Board, Price Stabilisation Fund Authority and Bankers. Your Directors are also thankful to the Statutory Auditors, Comptroller and Auditor General of India, Accountant General, Kamataka for their active and valuable cooperation. Your Directors also wish to thank the Company's valued customers all over India, Reclers, Twisters and Weavers. The Directors wish to place on record their appreciation for the valuable services rendered by the Executives and other employees of the Company at all levels.
For and on behalf of tbe Board of Directors f

C.H. GtyVlNDA 131JAT C&URMAN

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KARNATAKA SILK MARKETING BOARD Ltd. BALANCE SHEET AS AT 31.03.2005 Particulars Sen. no.
AS AT 31 .03.2005 Rs. AS AT 31 .03.2004 Rs.

Rs.

SOURCES OF FUNDS SHARE HOLDERS FUNDS Share Capital LOAN FUNDS Unsecured loans TOTAL APPLICATION OF FUNDS FIXED ASSETS JGross block (at cost) Less: Depreciation INet Block (INVESTMENT A. CURRENT ASSETS, LOANS AND ADVANCES Stock in Trade Sundry Debtors Cash and Bank balances Loans and Advances

1.01

314500000

314500000

1 .03

4277798 318777798

4095000 318595000

1 .04

1 1 931 459 7065459 4866000 50000

11926119 6548448 5377671 , 50000

1.05

1 .06 1 .07 1 .08 1 .09

4787571 27850078 163347932 1 3227768 252301493

763380211 401034491 1367418451 127171801 265900495

B. LESS: CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions Net Current Assets (A-B) Profit and Loss Account (Loss) TOTAL

1.10 1.11

28204 56 451366

23812317 451368

1.02

223645556 90216242 3187777S8

2416368101 71530519 318595000

Significant Accounting policies and Notes on Accounts (Schedule No.3)

Sd/(N.V.Anantha Murthy) Company Secretary & General Manager (Financs)l/c

For and on behalf of Board o? Directors

Bangalore Date: 28.07.2005

So7(C.H.Govinda Bhat) Managing Director

SoV(Sandeep Dave) Director

Per our Report of Even Date ForJAYAPRABHU&Co. Chartered Accountants Bangalore Date: 28.07.2005

SoV_4B.R.Jayap:abhu) 'Proprietor

N.vr*tf-,?;.v , 'r;r-: %, KARH/,-. < ; " . ' '"T" ,

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